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Deferred Prosecution Agreements: In Practice

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Negotiated Justice and Corporate Crime

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

Abstract

This chapter explores the use of Deferred Prosecution Agreements in practice, analysing the four DPAs that have been negotiated to date.

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Notes

  1. 1.

    SFO, ‘Press Release—SFO Agrees First UK DPA with Standard Bank’ (November 30, 2015); SFO v Standard Bank plc (now known as ICBC Standard Bank plc), Southwark Crown Court, Case No: U20150854, November 30, 2015. For further discussion of this DPA, see 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.

  2. 2.

    See Polly Sprenger, Deferred Prosecution Agreements: The Law and Practice of Negotiated Corporate Criminal Penalties (Sweet and Maxwell, 2015), ch. 9 for discussion of internal investigations (described as ‘a matter of critical importance’, p. 281), the first alert (i.e. ‘the first point at which a corporation’s management become aware of the allegations forming the basis of the misconduct’, p. 282) and the timeliness of self-reporting.

  3. 3.

    Bribery Act 2010, s. 7.

  4. 4.

    The exchange rate on the day in question was US1 = £0.6646439742.

  5. 5.

    SFO v Standard Bank plc (now known as ICBC Standard Bank plc), Southwark Crown Court, Case No: U20150854, November 30, 2015, paras. 12–13.

  6. 6.

    SFO, ‘Press Release—SFO Agrees First UK DPA with Standard Bank’ (November 30, 2015).

  7. 7.

    Edward Clough, ‘First UK Deferred Prosecution Agreement Between the SFO and a Bank’, Allen and Overy, Litigation and Dispute Resolution Review (April 2016), p. 21.

  8. 8.

    SFO/CPS, Deferred Prosecution Agreements Code of Practice (2013), para. 2.5.

  9. 9.

    SFO v Standard Bank plc (now known as ICBC Standard Bank plc), Southwark Crown Court, Case No: U20150854, November 30, 2015, para. 14.

  10. 10.

    Ibid.

  11. 11.

    Ellen Gallagher, ‘The Standard Bank DPA—The First of Many?’, International Bar Association Blog, June 9, 2016, available at: https://www.ibanet.org/Article/Detail.aspx?ArticleUid=70d2382a-e94e-4d81-a12c-3bef0730747b (last accessed January 18, 2018).

  12. 12.

    SFO v Standard Bank plc (now known as ICBC Standard Bank plc), Southwark Crown Court, Case No: U20150854, November 30, 2015, para. 19.

  13. 13.

    Crime and Courts Act 2013, Sched.17, para. 5(4).

  14. 14.

    Sentencing Council, Fraud , Bribery and Money Laundering Offences: Definitive Guideline (2014). For further discussion of financial penalties in the UK, see Polly Sprenger, Deferred Prosecution Agreements: The Law and Practice of Negotiated Corporate Criminal Penalties (Sweet and Maxwell, 2015), p. 420 et seq.

  15. 15.

    SFO v Standard Bank plc (now known as ICBC Standard Bank plc), Southwark Crown Court, Case No: U20150854, November 30, 2015, para. 16. The financial penalty is considered in more detail at paras. 43–58 of the preliminary judgment (delivered on the same date as the judgment approving the Agreement).

  16. 16.

    Ellen Gallagher, ‘The Standard Bank DPA—The First of Many?’, International Bar Association Blog (June 9, 2016).

  17. 17.

    Frederick T. Davis, ‘International Double Jeopardy: U.S. Prosecutions and the Developing Law in Europe’, American University International Law Review (2016), 31(1): 57.

  18. 18.

    Edward Clough, ‘First UK Deferred Prosecution Agreement Between the SFO and a Bank’, Allen and Overy, Litigation and Dispute Resolution Review (April 2016), p. 22.

  19. 19.

    Frederick T. Davis, ‘International Double Jeopardy: U.S. Prosecutions and the Developing Law in Europe’, American University International Law Review (2016), 31(1): 57, 100.

  20. 20.

    SFO v Standard Bank plc (now known as ICBC Standard Bank plc), Southwark Crown Court, Case No: U20150854, November 30, 2015, para. 18.

  21. 21.

    SFO v Standard Bank plc (now known as ICBC Standard Bank plc), Preliminary DPA Judgment, Southwark Crown Court, Case No: U20150854, November 30, 2015, para. 58.

  22. 22.

    SEC, ‘Press Release—Standard Bank to Pay $4.2 Million to Settle SEC Charges’ (November 30, 2015).

  23. 23.

    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, 407.

  24. 24.

    SFO/CPS, Deferred Prosecution Agreements Code of Practice (2013), para. 4.3.

  25. 25.

    Crime and Courts Act 2013, Sched.17, para. 11(2).

  26. 26.

    Ibid., para. 11(3).

  27. 27.

    David Connett, ‘Tanzanians Slam SFO’s Plea Bargain on African Corruption Case’, Independent (March 15, 2016); Moyagabo Maake, ‘Standard Sued by Former Tanzanian Official Ensnared in Bribery Scandal’, Business Live (May 20, 2016).

  28. 28.

    Criminal Law Act 1977, s.1.

  29. 29.

    Bribery Act 2010, s.7.

  30. 30.

    SFO v XYZ Ltd , Southwark Crown Court, Case No: U20150856, July 8, 2016, para. 14.

  31. 31.

    Ibid., para. 15.

  32. 32.

    Ibid., para. 16.

  33. 33.

    Ibid., para. 7.

  34. 34.

    Ibid., para. 16.

  35. 35.

    Ibid., para. 17.

  36. 36.

    Ibid., para. 18.

  37. 37.

    SFO v XYZ Limited, Preliminary DPA Judgment, Southwark Crown Court, Case No: U20150856, July 8, 2016, para. 3.

  38. 38.

    SFO v XYZ Ltd , Southwark Crown Court, Case No: U20150856, July 8, 2016, para. 20.

  39. 39.

    Ibid., para. 9.

  40. 40.

    Even then, it was noted that the multiplier figure ‘was always going to be academic given XYZ’s means and ability to pay’. Ibid., para. 23.

  41. 41.

    Ibid.

  42. 42.

    Lloyd Firth, ‘The UK’s Second DPA: A Hopeful Judgment’, Economia (July 25, 2016), available at: http://economia.icaew.com/features/july-2016/the-uks-second-dpa-a-hopeful-judgment (last accessed January 17, 2018). It is also noted that the US DOJ now makes provision for a 50% discount in FCPA enforcement actions: US Department of Justice, ‘Memo: The Fraud Section’s Foreign Corrupt Practices Act Enforcement Plan and Guidance’ (April 5, 2016) section B2 ‘Credit for Voluntary Self-Disclosure, Full Cooperation, and Timely and Appropriate Remediation in FCPA Matters’.

  43. 43.

    Referring to CJA 2003, s.144 and the sentencing guidelines, he stated: ‘Given the self-report and admission, under the guideline, a full reduction of one third is justified and appropriate. In addition, given that the admissions are far in advance of the first reasonable opportunity having been charged and brought before the court, that discount can be increased as representing additional mitigation. In the circumstances, a discount of 50% could be appropriate not least to encourage others how to conduct themselves when confronting criminality as XYZ has’. SFO v XYZ Limited, Preliminary DPA Judgment, Southwark Crown Court, Case No: U20150856, July 8, 2016, para. 57.

  44. 44.

    SFO v XYZ Ltd , Southwark Crown Court, Case No: U20150856, July 8, 2016, para. 24.

  45. 45.

    Ibid.

  46. 46.

    Ibid.

  47. 47.

    SFO, ‘Press Release—SFO Secures Second DPA’ (July 8, 2016).

  48. 48.

    SFO v XYZ Ltd , Southwark Crown Court, Case No: U20150856, July 8, 2016, para. 25.

  49. 49.

    Ibid., para. 20.

  50. 50.

    Ibid., para. 21.

  51. 51.

    Ibid.

  52. 52.

    Ibid., para. 22.

  53. 53.

    Ibid., para. 28.

  54. 54.

    Ibid., referring to the preliminary DPA judgment at para. 45.

  55. 55.

    Ibid., para. 28.

  56. 56.

    Thomas Webb, ‘The Serious Fraud Office Has Its Second Deferred Prosecution Agreement Approved’, Burges Salmon News and Insight (August 25, 2016), available at: https://www.burges-salmon.com/news-and-insight/legal-updates/the-serious-fraud-office-has-its-second-deferred-prosecution-agreement-approved/ (last accessed January 17, 2017).

  57. 57.

    Nicholas Lord and Colin King, ‘Negotiating Non-contention: Civil Recovery and Deferred Prosecution in Response to Transnational Corporate Bribery’, in Liz Campbell and Nicholas Lord (eds), Corruption in Commercial Enterprise: Law, Theory and Practice (Routledge, 2018).

  58. 58.

    Quinton Newcomb, ‘Second UK DPA Betrays a Commercial Approach by the SFO Despite the Tough “Prosecute First” Rhetoric’, Fulcrum Chambers—General News (July 13, 2016), available at: http://www.fulcrumchambers.com/deferred-prosecution-agreements/ (last accessed January 17, 2018).

  59. 59.

    Indonesia, Thailand, India, Russia, Nigeria, China and Malaysia.

  60. 60.

    SFO Press Release, SFO completes £497.25 million Deferred Prosecution Agreement with Rolls-Royce plc (January 17, 2017).

  61. 61.

    SFO v Rolls Royce PLC ; Rolls Royce Energy Systems Inc, Southwark Crown Court, Case No: U20170036, January 17, 2017, para. 67.

  62. 62.

    Rolls-Royce also reached agreements with the US Department of Justice and Brazil’s Ministério Público Federal. These agreements result in the payment of US$169,917,710 and $25,579,645, respectively, to the US and Brazilian authorities. Ibid., para. 69.

  63. 63.

    SFO v Rolls Royce PLC ; Rolls Royce Energy Systems Inc, Southwark Crown Court, Case No: U20170036, January 17, 2017, para. 4.

  64. 64.

    Ibid., para. 35.

  65. 65.

    Ibid.

  66. 66.

    Ibid., para. 38.

  67. 67.

    Ibid.

  68. 68.

    Ibid., para. 39.

  69. 69.

    Ibid., para. 42.

  70. 70.

    Ibid., para. 47.

  71. 71.

    Ibid.

  72. 72.

    Ibid., para. 48.

  73. 73.

    Ibid., para. 51.

  74. 74.

    See ibid., paras. 52–56.

  75. 75.

    Ibid., para. 57.

  76. 76.

    Ibid.

  77. 77.

    Ibid., para. 58.

  78. 78.

    Ibid.

  79. 79.

    Ibid., para. 60.

  80. 80.

    Ibid., para. 60.

  81. 81.

    Ibid., para. 61.

  82. 82.

    Ibid., para. 62.

  83. 83.

    Ibid., para. 63.

  84. 84.

    For example, it has been said that: ‘This is a sensible and expedient decision, where the court weighed up complex and conflicting factors to arrive at a conclusion that, on balance, was in the public interest’. Osborne Clarke, ‘The Rolls-Royce DPA: What Is the Message for Other Businesses?’, available at: http://www.osborneclarke.com/insights/the-rolls-royce-dpa-what-is-the-message-for-other-businesses/ (last accessed January 30, 2018).

  85. 85.

    Corruption Watch, ‘A Failure of Nerve: The SFO’s Settlement with Rolls Royce’ (January 19, 2017), available at: http://www.cw-uk.org/2017/01/19/a-failure-of-nerve-the-sfos-settlement-with-rolls-royce/ (last accessed January 28, 2018).

  86. 86.

    SFO v Rolls Royce PLC ; Rolls Royce Energy Systems Inc, Southwark Crown Court, Case No: U20170036, January 17, 2017, para. 4.

  87. 87.

    SFO v Rolls Royce PLC ; Rolls Royce Energy Systems Inc, Southwark Crown Court, Case No: U20170036, January 17, 2017, para. 61.

  88. 88.

    SFO/CPS, Deferred Prosecution Agreements Code of Practice (2013), para. 2.4.

  89. 89.

    SFO v Rolls Royce PLC ; Rolls Royce Energy Systems Inc, Southwark Crown Court, Case No: U20170036, January 17, 2017, para. 61. It has also been suggested that the adverse consequences of conviction were ‘vastly overplayed and their consideration as a public interest factor against prosecution undermines government commitments to ensure corrupt bidders are excluded from public contracts’. Corruption Watch, ‘A Failure of Nerve: The SFO’s Settlement with Rolls Royce’ (January 19, 2017), available at: http://www.cw-uk.org/2017/01/19/a-failure-of-nerve-the-sfos-settlement-with-rolls-royce/ (last accessed January 28, 2018).

  90. 90.

    SFO v Rolls Royce PLC ; Rolls Royce Energy Systems Inc, Southwark Crown Court, Case No: U20170036, January 17, 2017, para. 57.

  91. 91.

    This assumes, of course, that the corporate will satisfy all the terms of the DPA during the period that the prosecution is deferred.

  92. 92.

    Corruption Watch, ‘A Failure of Nerve: The SFO’s Settlement with Rolls Royce’ (January 19, 2017), available at: http://www.cw-uk.org/2017/01/19/a-failure-of-nerve-the-sfos-settlement-with-rolls-royce/ (last accessed January 28, 2018).

  93. 93.

    SFO v Rolls Royce PLC ; Rolls Royce Energy Systems Inc, Southwark Crown Court, Case No: U20170036, January 17, 2017, para. 58

  94. 94.

    It is noticeable that the SFO impressed upon the court that resourcing consideration, particularly in relation to investigations/prosecutions of large corporates, do influence its decisions whether to proceed with a case, and that in such situations it is open to negotiation. Ibid., para. 58.

  95. 95.

    Ibid., para. 118.

  96. 96.

    Ibid., para. 75. It was stressed, though, that ‘care must be used in relation to this term [i.e. gross profit] which is based on calculations reached by accountants instructed by the SFO and Rolls-Royce and agreed by the parties and does not necessarily reflect the way in which the accounting profession would approach gross profit for reporting standards’. Ibid., para. 35. For consideration of how disgorgement was calculated for the different counts, see para. 74 et seq.

  97. 97.

    Ibid., paras. 123–125.

  98. 98.

    Ibid., para. 127.

  99. 99.

    Daniel S. Nagin, ‘Deterrence in the Twenty-First Century’, Crime and Justice (2013), 42(1): 199.

  100. 100.

    Ibid., p. 202.

  101. 101.

    Christopher Williams, ‘Britain’s Anti-fraud Chief David Green Battles the Critics and City Wrongdoing’, The Telegraph (April 9, 2016).

  102. 102.

    OECD, Implementing the OECD Anti-bribery Convention. Phase 4 Report: United Kingdom (OECD, 2017), p. 17.

  103. 103.

    Ibid., p. 16.

  104. 104.

    SFO v Rolls Royce PLC ; Rolls Royce Energy Systems Inc, Southwark Crown Court, Case No: U20170036, January 17, 2017, para. 21.

  105. 105.

    See ibid, para. 16, where it is noted that concerns were first raised in internet postings.

  106. 106.

    See ibid, paras. 17–20. Indeed, counsel for the SFO recognised ‘the extraordinary cooperation of Rolls-Royce’ (para. 19).

  107. 107.

    Ibid., para. 22.

  108. 108.

    Corruption Watch, ‘A Failure of Nerve: The SFO’s Settlement with Rolls Royce’ (January 19, 2017), available at: http://www.cw-uk.org/2017/01/19/a-failure-of-nerve-the-sfos-settlement-with-rolls-royce/ (last accessed January 28, 2018).

  109. 109.

    SFO v Rolls Royce PLC ; Rolls Royce Energy Systems Inc, Southwark Crown Court, Case No: U20170036, January 17, 2017, para. 38.

  110. 110.

    OECD, Implementing the OECD Anti-Bribery Convention. Phase 4 Report: United Kingdom (OECD, 2017), p. 16.

  111. 111.

    OECD, Implementing the OECD Anti-Bribery Convention. Phase 4 Report: United Kingdom (OECD, 2017), p. 17. For details of the US DPA, see Department of Justice, Press Release—Rolls Royce plc Agrees to Pay $170 Million Criminal Penalty to Resolve Foreign Corrupt Practices Act Case (January 17, 2017).

  112. 112.

    SFO v XYZ Limited, Preliminary DPA Judgment, Southwark Crown Court, Case No: U20150856, July 8, 2016, para. 57.

  113. 113.

    Ibid.

  114. 114.

    SFO v Rolls Royce PLC ; Rolls Royce Energy Systems Inc, Southwark Crown Court, Case No: U20170036, January 17, 2017, para. 121.

  115. 115.

    OECD, Implementing the OECD Anti-Bribery Convention. Phase 4 Report: United Kingdom (OECD, 2017), p. 17.

  116. 116.

    Corruption Watch, ‘A Failure of Nerve: The SFO’s Settlement with Rolls Royce’ (January 19, 2017), available at: http://www.cw-uk.org/2017/01/19/a-failure-of-nerve-the-sfos-settlement-with-rolls-royce/ (last accessed January 28, 2018).

  117. 117.

    SFO v Rolls Royce PLC ; Rolls Royce Energy Systems Inc, Southwark Crown Court, Case No: U20170036, January 17, 2017, para. 134. ‘The reason for this conclusion is that the conduct resolved by the DPA spans eight jurisdictions, three of Rolls-Royce’s business divisions and over 20 years of conduct. The geographic, commercial and chronological scope together with the quantum of proposed financial terms is such that the matters which are the subject of the DPA are sufficiently extensive to satisfy the public interest. The investigations into Unaoil and Airbus are insufficiently advanced so as to provide evidence that could yet be included in a DPA or prosecuted and substantial further investigation would be required before such an eventuality if it were reached at all. Even if it did it is unlikely that the inclusion of additional matters would materially contribute to any change to the proposed terms’. Ibid., para. 135.

  118. 118.

    SFO v Rolls Royce PLC ; Rolls Royce Energy Systems Inc, Southwark Crown Court, Case No: U20170036, January 17, 2017, para. 128.

  119. 119.

    Corruption Watch, ‘A Failure of Nerve: The SFO’s Settlement with Rolls Royce’ (January 19, 2017), available at: http://www.cw-uk.org/2017/01/19/a-failure-of-nerve-the-sfos-settlement-with-rolls-royce/ (last accessed January 28, 2018).

  120. 120.

    SFO v Rolls Royce PLC ; Rolls Royce Energy Systems Inc, Southwark Crown Court, Case No: U20170036, January 17, 2017, para. 139.

  121. 121.

    Corruption Watch, ‘A Failure of Nerve: The SFO’s Settlement with Rolls Royce’ (January 19, 2017), available at: http://www.cw-uk.org/2017/01/19/a-failure-of-nerve-the-sfos-settlement-with-rolls-royce/ (last accessed January 28, 2018).

  122. 122.

    SFO v Rolls Royce PLC ; Rolls Royce Energy Systems Inc, Southwark Crown Court, Case No: U20170036, January 17, 2017, para. 142.

  123. 123.

    Ibid., para. 143.

  124. 124.

    Tesco Plc, ‘Press Release—Deferred Prosecution Agreement in Relation to Historic Accounting Practices’ (March 28, 2017).

  125. 125.

    Graham Ruddick, ‘High Court Approves £129m fine for Tesco Over Accounting Scandal’, The Guardian (April 10, 2017).

  126. 126.

    Ashley Armstrong, ‘Tesco Fraud Trail Adjourned as Serious Fraud Office Braces for Change’, The Telegraph (September 4, 2017).

  127. 127.

    SFO, ‘Press Release, SFO Agrees Deferred Prosecution with Tesco’ (April 10, 2017).

  128. 128.

    Theft Act 1968, s.17.

  129. 129.

    Fraud Act 2006, s.1 and 4.

  130. 130.

    After this book had been submitted to the publisher, the trial was abandoned when one of the defendants suffered a heart attack. The SFO announced that they will face a re-trial. See Jane Croft, ‘Former Tesco executives to face re-trial over accounting scandal’, Financial Times (March 2, 2018).

  131. 131.

    This relates to a finding of market abuse by the FCA with respect to a Tesco trading statement announced in August 2014. This statement overstated the expected profits of the Group at that time and arose from the same ‘historic accounting practices’ as relating to the DPA. In terms of the compensation scheme, Tesco agreed to compensate certain net purchasers of Tesco ordinary shares and listed bonds who purchased those securities for cash between 29 August 2014 and 19 September 2014. For further details see FCA Press Release, ‘Tesco to pay redress for market abuse’ (March 23, 2017).

  132. 132.

    Roger Best, ‘Serious Fraud Office Concludes Deferred Prosecution Agreement with Tesco Stores Limited’, Clifford Chance—Briefing Note (April 2017), available at: https://www.cliffordchance.com/briefings/2017/04/serious_fraud_officeconcludesdeferre.html (last accessed January 30, 2018).

  133. 133.

    Tesco Plc, Press Release—Deferred Prosecution Agreement in Relation to Historic Accounting Practices (March 28, 2017).

  134. 134.

    OECD, Implementing the OECD Anti-Bribery Convention. Phase 4 Report: United Kingdom (OECD, 2017), p. 56.

  135. 135.

    Ibid.

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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: In Practice. In: Negotiated Justice and Corporate Crime. Crime Prevention and Security Management. Palgrave Pivot, Cham. https://doi.org/10.1007/978-3-319-78562-2_5

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