Author: Azizur Rahman
27 January 2020
3 min read
It almost goes without saying that a corporate will want to minimise the damage if it finds itself under investigation. After all, any unfavourable publicity can mean reputational harm, an investigation can hamper a company’s ability to retain its standing in the marketplace and any resulting prosecution can mean hefty penalties and debarment from bidding for some types of public contracts here and abroad.
Little surprise, therefore, if such a company sees a deferred prosecution agreement (DPA) as an attractive option. Introduced under the provisions of Schedule 17 of the Crime and Courts Act 2013, a DPA allows a prosecution to be suspended for a set period providing the company meets specified conditions. No lengthy trial, no hugely-damaging conviction and the chance to atone for past mistakes: many companies facing scrutiny would be glad of such an offer. Six have taken the DPA offer so far and we wait to see if Airbus becomes the seventh.
But while those six may have gladly swapped the threat of conviction for a DPA – and the benefits one can bring – it should be emphasised that such an arrangement will not necessarily be in every company’s best interests. Which is why companies need to do some careful thinking (and take expert advice) before accepting a DPA when it is offered, as it will not always be the best choice.
To take a very recent example we can consider the sixth and most recent DPA, which was announced in December 2019 when reporting restrictions were lifted regarding the agreement between the SFO and seismic equipment company Guralp Systems Ltd (GSL). The DPA had been approved two months earlier but was only made public after the conclusion of a trial of three senior GSL figures on charges of conspiracy to make corrupt payments. As a firm, we successfully represented Natalie Pearce in this case, who was the former head of sales at GSL.
In concluding the DPA, GSL agreed to disgorge profits of £2,069,861, keep co-operating with the SFO and review its existing controls, policies and procedures regarding compliance with the Bribery Act 2010. GSL also accepted that it had been involved in conspiracy to make corrupt payments and a failure to prevent bribery in relation to its dealings in South Korea. The DPA, therefore, saw GSL making a number of significant commitments while also holding its hands up and openly saying it had done wrong. Yet with all three individuals charged in relation to the alleged wrongdoing being subsequently cleared there was the slightly bizarre situation where – minutes after all three were found by a jury to have done nothing wrong – the details of the DPA were announced in which the company accepted it had been involved in illegal activity. And the DPA was concluded on the basis of the same “evidence’’ that failed to see any of the defendants convicted of an offence, which certainly raises questions about the integrity of the DPA process.
It is possible that GSL may now be thinking that if the evidence was not there to convict individuals then maybe it, as a company, should have rejected the idea of taking a DPA and instead have been prepared to go to trial – if it would ever have gone that far. Similarly, Tesco took the DPA option over its accounting scandal and paid a £129M fine only for the collapse of the prosecution of all the individuals that were charged. And Rolls-Royce held its hands up over bribery and corruption and, under a DPA, paid £258M for disgorgement of profits, a £239M fine and £13M costs – only for no individuals to ever be charged, never mind convicted. Such cases indicate that, in some circumstances, it may be worthwhile for a company to hold its nerve and let the SFO know it is prepared to have its day in court rather than admit wrongdoing and take a DPA.
No individual has ever been convicted after a DPA has been concluded. There is an argument to be made, therefore, that if prosecutors find it difficult to convict those that can be considered the controlling mind of a company, why should companies automatically assume they will be found guilty of the same alleged wrongdoing? There is no one-size-fits-all approach that can be taken to every investigation where a DPA is a possibility. But the best approach will not always be jumping the gun and taking a DPA. Barclays never obtained a DPA over its Qatar dealings – and the SFO’s criminal proceedings against the bank were dismissed in 2018. And while the related trial of three former Barclays senior executives is ongoing, the case against its former chief executive John Varley has already failed due to insufficient evidence.
If a company refuses the offer of a DPA there is no guarantee that the SFO will automatically bring a prosecution. It is possible that the agency will quietly drop the case with no charges being brought, which is an even more favourable outcome for a company than a DPA. For some companies, a DPA may well be the best course of action. But from our experience of many such cases I cannot emphasise enough that the decision to take one requires careful consideration.
Some of those that have taken DPAs may, with hindsight, wish they had not. Those choices cannot be reversed. But they should certainly be considered when any other company is deciding whether a DPA is really in its best interests.
Aziz's article originally featured on Law360. (Subscription required)
Aziz Rahman is Senior Partner at Rahman Ravelli and its founder. His ability to coordinate national, international and multi-agency defences has led to success in some of the most significant corporate crime cases of this century and top rankings in international legal guides. He is recognised worldwide as one of the most capable legal experts regarding top-level, high-value commercial and financial disputes.