Post matching 'regulatory-lawRegulatory Law'

Deferred Prosecution Agreements (DFA) provide a powerful tool for defence lawyers to prevent a company from being prosecuted by the Serious Fraud Office (SFO).

In July 2019, outsourcing company, Serco, was fined nearly £23 million as part of a  Deferred Prosecution Agreement  with the Serious Fraud Office (SFO) over electronic tagging contracts.  Serco’s UK subsidiary, Serco Geografix, took responsibility for three offences of fraud and two of false accounting between 2010 and 2013, related to understating profits from its electronic monitoring contracts with the Ministry of Justice (MoJ).  It was fined £19.2 million and ordered to pay £3.7 million in costs.

The case has been running since 2013, when Serco self-reported irregularities.  At the time of writing the DFA had been approved in principle by Mr Justice William Davis but still requires formal sign-off.

How do DFAs work

A DFA is an agreement reached by an organisation (they cannot be applied to individuals) and prosecutor – the Director of Public Prosecutions (DPP) or Director of the Serious Fraud Office (SFO) – under the supervision of a judge.  They set out that if certain conditions are met, prosecution will be suspended indefinitely.

An organisation can be invited to enter into a DPA by the Prosecutor who will only do so if they are receiving full cooperation with the corporate concerned.  Likewise, the defence lawyers can approach the prosecutor to enter into DPA negotiations.  The agreements are entirely voluntary, so either side can reject the offer.  In addition, either party can withdraw from negotiations at any time without providing a reason; however, the prosecutor will normally provide a reason for doing so unless disclosing such information would prejudice the investigation.

Why would a company elect to enter into a DPA?

According to the Serious Fraud Office, DPAs:

How does the prosecution decide if DPA negotiations should be offered?

The test for whether a DPA is appropriate is set out in the DPA Code of Practice and comprises of two stages:

Stage One

The evidential stage of the Full Code Test in the Code for Crown Prosecutors must be satisfied, and there must be a realistic possibility of a conviction based on the evidence procured.

Stage Two

The prosecutor must decide if it is in the public interest to enter into a DPA rather than prosecute the organisation. The Code for Crown Prosecutors states how public interest may be evaluated.  Factors to be evaluated include the scale of the offence, the impact of the offence on the community, and the defendants alleged culpability.

Will a DPA be offered if a company does not self-report?

Ben Morgan, Joint Head of Bribery and Corruption at the SFO initially stated in various talks (see, at a Bird and Bird seminar: DPAs and the UK Aerospace and Defence Industry (1 July 2014); the Global Anti-Corruption and Compliance in Mining Conference 2015 (20 May 2015)) that the regulator would only offer to negotiate a DPA with an organisation which self-reported on a matter the SFO was unaware of.

However, Mr Morgan has said more recently (Annual Bar and Young Bar Conference 2016, London (17 October 2016)) he was not aware of a case where a DPA would be automatically ruled out.  However, he said that the key factor in determining whether to offer a DPA or prosecute is “the stance the company takes once it becomes aware of the issue”.  It is likely that whether a company self-reported or not will be a deciding factor.

There is no hope of being offered a DPA if an organisation does not fully cooperate with the investigator.  For example, a DPA was offered to Rolls-Royce PLC and Rolls-Royce Energy Systems Inc even though they did not self-report.  What triggered a willingness to negotiate was the “extraordinary” cooperation given by the company.

What are the advantages and disadvantages of a DPA?

For corporate bodies that rely on public procurement as part of their business model, the avoidance of prosecution is a significant advantage of a DPA as convictions can result in debarment from public tenders.

DPAs also allow the organisation to control the PR around the wrongdoing.  In addition, DPAs provide for a quicker result than a prosecution (especially if it is defended).

The fine given to the company will be broadly similar to one which would be imposed by the Court in a successful prosecution.  However, the two most recent DPAs suggest that the discount obtained can be up to 50%.

The disadvantages of a DPA include the fact that if a DPA is not agreed or approved by the Court, the Prosecution can use certain documents related to the DPA in later Court proceedings.

Furthermore, a DPA can contain conditions that would not be imposed by the Court, for example, steps to improve compliance, which may be expensive and difficult to implement within the timeframe set.

Remember, just because a company avoids criminal prosecution in the UK under a DPA, it does not preclude other jurisdictions from investigating allegations of wrongdoing or civil claims from being brought.

Final words

The decision to propose or enter into a DPA must be taken with care and following expert advice from a corporate crime barrister or lawyer.  They will provide the advice and representation required to ensure you make the best decision for your organisation.

Tanveer Qureshi is a Legal 500 barrister, specialising in ASA compliance, business to business fraud, health and safety, food standards, civil litigation, and corporate crime.  If you require legal representation, please contact directly on 020 3870 3187.

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