How useful are DPAs to 'the defendant?

Although hailed by the director of the Serious Fraud Office, David Green CB QC, as 'a template for future agreements', deferred prosecution agreements (DPAs) have serious consequences for defendant companies.

Introduced by the Crime and Courts Act 2013, DPAs provide companies with a means of avoiding conviction in return for voluntary disclosure and payment of fines and costs. In essence, if the terms of the agreement are satisfied, the prosecution will be discontinued. That being so, the corporate body is free to continue trading without the stigma of a criminal record. Yet, as so often, the devil is hiding in the small print.

Disadvantages of DPAs

First, DPAs will result in many of the same disadvantages for the corporate entity as a guilty plea. Although the initial negotiations are strictly private, the preliminary opinion of the court, its final approval of the DPA, and the agreement itself must be published once the agreement is implemented (see paragraph 8(7) of schedule 17 to the Act). As Sir Brian Leveson P commented in his final judgment in SFO v Standard Bank (case no U20150854), there can be 'no question of the parties having reached a private compromise without appropriate independent judicial consideration of the public interest: furthermore, publication of the relevant material now serves to permit public scrutiny of the circumstances and the agreement'.

There is therefore no scope for a corporate entity to shield itself from hostile scrutiny under the DPA system (though the fact that negotiations on the agreement are private will postpone such scrutiny until the agreement has been approved by the court).

Further, the financial penalties imposed by a DPA are designed to reflect those imposed following a guilty plea (see paragraph 5(4) of schedule 17). In short, beyond the avoidance of a formal conviction (which may be very important in itself), DPAs have few advantages over a guilty plea.

Nor are companies the only ones who may suffer as a result of an agreement. The DPA cannot apply to individuals and cannot preclude their future prosecution. Thus, the all-too-familiar pattern of company office holders or employees being at odds with the corporate body is perpetuated.

It is not difficult to foresee circumstances in which it is in a company's interests to negotiate and accept a DPA, even where its officers are likely to be prosecuted for the offence it avoids by so doing. Indeed, paragraph 4.5 of the DPA Code of Practice for Prosecutors, published jointly by the SFO and the Crown Prosecution Service, makes painfully clear that information disclosed during the pre-DPA negotiations may be used against individuals working for the company. Thus DPAs may actually facilitate or make possible the prosecution of company office holders.Interestingly, no obvious conflict arose between the corporation and its employees in the Standard Bank case because the only relevant individuals were employees of a sister bank of the defendant (and were neither UK citizens nor based in the UK).

Future prosecutions

Potentially the greatest pitfall of the DPA procedure is the high level of co-operation required of the company. It is quite clear that co-operation on behalf of the corporate body is a highly significant factor in determining whether a DPA will be offered by the prosecutor and accepted by the court.

Leveson P made clear that self-reporting (including co-operation with the prosecutor) was a significant factor in his decision to allow the Standard Bank DPA. The prosecutor's code on DPAs is equally strident on the matter. Further, such disclosure can be used to found future prosecution, either of the original allegation or unrelated charges.In addition, failure to disclose can be heavily sanctioned. Clause 8 in the Standard Bank DPA reads: 'After the expiry of the agreement the SFO may institute fresh proceedings if the SFO believes that during the course of negotiations for the agreement Standard Bank provided inaccurate, misleading, or incomplete information to the SFO and Standard Bank knew, or ought to have known, that the information was inaccurate, misleading, or incomplete.'

This raises the prospect of a corporation fully and faithfully complying with the DPA but being prosecuted (for the very offence the DPA was intended to suspend) if the prosecutor 'believes' that the company's previous disclosure was insufficient. The (presumably desired) effect of the above may well be to encourage levels of disclosure greater than those which would accompany a guilty plea. As stated above, such disclosure could then be used to prosecute either the company or individuals for unrelated offences.

In short, the DPA procedure seems to be very useful for prosecutors (reducing costs
and potentially leading to further prosecutions) but may seem less attractive to companies. Whether corporations believe a DPA to
be worth the cost remains to
be seen.

Ben Henriques is a barrister practising from Sonn Macmillan Walker @SMW_Law www.criminalsolicitor.co.uk