Out-Law / Your Daily Need-To-Know

Senior judge: bigger fine discounts needed for companies agreeing deferred prosecution agreements

Out-Law News | 30 Jun 2016 | 9:37 am | 2 min. read

Companies should receive substantial discounts on fines if they enter into deferred prosecution agreements (DPAs) with the Serious Fraud Office (SFO) after uncovering and self-reporting corruption offences, according to one of the UK's most senior judges.

Speaking at a conference in London last week, Sir Brian Leveson PC QC said that it was entirely open to lawyers negotiating DPAs with the SFO on behalf of their clients to argue that they were entitled to "much more than a 1/3 discount" on the financial penalty that they would have received had the case ultimately proceeded to trial. Leveson said that there was even a case for further discounts on the basis that the company would have admitted its guilt long before any guilty plea at the first opportunity in court, according to bribery and anti-corruption expert Barry Vitou of Pinsent Masons, the law firm behind Out-Law.com.

Writing on his blog, thebriberyact.com, Vitou, who spoke at the same conference, said that "common sense may be about to prevail" as far as the relationship between financial penalties and DPAs was concerned.

"As we have always thought, as the SFO and the courts learn and get comfortable with DPAs the position will move to a more balanced approach," he said.

"The DPA Code envisages that companies seeking a DPA could expect the same financial penalty in a DPA as they might if they pleaded guilty. This never made sense … In fact, if history were to be the judge, following the (very) limited examples (three cases) since the new Sentencing Guidelines, companies might anticipate a worse financial outcome (excluding the lack of a conviction)," he said.

"Recent public SFO statements have pushed the advantage of a DPA as being the lack of a criminal conviction. This meant companies were faced with turning a contingent liability (namely a Bribery Act violation which they hoped would remain undetected) into a non-contingent liability (by telling the authorities of the violation) with no economic upside ... For most companies the truth is probably that the 'carrot' of exactly the same penalty as they would receive if they did not self report was never going to be enough to tip the balance in favour of self reporting," he said.

DPAs became available to prosecutors in England and Wales in certain circumstances in February 2014. They are designed to encourage businesses to self-report wrongdoing in the hope of more lenient treatment, including the possibility of avoiding a criminal investigation and potential prosecution if strict conditions set by a judge are met. These conditions could include payment of substantial penalties, the need to compensate victims and submission to regular reviews and monitoring.

The Crown Prosecution Service's code of practice governing the use of DPAs explicitly states that any financial penalty imposed following a DPA should be "broadly comparable to one that the court would have imposed upon following a guilty plea". At the same time, the sentencing guidelines relating to bribery offences entitle an offender to a one third discount on its sentence if it pleads guilty at the earliest opportunity. However, when the SFO entered into its first DPA, with ICBC Standard Bank at the end of last year, it imposed financial penalties of more than $30 million - at the same multiplier used in the Smith & Ouzman case, in which a company and two of its directors were convicted after trial of paying bribes in Kenya and Mauritania.

Speaking at the same conference, SFO director David Green also said that he was "troubled that there were not enough incentives for companies who would self report and seek DPAs", Vitou said on his blog.

"Surely [in] the interests of fairness (and justice), penalties for companies who self report and are lucky enough to 'win' a DPA should be less than those who do not," he said.