The U.K. Ministry Of Justice Should Say No To DPAs In The Bribery Act Context
As noted in this prior post, the U.K. Ministry of Justice (“MoJ”) has a consultation process open concerning its proposal to adopt deferred prosecution agreements. Below is the text of my letter to the MoJ urging it to say no to DPAs in the Bribery Act context. You too can make your voice heard on this issue before August 9th (see here for more information).
*****
This letter responds to the Ministry of Justice’s (“MoJ”) request for consultation regarding deferred prosecution agreements (DPAs) (Consultation Paper CP9/2012).
While the MoJ’s DPA proposal concerns a variety of economic crimes, it is probable that a significant percentage of DPAs, if implemented, will be used to resolve Bribery Act enforcement actions as has happened in the U.S. where a significant percentage of DPAs and related nonprosecution agreements (NPAs) have been used to resolve Foreign Corrupt Practices Act (“FCPA”) enforcement actions. Given that my primary area of expertise is the FCPA and related anti-corruption laws and initiatives including the Bribery Act, I confine my comments to potential application of DPAs to resolve Bribery Act prosecutions.
To begin, I applaud the MoJ for its wholesale rejection of non-prosecution agreements (“NPAs”) to resolve allegations of corporate criminal activity. Like the MoJ, I agree that such resolution vehicles, which are a prominent feature of the U.S. criminal justice system including in FCPA enforcement actions, are not suitable given the lack of transparency in such agreements including the lack of judicial oversight. I can only hope that the U.S. Department of Justice sees the wisdom of your decision and likewise abolishes such agreements as I have advocated.
I also applaud the MoJ for insisting, should there be DPAs in the U.K., “that there should be judicial involvement from an early stage whereby the proposed DPA is considered at a preliminary hearing before it returns for final judicial approval.” As noted by the MoJ’s consultation paper, U.S. style DPAs lack such a feature.
I am concerned however that in its consultation paper the MoJ relies upon several unfounded assertions when discussing use of DPAs in the U.S. For instance, the consultation paper asserts, as if a fact, that such vehicles have been “successfully adopted” in the U.S. and that such vehicles “support an existing culture of self-reporting of serious economic crimes.”
If “successfully adopted” means that such vehicles has resulted in an increase in enforcement actions, then yes I agree with the MoJ’s statement. After all, it is not surprising that the more options an enforcement agency has (beyond the traditional two options of prosecuting and not prosecuting) the more enforcement actions that will result. Yet, I submit that a factor in determining success ought to be quality of the enforcement action and whether an enforcement agency theory of prosecution, if subjected to judicial scrutiny and an adversarial proceeding, can meet its high burden of proof. This element of “success” is missing from U.S. style resolution vehicles replaced with a system whereby entering into such a resolution vehicle is often merely a cost/benefit exercise for a company often divorced from the law and relevant facts. I’ve called this dynamic “the façade of enforcement” and I urge the MoJ to place greater importance on quality, not quantity, in assessing “success.”
Moreover, the MoJ asserts, as if fact, that such resolution vehicles “support an existing culture of self-reporting of serious economic crimes” in the U.S. While empirical data is lacking as to the frequency of voluntary disclosures of improper conduct during this era of frequent U.S. use of NPAs and DPAs, anecdotal evidence and comments from various experts suggest that a high percentage of corporate conduct that could implicate criminal laws is not reported to the enforcement agencies. I submit that one factor driving this dynamic is that companies and its counsel have come to realize that the enforcement agency will not be diligent and complete in its application of law to facts and its consideration of mitigating facts because the enforcement agency will never have to prove its enforcement theory to anyone other than itself. In short, U.S. alternative resolution vehicles ought not be viewed as a successful or desirable export.
Regardless of the divergent views one may have as to the “success” of alternative resolution vehicles in the U.S. and whether such vehicles support a culture of self-reporting, my primary concern with the U.K. looking to the U.S. for support in considering DPAs is the material differences between U.K. and U.S. corporate criminal liability, including in the bribery context.
Under the U.S. principle of respondeat superior a business organization can face criminal liability based on the acts of any employee or agent to the extent the individual’s conduct was in the scope of their duties and was intended to benefit, at least in part, the organization. U.S. adoption of alternative resolution vehicles largely developed out of a sense of injustice when this principle was applied to organizations based on isolated conduct or conduct that occurred despite the organization’s good faith compliance efforts.
Unlike the ease in which a business organization can be subject to criminal liability under U.S. law, as the consultation paper itself notes, organization criminal liability under U.K. law is very difficult to prove and “depends on establishing that the ‘directing mind and will’ of an organization was at fault.” In short, U.S. adoption of DPAs was largely a function of general circumstances not present under U.K. law.
Moreover, U.S. use of alternative resolution vehicles in the FCPA context implicates specific circumstances not present in the Bribery Act. As the consultation paper itself notes, the Bribery Act is a unique law in that it already provides in Section 7 a unique offense to hold organizations liable that fail to adopt adequate procedures to prevent bribery. Although many, including myself, have called for the FCPA to be amended to include such a compliance defense, the FCPA currently does not contain such an exception.
In conclusion, I pose the following questions the MoJ should consider during its consultation process. Why does a law with an adequate procedures defense require the third option of a deferred prosecution agreement (the first two options being prosecute vs. not prosecute)? If a corporate has adequate procedures, but an isolated act of bribery nevertheless occurs within its organization, the corporate presumably would not face prosecution under the Bribery Act. This seems like a just and reasonable result and there is no need for a third option in such a case. On the other hand, if a corporate does not have adequate procedures (thus demonstrating a lack of commitment to anti-bribery compliance) and an act of bribery occurs within its organization, it presumably would face prosecution under the Bribery Act. This seems like a just and reasonable result. Does a third option really need to be created for corporates who do not implement adequate procedures? I submit the answer is no and urge the MoJ to reject use of DPAs in the Bribery Act context.
Oxford Publishing Resolves U.K. SFO / World Bank Actions
Last July, the U.K. publisher resolving an enforcement action concerning textbook and other sales in East Africa was Macmillian Publishing (see here for the prior post). This July, it is Oxford Publishing Limited (OPL), a wholly owned subsidiary of Oxford University Press (OUP).
Yesterday the U.K. Serious Fraud Office announced (here) an enforcement action against OPL regarding “unlawful conduct related to subsidiaries incorporated in Tanzania and Kenya.” The conduct at issue included “participating in public tenders for contracts to supply governments with text books and other educational materials for the school curricula.”
Pursuant to a civil recovery order under the Proceeds of Crime Act, OPL agreed to pay £1,895,435.
Under the heading “self referral” the SFO release states as follows.
“In 2011, OUP became aware of the possibility of irregular tendering practices involving its education business in East Africa. OUP acted immediately to investigate the matter, instructing independent lawyers and forensic accountants to undertake a detailed investigation. As a result of the investigation, in November 2011 OUP voluntarily reported certain concerns in relation to contracts arising from a number of tenders which its Kenyan and Tanzanian subsidiaries … entered into between the years 2007 and 2010. […] The investigation was thorough – involving numerous interviews and an extensive review of documents and electronic data – and completed to the satisfaction of the SFO. The substantial product of those investigations was presented to the SFO […] The product of that work led the SFO … to believe that [OPL subsidiaries] had offered and made payments, directly and through agents, intended to induce the recipients to award competitive tenders and/or publishing contracts for schoolbooks.”
The SFO release states that “a number of relevant features … led to the decision to pursue a civil recovery order in place of a criminal prosecution.” Those factors include the following: “OUP has conducted itself in a manner which fully meets the criteria set out in the SFO guidance on self reporting matters of overseas corruption” and “there is no evidence of Board level (or the equivalent) knowledge or connivance within OUP in relation to the business practices which led to the case being referred to the SFO.” The SFO release also states as follows. “The products supplied were of a good standard and provided at ‘open market’ values. This means that the jurisdictions involved have not been victims as a result of overpaying for the goods or as a result being supplied goods which were unsuitable or not required.”
The SFO release further states as follows.
“Since the occurrence of the conduct that is the subject matter of the civil recovery order, OUP has introduced enhanced compliance procedures intended to significantly reduce the risk of recurrence of such conduct within OUP. These procedures will be subject to review by a monitor who will report to the Director of the SFO within twelve months …”.
As noted in the SEC release, OUP also “unilaterally offered to contribute £2,000,000 to not-for-profit organisations for teacher training and other educational purposes in sub-Saharan Africa. This was a reflection of the seriousness with which OUP views the course of events that were subject to the investigation and a wish to acknowledge that the conduct of [its subsidiaries] fell short of that expected within its wider organisation.” As to this contribution, the SFO releases states that it “decided that the offer should not be included in the terms of the court order as the SFO considers it is not its function to become involved in voluntary payments of this kind.”
In the release, SFO Director David Green states as follows. “This settlement demonstrates that there are, in appropriate cases, clear and sensible solutions available to those who self report issues of this kind to the authorities. The use of Civil Recovery powers has been exercised in accordance with the Attorney General’s guidelines. The company will be adopting new business practices to prevent a recurrence of these issues and these new procedures will be subject to an extensive and detailed review.”
Finally, the SFO release notes that it “has previously been subject to criticism in relation to the transparency of the processes and proceedings in civil recovery matters.” Thus the SFO release links to a number of documents including this Claim Form which sets forth specific claim details.
Based on the same core conduct, the World Bank also announced yesterday (here) that “OUP has agreed to make a payment of US$500,000 to the World Bank.” In addition, as part of a negotiated resolution, the World Bank “announced the debarment of two wholly-owned subsidiaries of OUP, namely: Oxford University Press East Africa Limited (OUPEA) and Oxford University Press Tanzania Limited (OUPT) – for a period of three years following OUP’s acknowledgment of misconduct by its two subsidiaries in relation to two Bank-financed education projects in East Africa.”
In a statement (here) OUP Chief Executive Nigel Portwood stated as follows.
“OUP is committed to maintaining the highest ethical standards, and we have been deeply concerned to discover evidence of wrongdoing in two of our African subsidiaries. We do not tolerate such behaviour. As soon as these matters came to light we acted immediately to investigate thoroughly and report to the relevant authorities. We have strengthened our management in the region and are taking appropriate disciplinary action in respect of those involved in this conduct.”
UK Bribery Act – Year One
Today’s post is from Robert Amaee (former Head of Anti-Corruption and Head of Proceeds of Crime at the UK Serious Fraud Office and currently of counsel at Covington & Burling – see here). Amaee is the United Kingdom Expert for FCPA Professor.
*****
UK Bribery Act – Year One
The UK Serious Fraud Office is yet to take enforcement action under the UK Bribery Act (“Bribery Act”). This is hardly a surprise to those familiar with the demands of an investigation into complex economic crime. The type of bribery cases that the SFO is duty bound to investigate and prosecute are precisely those that involve a heavy commitment of resource and time. The SFO is reported to currently spend an average of three and a half years and £1.5 million ($2.25 million) investigating each bribery case. These are not the Munir Patel type of bribery prosecutions that are typically handled by the UK Crown Prosecution Service (“CPS”).
Some commentators had set unrealistic expectations for the speed at which enforcement actions would appear, predicting a swift procession of dawn raids and arrests. This sense of anticipation and the inevitable anti-climax may well, at least in part, explain the findings of recent surveys, including a poll conducted by Deloitte. The poll found that fewer than one in ten of the 1200 compliance professionals polled expressed any concern about the possibility of a Bribery Act enforcement action being brought against their organisation. There appears to be little to fear from the SFO for the vast majority of those polled. In spite of the undoubted challenges that confront the SFO in the year ahead, it is important for companies and senior individuals to guard against complacency.
In the year since the Bribery Act came into force, David Green CB QC has taken over as Director of the SFO and the UK government has made tangible strides towards the adoption of a UK version of the US Deferred Prosecution Agreement (“DPA”). The new director will have little choice but to continue the SFO’s policy of guiding, assisting and engaging with responsible corporates and senior individuals, but there is no doubt that he will instil a more hard edged prosecutorial approach at the SFO than has been the case in the past. Green is a seasoned barrister who has defended and prosecuted serious economic crime cases during his 25 year career at the criminal bar. He also has prior experience of leading two prosecutions agencies. He was appointed the first director of the Revenue and Customs Prosecutions Office (“RCPO”) in April 2005, and served as director of the CPS Central Fraud Group from January 2010 until his return to the bar in April 2011.
Green began his four year term at the SFO on 23 April 2012. Since then, he has started to articulate his plans for the SFO in interviews with the Financial Times and most recently in a keynote address he delivered at an anti-corruption conference held in London on 26 June. At the conference, Green described this as a “challenging but exciting time” for the SFO. In a likely reference to the Tchenguiz case, he accepted that some of the recent “trenchant” criticism of the SFO has been justified, but stated that the SFO was “here to stay.” He warned against the “dilution” of the SFO brand by chasing “eye-catching quick results or taking short cuts” and said that he will not “sacrifice solid prosecutorial demands for easy headlines.” Green will focus the SFO’s “blood and treasures” on only the “most important cases *** that undermine confidence in UK Plc. and the City of London” and those that “undermine a level playing field.” He said that the SFO would not pursue cases of “crooks overcharging” but would look to use its “unique set up and capabilities to do what others cannot do.”
Green made no reference to the CPS Inspectorate-led review of the SFO that is currently underway, but explained that he has set about re-organising the SFO into four operational divisions; two dedicated to bribery and two to fraud. He is in the process of recruiting four senior civil servants into the “divisional head” roles. In addition, he is seeking to appoint a General Counsel to “shape and critique” cases, and a “Specialist Advisor” to “sharpen cases” and advise him on DPAs and civil settlements. Green made it clear that he is looking to bring external expertise into the organisation. He said that he wants to “foster and encourage a revolving door between private practice and the SFO” and extended an invitation to members of the junior bar, solicitors, investigators and accountants to join the SFO, either on a permanent basis or on secondment.
Green reiterated his support for the introduction of a UK DPA mechanism, stating that prosecutors should have “access to the broadest possible range of prosecutorial tools” so that they are not “outdone by the opposition.” He talked about strengthening his intelligence unit and made it clear that he would welcome a debate on whether UK whistle-blowers should be financially rewarded. He would like to “extend the reach” of the SFO and “encourage and increase self-reporting.” He expressed the view that the “advantages of self-reporting need to be articulated” so that companies are “inclined” to self-report. While he cannot give guarantees, he said that “self-reporting is a strong factor in deciding whether to prosecute or not.” If a prosecution is not in the public interest he said that the SFO is “likely to seek a civil settlement.” It is clear that the civil recovery mechanism, afforded by the UK Proceeds of Crime Act 2002, will continue to play a major role in future SFO enforcement actions.
Anti-corruption enforcement remains a priority for Green’s SFO which will continue to bring cases under the old UK bribery laws as well as the Bribery Act. Green confirmed that the SFO is currently handling four self-referrals and that eleven further cases are “being developed.” He said that most of these involve allegations of corruption. In relation to the Bribery Act, Green expressed his desire to bring cases that would help clarify the boundaries of the “adequate procedures” defence. In respect of the term “carries on business or part of a business in the UK” he warned that, in any court case, the SFO would “argue against an overly technical interpretation.”
The SFO’s priorities in relation to enforcement under the Bribery Act will become clearer in the year ahead. However, companies must not expect early answers on some of the thornier issues under the Bribery Act, such as the extent of the UK’s jurisdiction over non-UK companies; the extremities of third party liability; and the borderline between acceptable corporate hospitality and a prosecutable bribe. The SFO is likely to begin enforcement under the Bribery Act by seeking prosecutions or settlements in cases where there is clear criminal culpability, before it ventures on to tackle cases that test the boundaries of the Bribery Act. As we await further clarity from the UK, the recent US Department of Justice declination in the Morgan Stanley case provides companies with valuable insights into considerations that can successfully persuade a prosecutor not to prosecute. The relevance of this guidance to an assessment of the adequacy of a company’s policies and controls in the context of the Bribery Act will not be lost on readers of this publication. The DoJ is set to provide further assistance to us all when it launches its much anticipated FCPA guidance. This is expected in the next few weeks.
Friday Roundup
Checking in on Wal-Mart, an enforcement action that flew under the radar from beginning to end, a guilty plea in the U.K., and is sex a thing of value? It’s all here in the Friday roundup.
Wal-Mart
Various reports this week reported on the expansion of Wal-Mart’s FCPA probe. As many readers know, this is hardly surprising as most FCPA inquiries result in the “where else” question as indicated in this prior guest post. Even if the enforcement agencies do not actually ask the “where else” question, a company knows it will eventually be asked and will thus likely conduct a broader review of certain other FCPA high-risk jurisdictions not part of the original inquiry on its own initiative and to demonstrate to the enforcement agencies its committment to compliance and its cooperation.
This June 12th letter from Elijah Cummings (D-MD, Ranking Member, House Committee on Oversight and Government Reform) and Henry Waxman (D-CA, Ranking Member, House Committee on Energy and Commerce) to Wal-Mart CEO Michael Dukes references that Wal-Mart’s review has expanded beyond Mexico to also include Brazil, China, South Africa and India. Indeed, the letter references that Wal-Mart is “conducting a worldwide assessment of the company’s anti-corruption policies” something Wal-Mart indicated it was already doing. In short, Wal-Mart’s FCPA inquiry is following a typical path.
In the letter, Cummings and Waxman again express disappointment as to Wal-Mart’s cooperation in their own Congressional probe. For more on Cummings and Waxman’s interest in Wal-Mart, see this prior post (and links therein).
Meanwhile on the civil litigation front, a 12th lawsuit has been filed in the wake of April’s New York Times story. As noted in this release from the New York City Comptroller, New York City Pension Funds filed a shareholder derivative action in the Delaware Chancery Court alleging “that Wal-Mart’s officers and directors breached their fiduciary duty to the company and its shareholders by failing to properly handle credible claims of the bribery allegations and attempting to cover up details of the scandal.”
Under the Radar
This post from March 2011 highlighted how criminal charges against Manual Salvoch flew under the radar in that the DOJ did not issue a press release announcing the charges and the enforcement action appeared to escape coverage elsewhere. Salvoch is the former CFO of LatiNode and was charged in connection with payments to Hondutel (see here – according to the charging documents a state-owned telecommunications company in Honduras responsible for providing telecommunications services in Honduras). The Hondutel payments also resulted in criminal charges against Jorge Granados (the founder and former CEO and Chairman of the Board of LatiNode), Manuel Caceres (a former Vice President of Business Development) and Juan Vasquez (a former senior commercial executive).
This prior post highlights the sentences of Granados, Caceres and Vasquez.
Last week, Salvoch was sentenced by Judge Paul Huck (S.D. of Florida) t0 10 months in prison and 3 years of supervised release. Just like the beginning, the end of the Salvoch enforcement action also flew under the radar.
The final sentencing scorecard in the LatiNode individual prosecutions is thus as follows.
Granados – 46 months
Caceres – 23 months
Vasequez – 3 years probation
Salvoch – 10 months.
U.K. Plea
Previous posts (here and here) discussed charges on both sides of the Atlantic against Paul Jennings, the former CEO of Innospec. Earlier this week, the U.K. Serious Fraud Office announced (here) that Jennings pleaded guilty to the following charges: “Two allegations of conspiracy to corrupt in that he gave or agreed to give corrupt payments to public officials and other agents of the Government of Indonesia (between 14 February 2002 and 31 December 2008) and Iraq (between 1 January 2003 and 31 January 2008) as inducements to secure, or as rewards for having secured, contracts from that Government for the supply of its products including Tetraethyl Lead by Innospec.”
As noted in this previous post, in March 2010, Innospec resolved enforcement actions on both sides of the Atlantic based on the same core set of facts.
Thing of Value?
At its core, the FCPA’s anti-bribery provisions require “anything of value” to a “foreign official” to “obtain or retain business.”
This recent Reuters story concerning an employee of Oracle’s business unit in Singapore has a “foreign official” (the former head of the city-state’s anti-narcotics agency) and the article describes that the thing of value was provided to the “foreign official” as “an inducement to help further the firm’s business interest.”
The thing of value?
Sex.
Can sex be a thing of value under the FCPA’s anti-bribery provisions? I guess it depends, it’s a factual issue.
On that note, a good weekend to all.
U.K. Opens Consultation Period On Deferred Prosecution Agreements, Yet Rejects Non-Prosecution Agreements
Yesterday’s post concerned the United Kingdom and we stay across the pond for today’s post as well. Previous posts (here, here and here) have discussed the movement in the U.K. to adopt deferred prosecution agreements (DPAs).
Recently the U.K. Ministry of Justice announced (here) the opening of a consultation process concerning DPAs. The consultation period is open until August 9th and the MoJ states that its “ambition [in proposing DPAs] is to ensure that a higher proportion of economic crime is identified, investigated and dealt with. DPAs are a tool that seeks to achieve these goals whilst being transparent, clear and consistent.”
In a supplemental consultation paper, Crispin Blunt (Parliamentary Under-Secretary of State) and Edward Garnier QC (H.M. Solictor General) write a foreward that states, among other things, as follows.
“The obstacles [to prosecuting white collar crime] are familiar. Investigations and trials are forbiddingly long, expensive and complicated – particularly where offences occur across multiple jurisdictions. Identifying wrongdoing in hidden, specialist or technical fields often depends on commercial organisations cooperating or whistleblowers coming forward, but organisations have little incentive to self-report. Law enforcement agencies complain that they have a relatively narrow range of tools available to identify and bring corporate offenders to justice. In modern corporations, where responsibility for decision-making is distributed quite widely, it is very difficult to prove criminal liability, which depends on establishing that the ‘directing mind and will’ of an organisation was at fault. The consequence of all of this has been too few organisations held to account for their crimes, and too many victims waiting in vain for restitution.”
“… [W]e need to look again at the range of tools open to prosecutors when dealing with certain types of economic crime. We believe that deferred prosecution agreements (DPA), on which we are consulting in this paper, can make a valuable contribution to efforts to identify and address corporate economic crime. A DPA would sit alongside existing means of tackling crime, criminal prosecution and civil proceedings. Under its terms, a prosecutor would lay but would not immediately proceed with criminal charges against a company pending successful compliance with tough requirements such as financial penalties, restitution for victims, confiscation of the profits of wrongdoing and measures to prevent future offending.”
“DPAs would be a fair and pragmatic approach to tackling a serious problem and would need to be used judiciously. Where the alleged wrongdoing is most serious, or the public interest would otherwise require it, a criminal prosecution would continue to be the most appropriate course of action. As DPAs would be sanctioned by judges, the judiciary would be able to block DPAs which they do not think would serve the interests of justice, for example where prosecution would be the appropriate response. Entering into a DPA will be voluntary both for companies accused of wrongdoing and for prosecutors.”
“DPAs would contribute to a just outcome, enabling prosecutors to secure penalties for and the surrendering of the proceeds of wrongdoing, and providing benefits for victims in a way that is sanctioned by a judge, without the uncertainty, expense, complexity or length of a full criminal trial. They also enable commercial organisations to be held to account – but without unfairly affecting employees, customers, pensioners, suppliers and investors who were not involved in the behaviour that is being penalised. The process will be transparent; as DPAs will be public, the public will always know what wrongdoing has taken place, and the penalty that has been paid.”
“Our ambition is to ensure that a higher proportion of economic crime is identified, investigated and dealt with. DPAs are a tool that seeks to achieve these goals whilst being transparent, clear and consistent. We hope that you will consider our proposals carefully to help ensure that they are sensible, proportionate and will make a genuine difference when they are introduced.”
An entire section of the consultation paper is devoted to the U.S. approach and it states among other things as follows.
“[Non-prosecution agreements] NPAs and DPAs have been successfully adopted in a variety of circumstances. […] The availability of NPAs and DPAs, coupled with the risk of prosecution, incentivizes commercial organizations to cooperate with investigations, reducing the likelihood of a trial and of a criminal conviction. In general, once a commercial organization comes to the attention of authorities in the U.S., it is common for the organization to conduct its own internal investigation, and to submit a report to the prosecutor setting out its conclusions. […] The use of DPAs and NPAs therefore supports an existing culture of self-reporting of serious economic crimes in the U.S. […] Neither NPAs nor DPAs have a statutory basis, relying instead on the United States Attorney’s manual, Principles of Federal Prosecution of Business Organisations, which sets out the circumstances in which they are appropriate and the factors to consider when investigating, charging, and discussing an agreement with respect to corporate crimes. […] There has been increasing scrutiny of the use of NPAs and DPAs as an enforcement tool, with concerns over the lack of transparency around the factors that determine whether the DOJ grants a NPA or DPA, and that they inappropriately excuse criminal behavior. The DOJ has sought to address these criticisms and has continued to use these agreements to conclude a variety of investigations.”
The consultation paper section on the U.S. then discusses NPAs and how there is no judicial oversight of these agreements and, even as to DPAs, how little judicial scrutiny and review there is of these agreements.
The consultation paper section on the U.S. then contains a few sentences that should be of great interest to U.S. policy makers. The section states as follows. “In practice the extent of judicial involvement generally appears to be limited in the U.S. model, and despite the effectiveness of the process, is unlikely to be at a level suitable for the U.K.’s constitutional arrangements.” Elsewhere, the section states as follows. “Despite the effectiveness of the U.S. model, the lack of judicial oversight is likely to make it unsuitable for the constitutional arrangements and legal traditions in England and Wales. We have concluded that [NPAs] are not suitable for this jurisdiction due to their markedly lesser degree of transparency, including the absence of judicial oversight.”
Kudos to the U.K. for rejecting NPAs – a resolution vehicle that was used to resolve four corporate FCPA enforcement actions in 2011 and four corporate enforcement actions in 2010.
[For more on the use of NPAs and DPAs to resolve FCPA enforcement actions and how use of these resolution vehicles have contributed to a “facade of enforcement” see here – my scholarship titled “The Facade of FCPA Enforcement”]
Even so, it is clear from the consultation paper that the U.K. proposed model for DPAs is inspired by the U.S. model. Yet from the consultation paper proposal, even though the U.K. proposes to adopt DPAs, it is clear that U.S. style DPAs is not the goal. Among other things, the consultation paper states as follows as to transparency. “Public confidence in the justice system is vital. The public need to have confidence that a prosecutor is not entering into a ‘cosy deal’ with a commercial organisation ‘behind closed doors’. We therefore believe that there should be judicial involvement from an early stage whereby the proposed DPA is considered at a preliminary hearing before it returns for final judicial approval.”
Should the U.K. adopt DPAs they would be used, as the consultation paper makes clear, in a variety of cases, not just Bribery Act cases. The same is true in the U.S. DPAs (and NPAs) are not just used to resolve FCPA enforcement actions, although their most frequent use is in FCPA enforcement actions. (See here from Gibson Dunn – FCPA enforcement actions comprised approximately 40% of DOJ NPAs or DPAs in 2011; here from Gibson Dunn – FCPA enforcement actions comprised approximately 50% of DOJ NPAs or DPAs in 2010).
My concern with U.K. adoption of DPAs in the Bribery Act context is the same as when I originally voiced it in this October 2011 post.
Why does a law with an adequate procedures defense require the third option of a deferred prosecution agreement – the first two options being prosecute vs. not prosecute? If a corporate has adequate procedures, but an isolated act of bribery nevertheless occurs within its organization, the corporate presumably would not face prosecution under the Bribery Act. Seems like a reasonable result. In other words, no need for the third option in such a case. On the other hand, if a corporate does not have adequate procedures (i.e. has no committment to anti-bribery compliance) and an act of bribery occurs within its organization, it presumably would face prosecution under the Bribery Act. Seems like a reasonable result. Does a third option really need to be created for corporates who do not implement adequate procedures?
Even the MoJ consultation paper recognizes that the Bribery Act is different from other U.K. economic crime laws. For instance, the executive summary portion of the paper states as follows. “Options for dealing with offending by commercial organisations are currently limited and the number of outcomes each year, through both criminal and civil proceedings, is relatively low. In part, this is because of difficulties with the law of corporate criminal liability, which does not reflect the 21st commercial organization. It is also because offending in the area of economic crime is becoming increasingly sophisticated. As the size of commercial organizations and the reach of their interests grow, so too do the difficulties of identifying criminal activity and of prosecution at a national level for what can often be wrongdoing across a number of jurisdictions. This calls for increasingly close working with international law enforcement agencies. Although the creation under the Bribery Act 2010 of criminal liability for a commercial organisation that fails to prevent bribery is a notable improvement and although prosecuting agencies are taking more pro-active approaches in identifying and investigating serious economic crime, more needs to be done.” (emphasis added).
Likewise, elsewhere the consultation paper states as follows. “[The U.K.] law of corporate criminal liability poses some problems. Under the current law, in order to obtain a conviction a prosecutor must show that the ‘directing mind and will’ of the commercial organisation had the necessary fault element or ‘mens rea’ for the offence. However, this is often difficult to prove, especially in increasingly large and more sophisticated modern commercial organisations. While the new offence in connection with the failure of a commercial organisation to prevent bribery under section 7 of the Bribery Act 2010 will help, more needs to be done, especially in relation to other types of economic offending.” (emphasis added).
In short, the consultation paper recognizes that the Bribery Act is cut from a different cloth compared to other U.K. economic crime laws, but it fails to see how this key distinction ought to disfavor, not favor, use of DPAs to resolve Bribery Act cases.
For more on this recent U.K. development, see here from Debevoise & Plimpton (discussion included within its FCPA Update), here from Skadden, here from Bryan Cave, and here from DLA Piper.