SFO warns corporates about using smokescreens to mask corporate crime

Out-Law News | 17 Oct 2014 | 3:31 pm | 2 min. read

Internal investigations by businesses into potential corrupt practices or other corporate crimes should not be used as mechanisms to obstruct criminal investigations by prosecutors, the Serious Fraud Office (SFO) has warned.

The SFO's general counsel Alun Milford issued the caution in a speech at the Global Investigations Summit in which he provided some guidance to businesses on what actions they would need to take if self-reporting corporate crime to the SFO and on how the SFO will decide whether to offer a deferred prosecution agreement (DPA).

Anti-corruption law expert Barry Vitou of Pinsent Masons, the law firm behind Out-Law.com, said: "The SFO have repeatedly set out their stall when it comes to what they want from corporates and their advisers. Corporates considering these issues would be well advised to read the SFO statements carefully. The proof of the pudding will be in the eating, and the first DPA is now eagerly awaited."

DPAs are new tools that are available to UK prosecutors to offer businesses that admit their involvement in corporate crime, including, bribery, fraud and corruption. DPAs 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.

In his speech, Milford confirmed that DPAs can only be initiated by prosecutors. However, he outlined standards for self-reporting corporate crime that businesses hoping to win lenient treatment should meet.

"An invitation to embark upon DPA negotiations will depend upon a number of factors, but its hallmark will be co-operation and the free supply of relevant information," Milford said.

Milford said the SFO would not consider businesses to have genuinely self-reported corporate crime if they do not tell them something which is "not already in the public domain". Self-reporting also means telling the SFO something that is "adverse to the company", not a report of wrongdoing by individual employees, he said. Milford said reports of this kind may be viewed dimly by the SFO if it discovers "criminal liability by the company" following its own investigations.

"If it is a report into wrong-doing by others - employees of the company - then, co-operative as the company has apparently been, there is no prospect of a DPA because only corporates can be granted DPAs and the corporate has no criminal liability to purge," Milford said.

"However, we will not take a report at face value and we will conduct our own investigation around the allegation. And if, at the end of that process, we conclude that there is, after all, criminal liability by the company, then it will be difficult to have viewed the company as co-operative if the report it submitted to us was aimed at throwing us off the scent," he said.

Milford said that material gathered by companies in their own internal investigations, including documents held by advisers, must be made available to the SFO as part of its separate investigations. The businesses would also have to explain how those internal investigations were conducted to the SFO and make staff available for interview as part of the SFO's own probe.

"Plainly, how you or your clients decide to engage with the SFO is a matter entirely for you," Milford said. "If you judge that your interests are best served by adopting the Brer Rabbit stance of 'lie low and say nothing' that is your choice. You can adopt that stance safe in the knowledge that nothing I have said today is intended to disregard or dilute the right of any company or individual not to self-incriminate. Nor is it intended to ignore or side-step any other right (obviously meaning privilege) to which either is entitled and which is genuinely exercised."

"But do not expect us not to pursue lines of enquiry around how an internal investigation has been conducted, particularly if it cuts across our investigation and appears designed to do so. Do not expect the rewards of co-operation if you offer none.  Do not tell others that you are co-operating if you are not," he said.