Author: Nicola Sharp
21 August 2019
4 min read
After the acquittal of three Sarclad employees brought further embarrassment for the Serious Fraud Office in relation to deferred prosecution agreements (DPAs), business crime solicitors Rahman Ravelli considers where DPAs go from here - and what companies need to do to ensure they never need one.
Sometimes the best ideas just don’t turn out to be as good in practice as they were on paper. And 2019 seems to be the year that deferred prosecution agreements (DPAs) have joined the list of things that haven’t really lived up to their promise.
Introduced on February 24, 2014 under the provisions of Schedule 17 of the Crime and Courts Act 2013, which made them available to the SFO and Crown Prosecution Service, DPAs were supposed to enable a relatively speedy and efficient conclusion to what could be long-running, complex investigations into fraud, bribery or other economic crime. So far, there have only been five.
As an agreement reached under the supervision of a judge between a prosecutor and an organisation (not an individual) which could be prosecuted, a DPA allows for the prosecution to be suspended for a defined period provided the organisation meets certain specified conditions. Such conditions can include accepting a financial penalty, paying compensation to those affected by the wrongdoing and cooperating with future prosecutions of individuals.
If the company does not honour the conditions, the prosecution may resume. But if the conditions are met there is no prosecution, meaning the corporate has been able to make full reparation for the wrongdoing without a conviction, which could have led to sanctions and reputational damage.
The benefit of them to a corporate entity is still plain to see. However it is the difficulties encountered in translating the admissions made into real and tangible culpability for individuals which will give pause for thought.
This year started with the acquittal of the last of the three Tesco executives charged with fraud in relation to the company’s accounting scandal. Carl Rogberg walking free meant that all three executives had been cleared. Nobody, therefore, had been convicted for the offences that Tesco admitted had been committed – an admission it made when reaching a DPA with the Serious Fraud Office in 2017 in relation to the accounting scandal.
If this saga was not embarrassing enough, it was repeated almost note for note weeks ago. Three Sarclad employees were acquitted at Southwark Crown Court of bribery, three years after the company had agreed a DPA with the SFO in relation to the wrongdoing. Another case of wrongdoing being identified and admitted and another failure to convict any company or individual for it. Hardly the revolutionary approach to justice that the cheerleaders for DPAs would have hoped for when they became part of UK law.
Sarclad, following as it does in the footsteps of the Tesco verdicts, raises real questions about the value (or otherwise) of the DPA process. What should also be remembered is that the SFO reached a DPA with Rolls-Royce in 2017 over the large-scale bribery it committed over decades. Rolls-Royce did not self-report its wrongdoing but its cooperation with the investigation led to a DPA being granted and a discount on the financial penalty imposed. Rolls-Royce escaped prosecution yet there was no guarantee the individuals involved would do. Come February 2019 this year, however, the SFO announced it was closing the investigation with no charges being brought against individuals. Like Tesco and Sarclad, this is another DPA-fuelled contradictory situation – the company has openly accepted that wrongdoing was committed but yet again nobody is held to account for it in a court of law.
DPAs may be a swifter course of action than a lengthy investigation and trial. Ideally, companies would not need to seek one in a bid to avoid prosecution. To be in that position a company needs to be adept at preventing wrongdoing in the workplace. But how does a company achieve this?
Many in business may not view prevention of workplace business crime as exciting. But they do have to see it as a priority. If they do not know how to go about it then they can seek help from those with expertise in the field, who can assess how the company functions, identify the areas where there is the potential for crime and then devise and implement workplace practices that remove that possibility - or at least make it easy to identify at an early stage.
If the right procedures are introduced and they do identify wrongdoing they can help a company by giving it the opportunity of self-reporting the problem to the authorities. By doing this, the company has more chance of entering into a dialogue with the investigating agency than it would have if the agency itself had discovered the wrongdoing.
Such a dialogue can be the difference between a company being prosecuted and not prosecuted. In the case of the SFO that can mean obtaining a DPA.
In such circumstances, the length of time it took a company’s management to report the criminal behaviour – and whether the authorities would have discovered it by themselves – the quality of any measures that were in place to prevent wrongdoing and how swiftly the initial suspicions of wrongdoing were investigated by the firm will all be considered by the SFO.
It should be remembered that an internal investigation can be important not only in terms of determining whether there was any wrongdoing. If there was wrongdoing, an internal investigation can be of value in determining the next course of action: reporting the matter to the police or other authorities, bringing civil proceedings against those who are to blame to recover any losses or bringing a private prosecution against them.
Any activity that is intended to prevent workplace wrongdoing has to be done properly. If it is carried out half-heartedly as a box ticking exercise it is unlikely the measures introduced will be fit for purpose – and the chances of gaining a DPA will be very slim.
This article was originally featured on Thomson Reuters Regulatory Intelligence. (subscription required)
Nicola is known for her fraud, civil recovery, arbitration and business crime expertise, her experience of leading the largest financial disputes and multinational investigations and her skills in devising preventative measures and conducting internal investigations for corporates.