A couple of recent articles about the UK Serious Fraud Office (SFO) caught my attention. One was on thebriberyact.com, entitled “Opinion: DPA’s must show greater benefits. We discuss the Criteria & Process for a DPA set out in Alun Milford’s (SFO GC) recent speech” and was authored by those well known UK Bribery Act mavens and commentators, the Bribery Act guys, Barry Vitou and Richard Kovalesky QC. The second, entitled “The Inner Workings of the U.K. Serious Fraud Office”, is by my Compliance Week colleague Jaclyn Jaeger.
Both articles provide a wealth of information for the Chief Compliance Officer (CCO) whose company is subject to the UK Bribery Act. They also point out some of the differences in approach by the SFO from the US Department of Justice (DOJ); both articles are based on the remarks by Alun Milford, the SFO General Counsel (GC). Jaeger’s article dealt primarily with the beginnings of a case up to the negotiations over a Deferred Prosecution Agreement (DPA). The Bribery Act guys article dealt more with the issues around DPAs.
Jaeger reported, as with enforcement actions under the Foreign Corrupt Practices Act (FCPA), cases come into the SFO in a variety of ways. Some include self-reporting, through ancillary investigations, whistleblowers disclosures, disgruntled business rivals, occasionally a bribe recipient and some are from reports from other jurisdictions. Whichever the mechanism of disclosure, “Regardless of how a case comes into the SFO, he said, it will be looked at first by the SFO’s intelligence unit, whose members will assess whether the case meets the SFO’s criteria to take it on.”
From that point, if the Director of the SFO, currently David Green, agrees to move forward on the matter and will “open a criminal investigation, responsibility for it passes to a case controller on one of our casework Divisions, who will have day-to-day responsibility for the case. The lead investigator will head up a multi-disciplinary team of investigators, lawyers, forensic accountants, IT experts and outside counsel who will “pursue all reasonable lines of enquiry, gathering in and reviewing potentially relevant documents from the company and elsewhere. It will interview witnesses and suspects. At the end of that process, we will make a charging decision.””
If there is insufficient evidence, the matter is concluded. However, if the SFO considers that it has “sufficient evidence for a realistic prospect of conviction and the public interest warrants the corporate’s prosecution, we will prosecute—but if we think the public interest might not require a prosecution then we will consider a DPA.”
The SFO expects a company to cooperate during the pendency of the investigation. Milford said the “SFO would have a conference with the company involved, where “we will make clear that we are looking for cooperation for the duration of the investigation. The company under investigation is expected to preserve information and to make it available to the SFO. Collection of digital material needs to be forensically sound, with whole images being taken of digital collections are then preserved. Back-up tapes should be preserved, and any rolling destruction processes stopped.””
Milford also had some interesting thoughts around assertion of the attorney-client privilege. While initially noting the SFO “has no interest in the communications between client and lawyer on questions of liability or rights”; he made clear that the SFO does want facts. Further, each claim of privilege will be individually evaluated. He specifically noted:
- We will view as uncooperative false or exaggerated claims of privilege, and we are prepared to litigate over them: to do otherwise would be to fail in our duty to investigate crime.
- If a company’s assertion of privilege is well-made out, then we will not hold that against the company: to do otherwise would be inconsistent with the substantive protection privilege offers. We will simply judge the question of co-operation in our normal way against our published criteria.
- By the same token if, notwithstanding the existence of a well-made-out claim to privilege, a company gives up the witness accounts we seek, then we will view that as a significant mark of cooperation: here again, to do otherwise would be inconsistent with the substantive protection privilege offers.
- For the same reason, we will view as a significant mark of cooperation a company’s decision to structure its investigation in such a way as not to attract privilege claims over interviews of witnesses.
To obtain a DPA, the Bribery Act guys reported that Milford gave two general criteria. The first, echoing Jaeger’s article on the topic of cooperation, is that any company that wants a DPA must fully cooperate throughout the process. They quoted Milford for the following, “‘Considerable weight may be given to a genuinely proactive approach by (the organisation’s) management team when the offending is brought to their notice, involving within a reasonable time of the offending coming to light, reporting (the organisation’s) offending otherwise unknown to the prosecutor and taking remedial actions including, where appropriate, compensating victims. In applying this factor the prosecutor needs to establish whether sufficient information about the operation and conduct of (the organisation) has been supplied in order to assess whether (it) has been co-operative. Co-operation will include identifying relevant witnesses, disclosing their accounts and the documents shown to them. Where practicable it will involve making the witnesses available for interview when requested. It will further include providing a report in respect of any internal investigation including source documents.”
The second criterion is that the company seeking the DPA must be prepared to accept the consequences of their actions by pleading guilty. Milford emphasized this by stating “First, it should be obvious that a company that does not accept any criminal liability on its part cannot enter into a DPA, whatever view we may take of the evidence against it. Whilst the DPA process does not require a formal admission of guilt, a company which considers it has nothing to account for cannot agree to a statement of facts which sets out wrongdoing it denies, or to the payment of a financial penalty consequent on that wrongdoing, or to the payment of compensation when it considers it owes none or to rehabilitative measures when it considers there is nothing to rehabilitate.”
The Bribery Act guys also reported on the process around securing the DPA. They quoted Milford, “If the company takes up the offer, we will exchange confidentiality undertakings to enable the negotiations to take place privately. In those negotiations we will seek to reach agreement on a statement of facts, which sets out the extent of the company’s wrong-doing, and the terms on which the company should account for that wrongdoing.”
They noted the terms of a DPA could well include a financial penalty, which could be “broadly comparable with the fine a court would have imposed if the company had pleaded guilty on a full prosecution, disgorgement of profits, payment of compensation and the SFO’s costs, enforceable undertakings of co-operation and schemes for ensuring future compliance.” Milford said that he believes for a DPA to be “effective that agreement then needs judicial approval both as to the principle of a DPA with that company and its precise terms.”
The Court mechanism includes an initial hearing where “question of such approval will be considered must be in private.” If after this initial hearing, both the company and the SFO “decide to pursue the agreement and finalise its proposed terms, they must apply again, this time in a public hearing, for a declaration from the judge that: the DPA is in the interests of justice; and the terms of the DPA are fair, reasonable and proportionate. If the judge agrees to make that declaration, he or she must give reasons for this. It is really important to the statutory scheme that those reasons are easily available. Therefore, subject always to the power of the court to delay publication to ensure a fair trial of others, the prosecutor must then publish the DPA and the judge’s declaration. Finally, criminal proceedings against the company are started and immediately suspended in accordance with the terms of the agreement.”
These two articles provide the CCO or compliance practitioner, whose company is subject to the UK Bribery Act, useful guidance into how the SFO thinks through its decision to bring an enforcement action under the Act, what it excepts from the company in the way of cooperation and the process around securing a DPA.
The UK SFO General Counsel provides insight into how the agency moves forward on enforcement.Click to tweet
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© Thomas R. Fox, 2016