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.