But prosecutors robustly defend deferred prosecution agreements
How well are deferred prosecution agreements working? Two defence lawyers have raised serious concerns about arrangements that have always owed more to pragmatism than principle.
Under legislation that took effect in 2014, companies can reach agreements with prosecutors under the supervision of a judge. To qualify, the corporation needs to accept it has broken the criminal law; it has to pay a penalty that’s acceptable to the court; and it has to put its house in order. A criminal prosecution will then be put on hold — usually for three years — and if the company has kept to its side of the bargain that will be the end of it.
The biggest deferred prosecution agreement (DPA) by far was approved at the beginning of last year by Dame Victoria Sharp, sitting at Southwark Crown Court. Airbus, the world’s largest aircraft manager, agreed to pay around £840m in the UK as part of a €3.6bn global settlement. The case involved allegations that Airbus had allowed its agents to bribe purchasers of military and civilian aircraft. I explored the background to this case on Law in Action a year ago.
Nine deferred prosecution agreements (DPAs) have been reached so far with the Serious Fraud Office (SFO), which investigates and prosecutes serious or complex fraud, bribery and corruption in England, Wales and Northern Ireland.
Many of these DPAs involve offences under section 7 of the Bribery Act 2010, under which a commercial organisation may be committing an offence if its associates pay bribes.
Although section 7 is headed “failure of commercial organisations to prevent bribery”, that’s not the way the offence is defined. And yet that was how count 3 of the Airbus indictment was drafted. That has led to concerns by David Corker, a partner in the criminal defence firm Corker Binning which specialises in business crime.
Corker argues that judges who are called on to approve DPAs are not paying enough attention to the guiding principles set by Sir Brian Leveson — who approved four DPAs while president of the Queen’s Bench division — when he dealt with the first case to come before the courts. Leveson said:
In contra-distinction to the United States, a critical feature of the statutory scheme in the UK is the requirement that the court examine the proposed agreement in detail, decide whether the statutory conditions are satisfied and, if appropriate, approve the DPA... The court retains control of the ultimate outcome…
Thus, even having agreed that a DPA is likely to be in the interests of justice and that its proposed terms are fair, reasonable and proportionate, the court continues to retain control and can decline to conclude that it is, in fact, in the interests of justice or that its terms are fair, reasonable and proportionate.
Corker raised concerns about whether “what Sir Brian proclaimed, and his successors have intoned” has been borne out in the more recent Bribery Act-related DPAs:
I do not contend that his proclamation is being honoured only in the breach. There is insufficient publicly disclosed information about the course of court proceedings which precede a final judgment to justify such a conclusion. I can only draw an inference from the little that enters the public domain. I believe however that there is enough material to justify calling into question whether rhetoric and reality in this corner of our criminal law are aligned.
By necessary implication, I query whether the SFO has been acting, as it is obliged to do, in the interests of justice.
Why is nobody in the dock?
Concerns of a different kind have been raised by Ross Dixon, business crime partner at Hickman & Rose solicitors. By his calculations, a total of seven cases involving DPAs have completed their journey through the criminal justice system. The SFO had bagged some big names, he said, including Rolls-Royce, Tesco and Serco. But why, he asked, hadn’t any individuals been convicted?
Each of these seven DPAs is based on the alleged wrongdoing of individuals (sometimes very senior individuals) at the company in question. However, rather than the DPA being followed by the convictions of those who are said to be at fault, in none of those seven cases has anyone been found guilty. The SFO chose not to prosecute individuals in three of the seven matters — including Rolls-Royce — and in the four where it did prosecute, none was found guilty.
A DPA is a deal between a corporate and the prosecutor that works for both parties. The deal allows the company to draw a line under an issue and move on. From the SFO’s perspective it secures a corporate scalp together with the plaudits and revenue generation that come with it.
However, if the two sides doing the deal have a vested interest in the same outcome perhaps it’s not surprising that they can come to an agreement. Time after time the narrative on which a DPA has been based has not stood up to the scrutiny of a criminal trial (or the SFO has chosen not to test it). This risks the impression that a DPA does not tell the true story but is instead a mutually-convenient narrative that leads to an acceptable outcome for both parties to the deal.
To my mind, the persistent inconsistency of the criminal verdict with the DPA version of events calls into question the entire DPA regime. I am very concerned about the impact of this on individuals blamed for the wrongdoing.
While it is true that everyone prosecuted so far has walked away with their reputation and standing intact, they have not done so without having lived for years under the stress — and with the disruption to their lives — of a criminal investigation and prosecution. To be thrown under the bus by the company to which you have dedicating many years of your life is neither fair nor just when you have not committed the crime.
Dixon told me his firm had represented defendants in two of the four cases that have gone to trial, Tesco and Serco:
Both ended in acquittal of defendants who had been wrongly blamed in the DPA. In one, a judge threw out the prosecution after hearing the evidence and concluding it simply wasn’t good enough to leave to the jury. In the other, the judge expressed serious concerns about the prosecution case and refused an application by the SFO to adjourn the trial to try and resolve its disclosure failures.
What about the future? The role of the SFO is to investigate and prosecute with objectivity and rigour as befits an organisation dealing with the most serious and complex fraud and bribery matters, that approach should apply to DPAs as much as it does to anything else. For this regime to maintain public confidence it has to be about more than the money.
Responding to these comments, the SFO told me yesterday:
DPAs compel misbehaving companies to admit the facts of their misconduct, pay the financial penalty, and put in place measures to prevent further wrongdoing. If a company fails to comply with the terms of the DPA, the SFO retains the power to prosecute it.
There are many reasons why an individual involved in a dishonest organisation might not face criminal charges, particularly if the corporation operates outside the UK. Proving the culpability of individuals is not as easy as reaching an agreement with a company.
The SFO has always drawn a distinction between deferred prosecution agreements and individual prosecutions: a DPA does not mean that a prosecution is imminent just as the lack of individual convictions does not mean that the wrongdoing highlighted in a DPA statement of facts did not occur.
In the Serco case, for example, the agreed statement of facts contained evidence, based on email communications, that a fraud against the Ministry of Justice took place. The DPA was approved by Mr Justice William Davis and resulted in Serco paying a £19m fine and agreeing to improve its compliance procedures.
That investigation led to fraud charges against Simon Marshall, a former operations director within Serco, and Nicholas Woods, a former finance director of Serco Home Affairs. They were acquitted last month after the SFO offered no evidence. The SFO said at the time:
This follows a prosecution review of its disclosure process for the trial, which uncovered errors made in the non-disclosure of certain materials. We are considering how best to undertake an assessment to prevent this from happening in the future.
It’s extraordinary that the SFO is still making mistakes on something as fundamental as disclosure. But there’s no suggestion that this undermines the statement of facts, now published, on which the Serco DPA was reached.