Sometimes, the best ideas just don’t turn out to be as good in practice as they were either on paper or in the heads of those who devised them in the first instance. So far, 2019 seems to be the year that Deferred Prosecution Agreements (DPAs) have joined the list of things that haven’t really lived up to their promise, as Neil Williams observes.
Like certain overpriced footballers, DPAs have – so far, at least – failed to live up to expectations. Inevitably, this has led to calls in some quarters for them to be dropped altogether. Based on this year, the most ardent supporters of DPAs would struggle to produce a convincing argument for their continued use, let alone a firm case for using them more often.
This year began with the acquittal of the last of the three Tesco executives charged with fraud in relation to the company’s accounting scandal. Carl Rogberg walking free meant that all three executives had been cleared. Nobody, therefore, had been convicted for the offences that Tesco admitted had been committed – an admission it made when reaching a DPA with the Serious Fraud Office (SFO) in 2017 in relation to the accounting scandal.
As if this problem wasn’t embarrassing enough, it has just been repeated almost note for note. Three Sarclad Ltd employees were acquitted at Southwark Crown Court of conspiracy to corrupt and conspiracy to bribe three years after the company had agreed a DPA with the SFO in relation to wrongdoing. Another case of wrongdoing being identified and admitted by a business and another failure to convict any individual for what had taken place.
Hardly the revolutionary approach to justice that the cheerleaders for DPAs would have hoped for when the latter became part of UK law, it must be said.
Breath of fresh air
Introduced under the provisions of Schedule 17 of the Crime and Courts Act 2013, which duly made them available to the SFO and the Crown Prosecution Service, DPAs were supposed to be a breath of fresh air, enabling a relatively speedy and efficient conclusion to what could be long-running and complex investigations. The benefit of them to a corporate entity is still plain to see, but it’s really the difficulties encountered in translating the admissions made into real and tangible culpability for individuals which gives much pause for thought.
Following as it does in the footsteps of the Tesco verdicts, the Sarclad Ltd case raises real questions about the value (or otherwise) of the DPA process. The three Sarclad Ltd individuals who were acquitted – namely Michael Sorby, Adrian Leek and David Justice – were found by the presiding Jury to be not guilty of conspiring with various agents to agree bribes in relation to 27 separate overseas contracts for Sarclad Ltd.
The DPA was reached between the SFO and Sarclad Ltd in July 2016. Sarclad Ltd has accepted the charges of corruption and failure to prevent bribery in relation to the systematic use of bribes to secure contracts for the company between June 2004 and June 2012. The contracts that were the subject of the DPA process had a total value of over £17 million.
As a result of the DPA, Sarclad Ltd agreed to pay financial orders of £6,553,085 comprised of a £6,201,085 disgorgement of gross profits and a £352,000 financial penalty. £1,953,085 was paid by Sarclad Ltd’s US-registered parent company as repayment of a significant proportion of the dividends that it received from the company over the indictment period.
The DPA also required Sarclad Ltd to fully co-operate with the SFO and, every 12 months for the duration of the DPA, to provide a report addressing all third party intermediary transactions as well as the completion and effectiveness of its existing anti-bribery and corruption controls. The SFO has reported that the terms of the DPA have been met and that the DPA is now concluded, with reporting restrictions subsequently lifted.
Sarclad Ltd identified issues in the way in which a number of contracts had been secured in August 2012, hiring a law firm to advise the business. The report compiled by that law firm was delivered to the SFO on 31 January 2013, after which point the SFO conducted its own investigation.
Back in 2017, the SFO reached a DPA with Rolls-Royce over the large-scale bribery it committed over decades. Rolls-Royce did not self-report its wrongdoing, but its co-operation with the investigation led to a DPA being granted and a discount on the financial penalty imposed. Rolls-Royce escaped prosecution, yet there was no guarantee the individuals proven to have been involved would do so.
Come February 2019, however, the SFO announced it was closing the investigation with no charges being brought against individuals. Like Tesco and Sarclad Ltd, this is another DPA-fuelled contradictory situation. The company has openly accepted that wrongdoing was committed, but yet again nobody is held to account for it in a Court of Law.
Perhaps not surprisingly, such outcomes have prompted fierce criticism. What remains to be seen is whether such criticism – or, to be more precise, the high-profile failings that provoked the criticism in the first place – leads to the SFO becoming more reluctant to use DPAs.
The SFO’s director Lisa Osofsky has talked at great length about the value of corporates co-operating with her agency and the need to speed up investigations. This could be seen as an indicator of the greater use of DPAs in the future. This may appeal to many companies who have little option but to admit wrongdoing: three of the five DPAs granted so far have led to what can only be considered a failure to hold anyone to account. A situation which any company under investigation would be happy to have as an outcome.
This is a far from perfect situation. The dropping of the post-DPA Rolls-Royce investigation may just embolden companies, making them less likely to admit any wrongdoing regardless of whether or not a DPA is on offer.
DPAs may be a swifter course of action than a lengthy investigation and trial, but if they’re going to lead to more of the conflicting outcomes we’ve seen this year it would be little surprise if they were consigned to the back of the cupboard, much like the once-new toy that nobody wants to play with any longer.
Certainly, if DPAs are to continue to be offered as a carrot for co-operation then the SFO needs to up its game if prosecutions of individuals are to follow. On current evidence, a company may well wish to wait and see if there’s a knock on the door rather than invite the SFO over the threshold.
Neil Williams is Legal Director at Rahman Ravelli