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Deferred Prosecution Agreements: Law and Policy

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Negotiated Justice and Corporate Crime

Part of the book series: Crime Prevention and Security Management ((CPSM))

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Abstract

This chapter examines the law and policy relating to the implementation of Deferred Prosecution Agreements. This chapter examines the legal framework and considers the advantages and disadvantages of DPAs.

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Notes

  1. 1.

    Crime and Courts Act 2013, s.45 and Sched.17; Crime and Courts Act 2013 (Commencement No. 8) Order 2014. For detailed analysis of the framework, see Michael Bisgrove and Mark Weekes, ‘Deferred Prosecution Agreements: A Practical Consideration’, Criminal Law Review (2014), 6: 416; Polly Sprenger, Deferred Prosecution Agreements: The Law and Practice of Negotiated Corporate Criminal Penalties (Sweet and Maxwell, 2015).

  2. 2.

    Ministry of Justice, Consultation on a New Enforcement Tool to Deal with Economic Crime Committed by Commercial Organisations: Deferred Prosecution Agreements (Cm 8348) (May 2012), para. 23.

  3. 3.

    Ibid., para. 22.

  4. 4.

    Monty Raphael, Bribery : Law and Practice (Oxford University Press, 2016), p. 73.

  5. 5.

    Ministry of Justice, Consultation on a New Enforcement Tool to Deal with Economic Crime Committed by Commercial Organisations: Deferred Prosecution Agreements (Cm 8348) (May 2012), para. 29. For consideration of the ‘payoffs’ and ‘pitfalls’ of using DPAs, see Simon Bronitt, ‘Regulatory Bargaining in the Shadows of Preventive Justice: Deferred Prosecution Agreements’, in Tamara Tulich, Rebecca Ananian-Welsh, Simon Bronitt, and Sarah Murray (eds), Regulating Preventive Justice : Principle, Policy and Paradox (Routledge, 2017).

  6. 6.

    Ibid., para. 40. For further discussion of double jeopardy in this context, see Frederick T. Davis, ‘International Double Jeopardy: U.S. Prosecutions and the Developing Law in Europe’, American University International Law Review (2016), 31(1): 57.

  7. 7.

    Ibid., para. 40.

  8. 8.

    SFO/CPS, Deferred Prosecution Agreements Code of Practice (2013), p. 7.

  9. 9.

    OECD, Implementing the OECD Anti-Bribery Convention. Phase 4 Report: United Kingdom (OECD, 2017), p. 59.

  10. 10.

    Crime and Courts Act 2013, Sched.17, Part 2: ‘Offences in Relation to Which a DPA May Be Entered into’.

  11. 11.

    SFO v Standard Bank plc (now known as ICBC Standard Bank plc), Southwark Crown Court, Case No: U20150854, November 30, 2015, para. 1.

  12. 12.

    Crime and Courts Act 2013, Sched.17, para. 5.

  13. 13.

    SFO/CPS, Deferred Prosecution Agreements Code of Practice (2013), para. 1.2.i. The Code of Practice states that ‘a reasonable time period will depend on all the facts and circumstances of the case, including its size, type and complexity’ (para. 1.4).

  14. 14.

    Ibid., para. 1.2.ii.

  15. 15.

    Ibid., para. 1.5.

  16. 16.

    Ibid., para. 1.6.

  17. 17.

    For a critique of this judicial oversight, see Michael Bisgrove and Mark Weekes, ‘Deferred Prosecution Agreements: A Practical Consideration’, Criminal Law Review (2014), 6: 416, 428 et seq.

  18. 18.

    Though there has been criticism about a lack of clarity as to the role of the court, and when prosecutors should first approach the court. For example, Grasso notes: ‘the letter of the statute, pointing to the latest suitable moment in which the court can be approached, does not clarify when exactly prosecutors should first contact the court. In truth, as prosecutors must apply for a declaration on the suitability of already conceived and “proposed” terms, it seems that they could contact the court at quite an advanced phase of negotiations. Considered in those terms, this preliminary involvement seems to produce a sort of redundancy.’ Costantino Grasso, ‘Peaks and Troughs of the English Deferred Prosecution Agreement: The Lesson Learned from the DPA Between the SFO and ICBCSB Plc’, Journal of Business Law (2014), 5: 388, 397.

  19. 19.

    SFO/CPS, Deferred Prosecution Agreements Code of Practice (2013), paras. 9.4 and 10.3.

  20. 20.

    Simon Bronitt, ‘Regulatory Bargaining in the Shadows of Preventive Justice: Deferred Prosecution Agreements’, in Tamara Tulich, Rebecca Ananian-Welsh, Simon Bronitt, and Sarah Murray (eds), Regulating Preventive Justice : Principle, Policy and Paradox (Routledge, 2017), p. 219.

  21. 21.

    SFO/CPS, Deferred Prosecution Agreements Code of Practice (2013), paras. 2.8.2 and 2.9.1 et seq.

  22. 22.

    For an overview of ‘self-reporting’ see Nicholas Lord, Regulating Corporate Bribery in International Business: Anti-corruption in the UK and Germany (Ashgate, 2014), pp. 120–124; Polly Sprenger, Deferred Prosecution Agreements: The Law and Practice of Negotiated Corporate Criminal Penalties (Sweet and Maxwell, 2015), ch. 10.

  23. 23.

    SFO/CPS, Deferred Prosecution Agreements Code of Practice (2013), para. 6.

  24. 24.

    Ibid., para. 6.2.

  25. 25.

    Ibid.

  26. 26.

    Ministry of Justice, Consultation on a New Enforcement Tool to Deal with Economic Crime Committed by Commercial Organisations: Deferred Prosecution Agreements (Cm 8348) (May 2012), para. 87.

  27. 27.

    Such issues are explored in Chapter 6.

  28. 28.

    It has been said that the use of DPAs acts as a means of restoring equilibrium in the prosecution of corporates. See Robert J. Ridge and Mackenzie A. Baird, ‘The Pendulum Swings Back: Revisiting Corporate Criminality and the Rise of Deferred Prosecution Agreements’, University of Dayton Law Review (2008), 33(2): 197; Peter Spivack and Sujit Raman, ‘Regulating the ‘New Regulators’: Current Trends in Deferred Proseuction Agreements’, American Criminal Law Review (2008), 45: 159.

  29. 29.

    Brandon L. Garrett, ‘Structural Reform Prosecution’, Virginia Law Review (2007), 93: 853, 880.

  30. 30.

    The conviction was overturned due to error in instructing the jury. Arthur Andersen LLP v United States 544 US 696 (2005) 374 F.3d 281, reversed and remanded. The government did not seek a retrial as the firm was no longer in business. Carrie Johnson, ‘U.S. Ends Prosecution of Arthur Andersen’, Washington Post (November 23, 2005).

  31. 31.

    The Arthur Andersen case was specifically mentioned in the DPA Consultation: Ministry of Justice, Consultation on a New Enforcement Tool to Deal with Economic Crime Committed by Commercial Organisations: Deferred Prosecution Agreements (Cm 8348) (May 2012), para. 28. For further discussion of this case, see Elizabeth K. Ainslie, ‘Indicting Corporations Revisited: Lessons of the Arthur Andersen Prosecution’, American Criminal Law Review (2006), 43: 107. But see Gabriel Markoff, ‘Arthur Andersen and the Myth of the Corporate Death Penalty : Corporate Criminal Convictions in the Twenty-First Century’, University of Pennsylvania Journal of Business Law (2013), 15(3): 797, where it is argued that there is no evidence to support the ‘Arthur Andersen Effect’.

  32. 32.

    David M. Uhlmann, ‘Deferred Prosecution and Non-prosecution Agreements and the Erosion of Corporate Criminal Liability’, Maryland Law Review (2013), 72(4): 1302.

  33. 33.

    Mike Koehler, ‘Measuring the Impact of Non-prosecution and Deferred Prosecution Agreements on Foreign Corrupt Practices Act Enforcement’, University of California, Davis Law Review (2015), 49: 497.

  34. 34.

    Ibid., p. 544.

  35. 35.

    Robert J. Ridge and Mackenzie A. Baird, ‘The Pendulum Swings Back: Revisiting Corporate Criminality and the Rise of Deferred Prosecution Agreements’, University of Dayton Law Review (2008), 33(2): 197, 203.

  36. 36.

    Jennifer Arlen, ‘Prosecuting Beyond the Rule of Law: Corporate Mandates Imposed Through Deferred Proseuction Agreements’, Journal of Legal Analysis (2016), 8(1): 191.

  37. 37.

    See David Beetham, The Legitimation of Power (2nd ed, Palgrave Macmillan, 2013).

  38. 38.

    Allen R. Brooks, ‘A Corporate Catch-22: How Deferred and Non-prosecution Agreements Impede the Full Development of the Foreign Corrupt Practices Act’, Journal of Law, Economics and Policy (2010), 7: 155.

  39. 39.

    Ibid., p. 156.

  40. 40.

    SFO/CPS, Deferred Prosecution Agreements Code of Practice (2013), para. 9 (‘preliminary hearing(s)’) and 10 (‘application for approval’). See Michael Bisgrove and Mark Weekes, ‘Deferred Prosecution Agreements: A Practical Consideration’, Criminal Law Review (2014), 6: 416, 428 et seq for consideration of judicial oversight.

  41. 41.

    It must be acknowledged, though, that such difficulties are now mitigated somewhat by ‘failure’ offences, such as failure to prevent bribery and failure to prevent the criminal facilitation of tax evasion. These offences are contained in the Bribery Act 2010 and the Criminal Finances Act 2017, respectively. Failure offences involve a form of strict liability that circumvents the need to ‘identify’ the guilt of the controlling minds of the company.

  42. 42.

    This is particularly true for larger corporates. This issue is discussed further in Chapter 6.

  43. 43.

    This concern was explicitly emphasised in the DPA consultation: ‘Commercial organisations which could be prosecuted in both England and Wales and the US may choose to engage with US authorities so as to prevent action being taken in England and Wales. Resolving a case in the US may also be attractive given the wider and more flexible range of enforcement tools, including non-prosecution agreements (NPAs) and DPAs which do not result in a criminal conviction. The lack of equivalent enforcement tools for UK prosecutors makes negotiations between UK and US prosecutors, and ultimately resolution of the case, difficult.’ Ministry of Justice, Consultation on a New Enforcement Tool to Deal with Economic Crime Committed by Commercial Organisations: Deferred Prosecution Agreements (Cm 8348) (May 2012), para. 40.

  44. 44.

    SFO/CPS, Deferred Prosecution Agreements Code of Practice (2013), para. 6.3.

  45. 45.

    Polly Sprenger, Deferred Prosecution Agreements: The Law and Practice of Negotiated Corporate Criminal Penalties (Sweet and Maxwell, 2015), p. 333.

  46. 46.

    Peggy Hollinger and Catherine Belton, ‘Rolls-Royce Shares Climb on Back of Bribery Settlement’, Financial Times (January 17, 2017).

  47. 47.

    David Green, ‘Ethical Business Conduct: An Enforcement Perspective’ Speech at PricewaterhouseCoopers (March 6, 2014).

  48. 48.

    Peter Spivack and Sujit Raman, ‘Regulating the ‘New Regulators’: Current Trends in Deferred Proseuction Agreements’, American Criminal Law Review (2008), 45: 159, 161.

  49. 49.

    Monty Raphael, Bribery : Law and Practice (Oxford University Press, 2016), p. 166.

  50. 50.

    See Jennifer Arlen, ‘Prosecuting Beyond the Rule of Law : Corporate Mandates Imposed Through Deferred Proseuction Agreements’, Journal of Legal Analysis (2016), 8(1): 191; Brandon Garrett, Too Big To Jail: How Prosecutors Compromise with Corporations (Harvard University Press, 2014).

  51. 51.

    The DPA is available on the SEC website:

    https://www.sec.gov/Archives/edgar/data/83246/000119312512499980/d453978dex101.htm (last accessed January 12, 2018). See also Stephen Morris, ‘HSBC Escapes Prosecution as U.S. Ends 5-Year Deferred Deal’, Bloomberg (December 11, 2017).

  52. 52.

    The ‘Statement of Facts’ is available on the DOJ website: https://www.justice.gov/sites/default/files/opa/legacy/2012/12/11/dpa-attachment-a.pdf (last accessed January 15, 2018). See also Jill Treanor and Dominic Rushe, ‘HSBC Pays Record $1.9bn Fine to Settle US Money-Laundering Accusations’, The Guardian (December 11, 2012).

  53. 53.

    Indeed there have been various reports where concern was expressed as to HSBC’s compliance with the terms of the DPA. See, for example, Scott McCulloch, HSBC’S Anti-Money Laundering Compliance Under Investigation (February 21, 2017), available at: https://www.insider.co.uk/news/hsbcs-anti-money-laundering-compliance-9896293 (last accessed January 15, 2018); Zacks Equity Research, DOJ to Rescind HSBC’s Deferred-Prosecution Agreement? available at: http://www.nasdaq.com/article/doj-to-rescind-hsbcs-deferred-prosecution-agreement-cm676170 (last accessed January 15, 2018).

  54. 54.

    ‘Letter from Chancellor Osborne to Chairman Bernanke and Secretary Geithner (September 10, 2012)’, in Jeb Hensarling (Chair), Too Big to Jail: Inside The Obama Justice Department’s Decision Not to Hold Wall Street Accountable . Report Prepared by the Republican Staff of the Committee on Financial Services, U.S. House of Representatives (2016), available at: https://financialservices.house.gov/uploadedfiles/07072016_oi_tbtj_sr.pdf (last accessed January 12, 2018), Appendix 4.

  55. 55.

    Ibid., p. 15.

  56. 56.

    This recommendation was made by the DOJ Asset Forfeiture and Money Laundering Section. Ibid., p. 12.

  57. 57.

    Ibid., p. 18.

  58. 58.

    Ibid., p. 26.

  59. 59.

    Ibid.

  60. 60.

    Patrick Rucker, ‘U.S. Fines HSBC $175 Million for Lax Forex Trading Oversight’, Reuters (September 29, 2017).

  61. 61.

    A Judicial Agreement in the Public Interest, which is modelled on DPAs in the US and UK. The French term for the agreement is Convention Judiciaire d’Intérêt Public (CJIP), under the Sapin II Law.

  62. 62.

    David Keohane and Martin Arnold, ‘HSBC Agrees to Pay €300m to Settle Probe into Tax Evasion’, Financial Times (November 14, 2017).

  63. 63.

    Rob Davies, ‘HSBC “Complicit” in South Africa Scandal, House of Lords Told’, The Guardian (November 1, 2017).

  64. 64.

    Department of Justice, Press Release—HSBC Holdings Plc Agrees to Pay More Than $100 Million to Resolve Fraud Charges (January 18, 2018).

  65. 65.

    HSBC, ‘News Release—HSBC Holdings Plc Expiration of 2012 Deferred Prosecution Agreement’ (December 11, 2017), available at: http://www.hsbc.com/news-and-insight/media-resources/media-releases/2017/hsbc-holdings-plc-expiration-of-2012-deferred-prosecution-agreement (last accessed January 12, 2018).

  66. 66.

    It is recognised that there are difficulties in measuring ‘effectiveness’ of law and enforcement responses. See, for example, Anthony Allott, ‘The Effectiveness of Law’, Valparaiso University Law Review (1981), 15: 229. For a multi-faceted definition of legal effectiveness, see W. Bradnee Chambers, ‘Towards an Improved Understanding of Legal Effectiveness of International Environmental Treaties’, Georgetown International Environmental Law Review (2004), 16: 501.

  67. 67.

    See, generally, US Government Accountability Office, Corporate Crime: DOJ Has Taken Steps to Better Track Its Use of Deferred and Non-Prosecution Agreements, but Should Evaluate Effectiveness. GAO-10-110 (December 2009).

  68. 68.

    Ved P. Nanda, ‘Corporate Criminal Liability in the United States: Is a New Approach Warranted?’ in Mark Pieth and Radha Ivory (eds), Corporate Criminal Liability. Emergence, Convergence and Risk (Springer, 2011), p. 65.

  69. 69.

    See Chapter 6.

  70. 70.

    Suzanne Karstedt, ‘Creating Institutions: Linking the ‘Local’ and the ‘Global’ in the Travel of Crime Policies’, Police Practice and Research (2007), 8(2): 145.

  71. 71.

    David Green, ‘Ethical Business Conduct: An Enforcement Perspective’, Speech at PricewaterhouseCoopers (March 6, 2014).

  72. 72.

    Barry A. Bohrer and Barbara L. Trencher, ‘Prosecution Deferred: Exploring the Unintended Consequences and Future of Corporate Cooperation’, American Criminal Law Review (2007), 44: 1481.

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  1. School of Law, University of Sussex, Falmer, Brighton, UK

    Colin King

  2. School of Law, University of Manchester, Manchester, UK

    Nicholas Lord

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King, C., Lord, N. (2018). Deferred Prosecution Agreements: Law and Policy. In: Negotiated Justice and Corporate Crime. Crime Prevention and Security Management. Palgrave Pivot, Cham. https://doi.org/10.1007/978-3-319-78562-2_4

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