In November, Sir Brian Leveson approved the deferred prosecution agreement (DPA) between the Serious Fraud Office (SFO) and ICBC Standard Bank. While some believe this will be the first of many, the second expected DPA, which the SFO anticipated by the end of last year, failed to materialise. But I was left with one question: who would want one anyway?
A unique case
Much has been made of the recent DPA, but the particulars of this first case were unique and are unlikely to be met again any time soon. This was the case of an isolated bribe that was quickly identified and immediately reported. The self-report was made in 2013 and the bank was later acquired by new owners, which negated all the usual questions about the culture at the top of an organisation and weighed in favour of the DPA. The SFO also made it clear that they wanted to secure a DPA by the end of 2015 and the US Department of Justice (DoJ) said it would no longer investigate should a DPA be agreed. These factors created a one-off opportunity for a potential DPA candidate to negotiate a favourable settlement.
But are we likely to see many more instances with one isolated instance of wrongdoing? Where the matter is reported immediately? Where ownership of the business has recently changed? And will the DoJ always be so accommodating? The answer to all these questions is “no” – and this will limit the number of DPAs we’re likely to see in 2016 and beyond.
A tortuous process
The real problem lies in both the nature of a DPA and in its convoluted and tortuous process. Questions around secrecy in the process, the need for anonymity of implicated individuals and public disclosure obligations of listed companies are just a few of the minefield of problems. The SFO’s current thinking – supported by the DPA guidelines – is that it won’t even be offered unless the company has agreed to waive privilege. The SFO also doesn’t really like the idea of companies undertaking their own investigations, fearful of external lawyers “trampling the flowers” by interviewing witnesses. What’s more, at the end of this whole process, the resulting fine discount of 30 per cent is no different to what could be achieved through early co-operation and a guilty plea.
A better alternative?
Under the current regime, the SFO has ceased to use the old civil settlement remedy. Officially, the SFO says that civil settlements are still possible, but it’s difficult to escape the feeling that this flexible and easy-to-use tool has been unwisely discarded. A company that uncovers a problem, deals appropriately with the individuals and customers involved and upgrades its compliance programme accordingly, ought to be able to avail itself of a civil resolution. This might well still involve a significant financial penalty, but without the numerous hurdles involved in the DPA process. In addition, a civil option would encourage companies to self-report, meaning that the SFO can focus its limited resources on those companies which do not take such an enlightened path.
So, whilst DPAs are currently the talk of the town, spare a thought for the forgotten civil settlements. Not only would they be better for the SFO, being able to focus its limited resources, but clearly better – and completely appropriate – for reformed and ethically compliant companies too. Set against that possibility, who would want a DPA?
Jonathan Pickworth, partner, White & Case