Deferred Prosecution Agreements - An Overview

DEFERRED PROSECUTION AGREEMENTS - AN OVERVIEW


Written January 2015 by:
Peter Doyle QC - 25 Bedford Row - Called 1975 - Silk 2002

A Criminal defence practitioner highly proficient in defending Serious Crime, Complex Fraud & Confiscation proceedings. Peter Doyle QC has a phenomenal eye for detail and is unrivalled in his thorough preparation of cases. He is recommended as a leading Silk in Fraud in the Legal 500 2013 and Chambers & Partners 2014.

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  • A DPA involves a company reaching an agreement with a prosecutor to settle allegations of economic criminal wrongdoing (eg money laundering) without being prosecuted. Instead an indictment will be preferred but then immediately suspended to allow an organisation to comply fully with the terms and conditions of the DPA.
  • DPAs apply only to organisations, (although in the US the first DPA with an individual was entered into in November 2013). The likelihood is that they will be deemed appropriate in circumstances where the public interest is not best served by mounting a prosecution.
  • The DPA process will be transparent and will require the supervision and ultimate endorsement of a Judge to come to fruition.
  • draft code of practice has been issued by the Director of Public Prosecutions and Director of the Serious Fraud Office pursuant to Paragraph 6(1) of Schedule 17 to the Crime and Courts Act 2013 (“the Act”).
  • The purpose of the code is threefold. It is to give guidance to prosecutors when:


    • Negotiating a DPA with an organisation whom the prosecutor is considering prosecuting for an offence specified in the Act;
    • Applying to the court for the approval of a DPA; and
    • Oversight of DPAs after their approval by the court. In particular, variation, breach, termination and completion.
  • This code sheds helpful light on the way in which DPAs will work in practice and what will be required by all parties for the agreement to be acceptable.

    The Test

    The Evidential Stage

  • DPAs may be employed by the prosecuting authorities where there is reasonable suspicion that an offence has been committed. This may either be as a result of investigation, information or self-reporting.

  • In order to determine whether a DPA is appropriate a two stage test is applied; an evidential stage and a public interest stage.
  • Either:


    • The evidential stage of the Full Code Test in the Code for Crown Prosecutors is satisfied, or, if this is not met;
    • There is at least a reasonable suspicion that the commercial organisation has committed the offence, and there are reasonable grounds for believing that a continued investigation would provide further evidence within a reasonable period of time, so that all the evidence together would be capable of establishing a realistic prospect of conviction in accordance with the Full Code Test;
  • AND


    • The public interest would be properly served by the prosecutor not prosecuting but instead entering into a DPA with P in accordance with the criteria set out below.
  • A DPA is a discretionary tool created by the Act to provide a way of responding to alleged criminal conduct. The prosecutor may invite the organisation to enter into negotiations to agree a DPA as an alternative to prosecution. However an organisation has no right to be invited to negotiate a DPA. Equally an invitation to enter into discussions is no guarantee that a DPA will be offered.
  • The prosecutor will be required to balance competing interests when deciding whether to consider a DPA. An offence will be considered more serious not only when the value of gain or loss is high, other factors to be considered are: risk of harm to the public; to unidentified victims; shareholders; employees and creditors; and to the stability and integrity of financial markets and economic trade. The more serious the offence, the greater the likelihood that prosecution is in the public interest.
  • Factors set out in the draft code as having a bearing on the issue of whether to prosecute are set out below:
  • a) Additional public interest factors in favour of prosecution:

  • A history of similar conduct (including prior criminal, civil and regulatory enforcement actions against it). Failing to prosecute in circumstances where there have been repeated and flagrant breaches of the law may not be a proportionate response and may not provide adequate deterrent effects;
  • The conduct alleged is part of the established business practices of the company;
  • The offence was committed at a time when the company had an ineffective corporate compliance programme;
  • The company had been previously subject to warning, sanctions or criminal charges and had nonetheless failed to take adequate action to prevent future unlawful conduct, or had continued to engage in the conduct;
  • Failure to report wrongdoing within reasonable time of the offending conduct coming to light. (The prosecutor will also need to consider whether it is appropriate to charge the company officers responsible for the failures/ breaches);
  • Failure to report properly and fully the true extent of the wrongdoing;
  • An adverse impact on the economic reputation of England and Wales;
  • Severe economic harm to victims of the wrongdoing.
  • b) Additional public interest factors against prosecution:

  • A genuinely proactive approach adopted by the corporate management team when the offending is brought to their notice involving self-reporting and remedial actions and including the compensation of victims. In applying this factor, the prosecutor needs to establish whether sufficient information about the operation of the company in its entirety has been supplied in order to assess whether the company has been proactively compliant. This will include making witnesses available and disclosure of the details of any internal investigation;
  • A lack of a history of similar conduct involving prior criminal, civil and regulatory enforcement actions against the company. Contact should be made with the relevant regulatory departments to ascertain whether investigations are being conducted in relation to the due diligence of the company;
  • The existence of a genuinely proactive and effective corporate compliance programme;
  • The offending represents isolated actions by individuals, for example by a rogue director;
  • The offending is not recent in nature, and the company in its current form is effectively a different body to that which committed the offences. For example it has been taken over by another company; it no longer operates in the relevant industry or market; all of the culpable individuals have left or been dismissed; or corporate structures or processes have been changed in such a way as to make a repetition of the offending impossible;
  • A conviction is likely to have unduly adverse consequences for the company under the law of another jurisdiction including European Law, always bearing in mind the seriousness of the offence and any other relevant public interest factors.
  • Organisations will be particularly interested to note that full, frank and early self- reporting to the relevant authorities will militate against a prosecution being brought. The earlier this can be done the better as the code stresses that prosecutors will need sufficient information about the way the business works, the results of any internal investigation and any other relevant information to make an informed decision.
  • Where the prosecutor decides to offer the opportunity to negotiate a DPA the organisation will be sent a letter of invitation. If the organisation agrees to enter into negotiations then a letter setting out undertakings will be sent. These letters provide a framework for the timetable and sets out the position regarding confidentiality and disclosure. It is made clear at this point that ‘the law in relation to the disclosure of unused material may require the prosecutor to provide information received during the course of DPA negotiations to a defendant in criminal proceedings.’ (Paragraphs 19-21 of the Draft Code).
  • Until the issues of confidentiality, use of and retention of information have been agreed to the satisfaction of both parties, and the agreement reflected in signed undertakings, the prosecutor must not continue with the substantive DPA negotiations.

Disclosure

  • It is clear that any attempt to withhold information or provide misleading or incomplete information is likely to have far reaching ramifications as far as any DPA is concerned.
  • The use to which material obtained by a prosecutor during the course of negotiations can be put is dealt with in Schedule to the Act. This is an area which is likely to cause much consternation as, on the one hand, failure to disclose everything is likely to jeopardise the implementation of a DPA or enable the prosecution to instigate fresh proceedings for the same offence. On the other hand, certain information provided by the organisation would be available to be used by the prosecutor in a subsequent prosecution of the organisation if the DPA process failed or was not sanctioned by the Judge.
  • As the current code stands there is no obligation on the prosecutor to disclose everything in their armoury although it does make clear that an organisation should not be misled as to the strength of the case against them and that negotiations should be fair.
  • The Draft Criminal Procedure Rules dealing with DPAs at Part 12. Rule 12.2.3 may give an indication as to how disclosure is hoped to function given the necessity for both parties to give an undertaking not to have supplied ‘inaccurate, misleading or incomplete information’.

Statement of Facts

  • The statement of facts includes all particulars of the alleged offence and the details of any financial loss or gain along with any key documents. Factual issues must be agreed as the court has no power to adjudicate upon any differences. An admission of guilt is not required but the organisation will have to admit the contents and meaning of key documents referred to in the statement of facts. It should be noted that agreeing a statement of facts is no guarantee that a DPA will inevitably follow. A statement of facts is likely to be admissible by way of a Section 10 CJA 1967 admission.
  • Paragraph 5(3) of Schedule 17lists suggested terms that could be included as part of a DPA. The prosecution and organisation must agree terms which are ‘fair, reasonable and proportionate’. This will of course vary from case to case and different terms will be appropriate in different circumstances. However typical terms will include the payment of substantial penalties; making reparation to victims; undertaking reform to prevent that type of conduct occurring again; and submitting to regular reviews and monitoring.

    DPA Hearings and Judicial Scrutiny
  • Once a potential DPA has been agreed, the court process will commence. The Crime and Courts Act provides for Judges to play an active role from an early stage in the process. There are two hearings (set out at paragraphs 7 and 8 of Schedule 17 of the Act.) The initial Preliminary Hearing will be heard in private in order to preserve confidentiality. Prior to this hearing the prosecutor must make an application to the court making a declaration that (a) entering into a DPA with the organisation is ‘likely to be in the interests of justice’ and (b) ‘the proposed terms of the DPA are fair, reasonable andproportionate.’ Hearings may be adjourned for the court to be provided with sufficient information to be confident that proposed DPAs are ‘in the interest of justice.’
  • At the Final Hearing, which again may be heard in private (until matters are agreed) court approval is needed for a DPA to come into effect. If the DPA is approved by the Judge then the court must give its declaration in open court.
  • The Solicitor General, when speaking at the C5 7th Forum on Anti-Corruption, said this of the role of the court in the DPA process: ‘We wanted effective judicial scrutiny – not “rubber stamping”’.
  • It will (unlike the US system) ultimately be the Judge who decides if a DPA is in the interests of justice and whether the terms of the agreement are fair, reasonable and proportionate.
  • There are no guarantees that a DPA will be entered into until the Judge declares it to be appropriate at the final stages. Organisations will need to comply fully with their obligations and take the risk that the full and frank disclosure they provide in an attempt to avoid prosecution is not in the end used against them. In the end, it is likely to be worth the gamble as avoiding prosecution and the damage to reputation will outweigh the dangers of being passive.

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Expert Fraud Solicitor: 
Majad J Habib: Director - Stuart Miller Solicitors

The expert Fraud Solicitors at Stuart Miller Solicitors are proficient with Fraud & Associated legislation, knowledgeable in creating the best strategy & able to analyse huge volumes of evidence to find the grain of detail required to achieve success for you. Having Specialist Fraud Lawyers on your side is vital to achieve the best result and ensure fairness in the proceedings. Challenging Complex Fraud allegations successfully is not a stroll in the park by any means, thus ensuring your Fraud Solicitors are leading experts will maximise your chances of success and avoiding the seizure of your assets.

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This document is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of its content.