Do NPAs And DPAs Deter?
As highlighted below, the DOJ recently acknowledged, despite prior definitive statements by former Assistant Attorney General Lanny Breuer to the contrary, that “measuring the impact of NPAs and DPAs in deterring the bribery of foreign public officials would be a difficult task, save providing certain anecdotal and other circumstantial evidence.”
As discussed in this previous post, in September 2012 then Assistant Attorney General Lanny Breuer passionately defended the DOJ’s use of NPAs and DPAs. Among other things, Breuer boldly stated that NPAs and DPAs “have had a truly transformative effect on particular companies and, more generally, on corporate culture across the globe” and that the result of DOJ’s frequent use of such agreements “has been, unequivocally, far greater accountability for corporate wrongdoing – and a sea change in corporate compliance efforts.” Breuer further stated as follows.
“One of the reasons why deferred prosecution agreements are such a powerful tool is that, in many ways, a DPA has the same punitive, deterrent, and rehabilitative effect as a guilty plea: when a company enters into a DPA with the government, or an NPA for that matter, it almost always must acknowledge wrongdoing, agree to cooperate with the government’s investigation, pay a fine, agree to improve its compliance program, and agree to face prosecution if it fails to satisfy the terms of the agreement.”
Despite Breuer’s rhetoric, the question of whether NPAs and DPAs adequately deter future improper conduct has long been asked.
As noted in this previous post, in 2009, the Government Accountability Office (“GAO”) released a report regarding DOJ’s use of NPAs and DPAs. The GAO Report was not FCPA specific, although it does mention the FCPA as being one area where NPAs and DPAs are frequently used. The GAO Report stated as follows.
“DOJ cannot evaluate and demonstrate the extent to which DPAs and NPAs—in addition to other tools, such as prosecution—contribute to the department’s efforts to combat corporate crime because it has no measures to assess their effectiveness. Specifically, DOJ intends for these agreements to promote corporate reform; however, DOJ does not have performance measures in place to assess whether this goal has been met.”
The GAO Report concluded as follows.
“[W]hile DOJ has stated that DPAs and NPAs are useful tools for combating and deterring corporate crime, without performance measures, it will be difficult for DOJ to demonstrate that these agreements are effective at helping the department achieve this goal.
As noted in this previous post, in the 2010 OECD Phase 3 Report of U.S. FCPA enforcement, the evaluators likewise noted that the “actual deterrent effect [of NPAs and DPAs have] not been quantified.” In the Report, the evaluators sought information about the deterrent effect of DPAs and NPAs” and one of the recommendations in the Report was for the U.S. to “make public any information about the impact of NPAs and DPAs on deterring the bribery of foreign public officials.”
The DOJ recently responded to the OECD’s recommendation in its “Final Follow-Up To Phase 3 Report and Recommendations.” The DOJ response, dated December 2012, states in full, as to the NPA / DPA issues as follows.
“Scholars have recognized that quantifying deterrence is extremely difficult. This is equally true for the deterrent effect of DPAs and NPAs. Thus, as discussed at the time this recommendation was made, measuring ‘the impact of NPAs and DPAs in deterring the bribery of foreign public officials’ would be a difficult task, save providing certain anecdotal and other circumstantial evidence.
One of the best sources of anecdotal evidence demonstrating that DPAs and NPAs have a deterrent effect comes from the companies themselves. The companies against which DPAs and NPAs have been brought have often undergone dramatic changes. For instance, prior to or following the entry of DPAs or NPAs, many companies have terminated personnel, including senior managers, established new codes of conduct and compliance policies and procedures, pledged not to use third-party agents, withdrawn from bids tainted by corruption, provided new and substantial resources to compliance and audit functions within their organizations, and instituted new training regimes. These companies, through their remediation efforts under DPAs and NPAs, have often fundamentally changed how they conduct business. In addition, just like with individuals on parole or probation, the monitor provisions or self-reporting requirements of DPAs and NPAs are designed to deter future misconduct and, at the same time, ensure that companies meet their obligations. In meetings with board members, chief executive officers, chief financial officers, general counsel, and chief compliance officers, DOJ and SEC have heard directly from these senior leaders about the impact DPAs and NPAs have had on their companies for the better.
Beyond the companies themselves, DOJ and SEC have heard anecdotal stories about the deterrent effect of NPAs and DPAs on other companies and how those resolutions raise awareness of anti-corruption laws. Often those stories come from other corporate leaders who have discussed how their own practices have changed or even whole industries that have changed their behavior for the better. For example, during the course of one investigation, it was revealed that a major multinational corporation’s DPA caused another Fortune 50 company to implement an FCPA compliance program. In addition, following DPAs in different cases, companies have come forward to make voluntary disclosures of similar conduct. Many of our DPAs and NPAs are publicized extensively and scrutinized closely by the business community, the legal profession, and the compliance community, among others. The ‘lessons learned’ from these DPAs and NPAs, for example, help raise awareness of compliance risks and failures. The existence of DPAs and NPAs also encourages companies to voluntarily disclose conduct, by providing meaningful rewards to those companies, which enables DOJ and SEC to ensure further specific and general deterrence.”
Of course, what the DOJ says above as to the deterrent value of NPAs or DPAs would equally apply to actual prosecutions.
But let’s test the following statement made by the DOJ “One of the best sources of anecdotal evidence demonstrating that DPAs and NPAs have a deterrent effect comes from the companies themselves. The companies against which DPAs and NPAs have been brought have often undergone dramatic changes.”
In 2008, the DOJ announced (here) that Aibel Group Ltd. (Aibel Group) pleaded guilty to violating the antibribery provisions of the FCPA. As noted in the DOJ release, “Aibel Group admitted that it was not in compliance with a deferred prosecution agreement it had entered into with the Justice Department in February 2007 regarding the same underlying conduct.” The DOJ release further states as follows. “This is the third time since July 2004 that entities affiliated with Aibel Group have pleaded guilty to violating the FCPA.”
As this previous Wall Street Journal Corruption Currents post highlighted, Ingersoll-Rand, fresh off its exit of a DPA in 2011, soon disclosed that it found other potential violations of the FCPA. In a 2011 filing, the company stated as follows.
“We have reported to the DOJ and SEC certain matters which raise potential issues under the FCPA and other applicable anti-corruption laws, including matters which were reported during the past year. We have conducted, and continue to conduct, investigations and have had preliminary discussions with respect to these matters with the SEC and DOJ, which are ongoing.”
So the question remains, do NPAs and DPAs deter?
It turns out that not even the DOJ knows the answer.
*****
Interested in NPA and DPA issues? On May 3rd, I will be speaking at this event at the National Press Club in Washington, D.C. hosted by Corporate Crime Reporter.
DOJ Prosecution Of Individuals – Are Other Factors At Play?
Yesterday’s post (here) focused on DOJ FCPA individual prosecutions and highlighted the following facts and figures.
- Since 2008, the DOJ has charged 77 individuals with FCPA criminal offenses.
- 61% of the individuals charged by the DOJ with FCPA criminal offenses since 2008 have been in just four cases and 77% of the individuals charged by the DOJ since 2008 have been in just seven cases.
- There have been 53 corporate DOJ FCPA enforcement actions since 2008 and of the 53 corporate DOJ FCPA enforcement actions, 39 (or 74%) have not (at least yet) resulted in any DOJ charges against company employees.
These statistics should cause alarm, including at the DOJ as it has long recognized that a corporate-fine only enforcement program is not effective and does not adequately deter future FCPA violations. For instance, in 1986 John Keeney (Deputy Assistant Attorney General, Criminal Division, DOJ) submitted written responses in the context of Senate hearings concerning a bill to amend the FCPA. He stated as follows:
“If the risk of conduct in violation of the statute becomes merely monetary, the fine will simply become a cost of doing business, payable only upon being caught and in many instances, it will be only a fraction of the profit acquired from the corrupt activity. Absent the threat of incarceration, there may no longer be any compelling need to resist the urge to acquire business in any way possible.”
Likewise, in 2010 Hank Walther (Deputy Chief Fraud Section) stated that a corporate fine-only FCPA enforcement program allows companies to calculate FCPA settlements as the cost of doing business.
In my 2010 Senate FCPA testimony (here), I noted that the absence of individual FCPA charges in most corporate FCPA enforcement actions causes one to legitimately wonder whether the conduct giving rise to the corporate enforcement action was engaged in by ghosts. Others have rightly asked the “but nobody was charged” question, including perhaps most notably James Stewart in a New York Times column highlighted in this previous post.
However, as I stated in my Senate testimony, there is an equally plausible reason why no individuals have been charged in connection with many corporate FCPA enforcement actions. The reason has to do with the quality and legitimacy of the corporate enforcement action in the first place. Readers know well of the prevalence of non-prosecution and deferred prosecution agreements (NPA / DPA) in the FCPA context and how these agreements, not subject to any meaningful judicial scrutiny, are often agreed to by companies for reasons of ease and efficiency, and not necessarily because the conduct at issue violates the FCPA. For more on this dynamic, see my article “The Facade of FCPA Enforcement.” Individuals, on the other hand, face a deprivation of personal liberty, and are more likely to force the DOJ to satisfy its high burden of proof as to all FCPA elements.
In other words, perhaps the more appropriate question is not “but nobody was charged,” but rather do NPA and DPAs always represent provable FCPA violations.
I set out to test this with the following working hypothesis. Instances in which the DOJ brings actual criminal charges against a company or otherwise insists in the resolution context that the corporate entity pleads guilty to FCPA violations, represent a higher quality FCPA enforcement action (in the eyes of the DOJ) and is thus more likely to result in related FCPA criminal charges against company employees. Instances in which the DOJ resolves an FCPA enforcement action solely with an NPA or DPA, represent a lower quality FCPA enforcement action and is thus less likely to result in related FCPA criminal charges against company employees given that an individual is more likely to put the DOJ to its high burden of proof.
The below statistics provide a compelling datapoint concerning the quality and legitimacy of many corporate DOJ FCPA enforcement actions.
Since NPAs and DPAs were first introduced to the FCPA context in December 2004 (see here), there have been 69 corporate DOJ FCPA enforcement actions.
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12 of these corporate enforcement actions were the result of a criminal indictment or resulted in a guilty plea by the corporate entity to FCPA violations. 10 of these corporate enforcement actions – 83% – resulted in related criminal charges of company employees.
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46 of these corporate enforcement actions were resolved solely with an NPA or DPA. In only 3 instances – 6.5% – were there related criminal charges of company employees.
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A third type of corporate FCPA enforcement action is what I will call a hybrid action in which the resolution includes a guilty plea by some entity in the corporate family – usually the relevant foreign subsidiary – and an NPA or DPA against the parent company. Since the advent of NPAs and DPAs in the FCPA context, there have been 11 such corporate enforcement actions. In 3 of these actions – 27% – there were related criminal charges of company employees. This percentage is what one might expect compared to the two types of corporate FCPA enforcement actions discussed above, although it is interesting to note the following regarding these three instances. The DOJ ended up dismissing the charges against Si Chan Wooh (Schnitzer Steel), John O’Shea (ABB) was not found not guilty, and Bobby Elkin (Alliance One) received a probation sentence after the sentencing judge questioned many aspects of the enforcement action (see here for the prior post).
If the above statistics do not cause you to question the quality and legitimacy of many corporate FCPA enforcement actions, no empirical data ever will. For those who believe NPAs and DPAs always represent provable FCPA violations, the ball is now in your court to offer credible explanations for following datapoints.
If a corporate DOJ FCPA enforcement action is the result of a criminal indictment or resulted in a guilty plea by the corporate entity to FCPA violations, there is a 83% chance that related criminal charges will be brought against a company employee. If a corporate DOJ FCPA enforcement action is resolved solely with an NPA or DPA, there is a 6.5% chance that criminal charges will be brought against a company employee.
[Note – the above data was assembled using the “core” approach as well as the definition of an FCPA enforcement action described in this prior post]
The Manhattan Institute Joins The FCPA Reform Conversation
Citing to certain of my prior scholarship (here and here) and other writings, and otherwise highlighting certain issues that have been frequently highlighted on this site for a long time, the Manhattan Institute for Policy Research has joined the FCPA reform conversation.
The issue brief (here) titled “The Foreign Corrupt Practices Act: Aggressive Enforcement and Lack of Judicial Review Create Uncertain Terrain for Businesses,” and authored by Paul Enzinna (a partner at Brown Rudnick), argues as follows. “There is a strong case for reforming the FCPA through legislation, in order to continue to uphold the statute’s historical commitment to maintain the integrity of American businesses’ dealings abroad while limiting the ability of federal enforcement agencies to police business conduct worldwide and gain broad, quasi-regulatory powers over global businesses absent judicial oversight.”
The issue brief then states as follows.
“Congress should take up the cause of FCPA reform, clarifying the statute’s reach in the areas in which DOJ and the SEC have aggressively sought its expansion:
- Jurisdiction. Congress should clarify the reach of the FCPA’s “in furtherance of” jurisdiction. Specifically, Congress should decide whether to limit the FCPA’s application against foreign businesses bribing foreign officials. The Justice Department’s broad interpretation of the FCPA, predicated upon transactions denominated in dollars and those messages that may pass through U.S.-based e-mail servers, potentially affects U.S. diplomacy and finance and technology sector competitiveness.
- Foreign official. Congress should specify the extent to which the FCPA applies to low-level employees of state-owned enterprises. The economic emergence of formerly Communist countries and of the still formally Communist China has led to a proliferation of state-owned enterprises with which American companies must do business in order to compete globally.
- To obtain or retain business. Congress should clarify the “routine government actions” covered by the FCPA’s express exemption for “facilitating payments” not covered by its prohibition on payments to officials to “obtain” or “retain” business. DOJ’s broad interpretation of this element to include payments intended to obtain licenses or permits and other low-level bribes seems in conflict with the statute’s express preemption and has fueled the growth in FCPA enforcement actions.”
I agree with many of the issues raised in the brief such as:
“Although the ever-widening interpretations of the FCPA seem to go beyond a commonsense understanding of the statute and its purpose, these interpretations are not being subjected to adequate judicial review because the high costs associated with potential criminal conviction have generally led targeted corporations to resolve cases without trial through “deferred-prosecution agreements” (DPAs) or “non-prosecution agreements” (NPAs).”
“DOJ has made it difficult for businesses to parse the statutory term “foreign official” by issuing contradictory statements” (see here for the prior post).
“DOJ’s expansive readings of the FCPA, along with the lack of judicial review over the department’s interpretations, are problematic. Invoking the statute to prosecute payments intended to help obtain licenses or permits is clearly at odds with Congress’s express facilitating-payments exception.” (see here for my article detailing legislative history and judicial scrutiny concerning non-foreign government procurement payments).
“In its current guise, the FCPA has helped generate an essentially unaccountable DOJ bureaucracy …”.
However, my reaction to the latest reform proposals is the same as my general reaction to certain of the Chamber’s FCPA reform proposals (see here).
While I have argued for an FCPA compliance defense (see here for my scholarship “Revisiting an FCPA Compliance Defense”), many other aspects of FCPA reform – and calls to amend the statute – are more pleas for judicial scrutiny and application of black letter legal principles to FCPA enforcement.
The remedy for enforcement of a law that largely takes place in the absence of judicial scrutiny where enforcement is in many cases contrary to Congressional intent and inconsistent in certain other respects with black letter legal principles, is not to amend the law, but to inject judicial scrutiny into the process so that Congressional intent and black letter legal principles can be vetted and decided upon by someone other than the enforcement agencies. For my verbal explanation of this issue, see this recent interview (approximately 5 to 7 minute mark) with the on-line news site Main Justice.
My FCPA reform proposal is to couple a compliance defense along the lines I outline in my article with abolishing NPAs and DPAs. These alternative resolution vehicles (first introduced into FCPA enforcement in 2004 as a matter of DOJ policy and not Congressional authorization) have created the conditions in which the “facade of FCPA enforcement” I have written about here continues to flourish. Think of the judicial process as a river where issues are allowed to flow into the proper channel. NPA and DPAs are logs in the river blocking the flow of issues into the proper channel.
In terms of other FCPA reform measures, I have also suggested that the enforcement agencies publish declination decisions when a company voluntarily discloses and the establishment of meaningful post-employment restrictions on FCPA enforcement attorneys.
Secret FCPA Enforcement
The DOJ’s Foreign Corrupt Practices Act Guidance press release (here) states that the Guidance “is an important illustration of [the DOJ’s] transparency.” Likewise, at the Guidance press conference (see here for the prior post), Assistant Attorney General Lanny Breuer stated that the DOJ strives to be “transparent” in its FCPA enforcement. A few days later, in a speech to an FCPA audience (see here), Breuer again stated that the FCPA Guidance was a “vivid example” of the DOJ’s committment to transparency and that the Guidance is “perhaps the boldest manifestation of [the DOJ’s] transparent approach to [FCPA] enforcement.”
While reading the FCPA Guidance in November, I couldn’t help but notice two things.
First, footnote 379 of the Guidance states as follows. “Historically, DOJ had, on occasion, agreed to DPAs with companies that were not filed with the court. That is no longer the practice of DOJ.”
Second, page 75 of the Guidance suggests that the DOJ has used non-prosecution agreements in individual FCPA-related case (e.g., “If an individual complies with the terms of his or her NPA, namely, truthful and complete cooperation and continued law-abiding conduct, DOJ will not pursue criminal charges.” The Guidance also states that “in circumstances where an NPA is with a company for FCPA-related offenses, it is made available to the public through DOJ’s website.” (emphasis added). This statement suggests that when an NPA is with an individual for FCPA-related offenses, the agreement is not made public.
The Guidance statements on secret FCPA enforcement confirmed whispers I’ve heard from others on this topic.
Beginning on November 21st, I began seeking answers from the DOJ’s press office (from an individual who previously has responded to my e-mails), as to the following two questions.
As to the first issue above, I asked the DOJ to “please list specific instances in which the DOJ ‘agreed to DPAs with companies that were not filed with the court’ and the year in which DOJ stopped this practice.”
As to the second issue above, I asked the DOJ to “please confirm that the DOJ has used NPAs to resolve [individual] FCPA-related cases and [to] provide the specific number of instances in which the DOJ has done so, including the year.”
No response.
Follow-up e-mails were sent to the DOJ press office (again to an individual who previously has responded to my e-mails) on November 28th and December 5th.
No response.
On December 12th, I e-mailed a DOJ FCPA enforcement attorney (an individual who previously has responded to my e-mails) seeking answers to my two questions.
No response.
So much for that transparency thing.
The DOJ’s secret FCPA enforcement remains a mystery.
Across The Pond
After focusing on the FCPA guidance for the past few weeks, this post goes across the pond to check in on three U.K. developments.
First Her Majesty’s Crown Prosecution Service Inspectorate, the independent Inspectorate for the U.K. Crown Prosecution Service, recently released (see here) a “Report to the Attorney General On The Inspection of the Serious Fraud Office.” The report focuses mostly on general issues, but readers may be most interested in Chapter 8 dealing with “Asset Recovery and Alternative Resolution.”
Second, the Crown Office (the agency responsible for prosecution of crime in Scotland) recently announced (here) a £5.6 million civil recovery enforcement action against Aberdeen, Scotland based drilling company Abbot Group Limited. According to the release, Abbot “admitted that it had benefited from corrupt payments made in connection with a [2006] contract entered into by one of its overseas subsidiaries and an overseas oil and gas company.” According to the release, “the sum to be paid by Abbot represents the profit made by the company under the contract.” Two things to note. First, the release makes much of the fact that Abbot “self-reported” the conduct at issue. Yet, the release itself states that “the corrupt payments were brought to light in May 2011 following enquiries by an overseas tax authority which resulted in an investigation by a firm of solicitors and a firm of accountants instructed by Abbot itself.” Second, the release notes that the enforcement proceeds “will be invested in the Scottish Government’s hugely successful CashBack for Communities Programme which takes cash from the Proceeds of Crime and invests it in a range of sporting, cultural, community mentoring projects and sports facilities for the benefit of our young people and their communities.”
Third, David Green (Director of the U.K. Serious Fraud Office) recently answered questions before a House of Commons Justice Committee. (See here for the transcript). In his comments, Green: (i) says FCPA / Bribery Act Inc. created unnecessary “spin” regarding the SFO’s recent policy revisions; (ii) discusses the role of the SFO; (iii) makes an apt analogy to early enforcement of the FCPA; and (iv) talks about the prospect of DPAs in the U.K.
Below are excerpts from the Q&A’s that touch upon bribery and corruption issues.
“Q24 Steve Brine: […] I want to ask you about the notes that I have been reading about facilitating payments, business expenditure and corporate self-reporting. What is your intention behind the revision of policies on those three areas? Are they really a radical departure from the previous guidance, or is there a bit of spin there?
David Green: It is not my spin. What you might call the bribery and corruption industry-by which, I suppose, if I was being unkind, I might mean lawyers who make an enormous amount of money out of it, advising corporates-wants to put it that way. In fact, it is not that. What I have done, as you know, is to withdraw policies in relation to bribery and corruption, and they have been replaced with a statement that we are subject to the joint guidance agreed with the Crown Prosecution Service. In other words, all I have done is to remove what is actually a unilateral gloss placed on that joint guidance by my predecessor at the SFO. It was also done in order to comply with the recommendations of the OECD which, as you will know, are about being careful how a self-report is defined.
What I have done most specifically, which certainly excited some-perhaps they are easily excited-is to withdraw the exclusive pledge that the SFO would not prosecute if you self-report. Why did I do that? In my view, it is not something that a responsible prosecutor should be saying, simply because you have no idea what kind of facts or combination of facts you might be presented with when somebody comes through your door with an expensive lawyer. You have no idea, so you cannot cater for it in advance. What you can say, without question, is that the fact of a genuine self-report-by a genuine self-report I mean, in its purest form, telling us something that we did not know already, and the corporate acting proactively to investigate it-must be very significant as a factor in weighing up the public interest limb of the decision to prosecute; that is the code test. That is what I am about. That is why I did that.
There is one other thing. I have said that I wanted to restate the SFO’s role as a crime-fighting agency. In addition, frankly, so far as I am concerned, we are not there to give advice to people. They can get their advice from their lawyers and their other experts, which they have in spades. I am not there, nor are my staff there, to give advice. We are there to investigate and prosecute serious fraud, bribery and corruption.”
[…]
Q26 Steve Brine: […] “Without specifying details, would you give us some indication of how many investigations you are currently undertaking into potential offences under the Act?
David Green: Under the new Act?
Q27 Steve Brine: Yes, because you are also bringing cases under old bribery legislation, are you not? Let us just look at the new Act. It is not retrospective, if I am correct.
David Green: That is exactly right. We are just concerned with stuff after July 2011. It is important to understand that section 2A of the Criminal Justice Act 1988 added a pre-investigation power in relation to bribery and corruption, which enables us basically to look at the facts and assess them, and to see whether there is material that would justify, in law, my launching a full-scale investigation. If I may, for the sake of clarity, I shall call those pre-investigation investigations “projects”.
From recollection, we have seven cases that are in the project phase. What will come of them I cannot tell you; I really do not know, but if we can we will turn them into investigations if we are justified in doing so. We have another half dozen cases that relate to pre-Bribery Act law; again, they are in the same phase.
Understandably, legislators, journalists and, indeed, members of the public may say, “Well, you have this marvellous new Bribery Act. What are you doing about it?” As a kind of private project, I have been looking at the fortunes of the FCPA-the Foreign Corrupt Practices Act of the United States. That was enacted in the late 1970s, and the first prosecution was in 1981. It did not get any teeth, in a really meaningful way, until the penalties were enhanced, and so forth, in the 1990s. I am not saying for a moment that you are going to have to wait 20 years for your first Bribery Act prosecution, but things are in hand and no one would be keener than I would to see a good, solid Bribery Act prosecution. We are working on it.”
[…]
“Q30 Mr Buckland: May I move on to the question of deferred prosecution agreements? I have read very carefully the memorandum and evidence that you have submitted to the Committee, and it is clear that the SFO supports the Government’s proposals to amend the current Crime and Courts Bill and to bring in DPAs. I do not know whether you or your office have troubled yourselves with the potential impact assessment, in terms of financial benefit and whether the SFO directly would receive either a share or the entirety of any receipts from financial settlements pursuant to DPAs.
David Green: As I understand it, all funds from DPAs will go directly to the Treasury, to avoid concerns over conflicts of interest.
Q31 Mr Buckland: So there is no hypothecation. Would it be fair to say that the SFO would have a legitimate expectation that, even though the moneys were not hypothecated, you could end up receiving some additional funding to help deal with the work that you are doing?
David Green: It has always been my view, Mr Buckland, that the SFO is here to stay, but that it needs to prove itself. Assuming that it proves itself-I hope fervently that it does-I would be the first to join any negotiation on an enhanced budget to get us more resources to do more good work. But I would say that, wouldn’t I?
Q32 Mr Buckland: I would expect you to, and I am glad to hear it. Having looked at the impact assessment prepared by the MoJ on DPAs, I was a little concerned. My reading of it is that there was an assumption in the document that there would not be an overall increase in the number of cases dealt with. In other words, there would potentially be a shift from early guilty pleas to DPAs, meaning no overall increase in the number of cases dealt with. Would that be your expectation, or would you hope for something more ambitious?
David Green: I would be far more ambitious. I would expect our case load-including cases dealt with under DPAs-to increase significantly once they kick off. I hope, as I am sure you do, that we will have our first DPA in place in early 2014.
Q33 Mr Buckland: Obviously, public perception is very important. Two aspects of DPAs as currently proposed may cause some concern. The first is having the preliminary hearings in private, as opposed to having all hearings in public. Does the SFO have a view on the reasons for that proposal?
David Green: I do not, as I sit here, have a particular view on that. What I would say is that later on, as the process develops, it does of course become public. Obviously a big difference between our DPAs and the US model is judicial involvement from day one. I would not be happy in expressing a particular view on that. It is something that I would have to think about, but I would be happy to let you know in due course.
Q34 Mr Buckland: I would be very grateful, Mr Green. Thank you. Again, public perception is important. The idea that you are doing some sort of niche job is wholly wrong, I think. The public are genuinely concerned about a culture of impunity that is perceived to have grown up around corporate and serious fraud. Is there a danger, with DPAs, that we could end up with white-collar crime somehow being seen as less serious than other types of crime?
David Green: That is obviously something that I have thought about a lot-indeed, it has troubled me-and I think that the answer is this. It is important that DPAs are seen as just one additional tool in the prosecutor’s toolkit. They are certainly not, in any sense, a universal panacea for corporate misconduct. They will be used in the right circumstances only. An example of what I think would be the right circumstance is where an incoming board chooses to self-report past misconduct by a previous board, which it has unearthed and proactively investigated. That would be just the sort of challenge to be met, in my view, by a DPA. It would certainly not be appropriate if, for instance, the corporate had been set up and used as a vehicle for fraud. That would be quite wrong. Obviously our first principle, as I hope I have made clear, is that serious fraud, bribery and corruption must always be prosecuted where that is possible-always.
Q35 Mr Buckland: Do you see this as having the potential to deal with the common scenario of when a legitimate business becomes dishonest? I am sure that, like me, you have had plenty of experience of that sort of scenario.
David Green: Of course, we would only be dealing with the corporate itself, under a DPA.
Q36 Mr Buckland: Not the individual.
David Green: Indeed. If there was a case against individuals, we would obviously prosecute if we could.
Q37 Mr Buckland: One concern that has been put to me about DPAs is that we have looked to the United States as an example, but that the US has a very big stick in terms of how they-I won’t say aggressively, but certainly robustly-police their free market, and the penalties available under the criminal justice system in the various US states to deal with wrongdoers. Do you think that the British scenario, where the stick is much less potent, is a good parallel to draw with the United States?
David Green: Just as we have adapted the US model for our circumstances, so we have adapted the carrot and stick equation. I have touched on this twice, but I cannot overemphasize the importance of our decision to enhance our intelligence capability. I really mean business on that. At the moment, our intelligence capability-the one I inherited-is really a sort of vetting process. I want to be far more aggressive in our intelligence activities, not to run it ourselves but to buy it in from, say, the City of London police or external agencies, going up to all sorts of exotic intelligence. The intelligence capability being built up-that is the stick. These people may well be found out, and they need to understand that. The carrot, of course, is often said to be certainty. Actually, it is not really certainty, because when they come along to self-report, they are not sure how they are going to end up. What they mean, I think, is finality. In other words, a line will be drawn in the sand under previous corporate misconduct, under certain conditions, and a company can then move on. Having thought about it quite a lot, I think that that is really what a corporate wants.”