The Serious Fraud Office (SFO) last week published a draft Code of Practice setting out their approach to the use of Deferred Prosecution Agreements (DPAs) in a move that lawyers warn will open the floodgates to unduly lenient case settlement.
DPAs are to be introduced by the Crime and Courts Act 2013, expected to come into force next year, and offer a company charged with criminal activity, such as corporate criminal liability under the Bribery Act, the chance to reach an agreement with a prosecutor without going to trial.
The US-style model, which addresses a lack of resources to undertake high profile prosecutions and is likely to encourage much greater self-reporting, will see companies agree the terms of a penalty, restitution for victims and possibly co-operate on future prosecutions of individuals. Unlike the US, there is strong judicial oversight and any agreement will need court approval. If the conditions are not met, the prosecution can resume.
In these cash-strapped times the measures are likely to mean far more prosecutions, which on one level is a good thing. However, lawyers are asking whether allowing companies to escape full prosecution sends out the right message. ‘Is it good for the public and the rule of law that prosecutors are enabled to make a decision not to prosecute a company for a serious offence which has potentially harmed many on such a flimsy foundation?’ asks founding partner of criminal, fraud and regulatory firm Corker Binning, David Corker (pictured).
The move is seemingly at odds with a consultation also launched last week on sentencing guidelines for individuals who commit financial crime, under which the Sentencing Council proposes tougher and far more victim-centred penalties.
Sentencing Council member Michael Caplan QC said: ‘Fraud is committed for financial gain, but it can mean much more than financial loss to the victim. Our research with victims showed the great impact it can have on them.
‘Our proposed guidelines therefore direct courts to start the sentencing process by looking at what victims have been through.’
There is also a risk for companies that DPAs, under which the SFO needs only ‘reasonable’ suspicion and grounds to proceed, will become the default position, marking an era of lazy prosecutions.
Corker added: ‘Is it good for a company to be pressured by a prosecutor to accept and settle an allegation of crime via a DPA without that prosecutor having had to determine the strength of evidence behind that allegation?
‘It helps to create an illusion of rigorous enforcement as the company concerned is willing to make admissions as a precursor to a DPA.’
Corker points to widespread disquiet arising from recent US DPA settlements, where there have been allegations of unhealthy competition among prosecutors and suggestions that they are picking on companies who they believe will pay up.
However, the SFO stresses DPAs could be appropriate where the public interest is not best served by mounting a prosecution and emphasises that the UK model will benefit from its judicial oversight.
The SFO is inviting comments on the Code of Practice and the consultation ends 20 September.