Six of one, and over half a dozen of the other

Details have today been published of the UK’s sixth Deferred Prosecution Agreement (DPA) following the acquittal of three senior individuals who were employed by the offending company.

Sitting at Southwark Crown Court on 22 October 2019, Mr Justice William Davis approved a DPA between the Serious Fraud Office (SFO) and Guralp Systems Limited (GSL), which brought to an end an almost four year investigation into GSL’s business activities. In short, GSL accepted allegations of conspiracy to make corrupt payments (s.1 Criminal law Act 1971, and s.1 of the Prevention of Corruption Act 1906), and failure to prevent bribery by employees (s.7 Bribery Act 2010) in relation to payments made between 2002 and 2015.

In addition to cooperating with the SFO, and to review/maintain its existing internal ABC controls, policies and procedures, the terms of the DPA also include an agreement by GSL to pay over £2m, which represents the disgorgement of profits. However, there were key differences to the five previous DPAs:

  • Despite the relatively small disgorgement figure (when compared to the £500m Rolls Royce was ordered to pay), and the instalment amounts, the DPA is to last for five years (like that entered into by Rolls Royce).

  • Unusually, no timetable was set for the payment of the disgorgement figure; Mr Justice William Davis noting that GSL’s precarious financial position prevented one from being set. To that end, the disgorgement figure is to be settled by the fifth anniversary of the date of the DPA. But, there is a further twist.

  • The DPA also acknowledges the possibility that GSL may not be able to meet the disgorgement figure within the term of the DPA, and that the business may apply to vary the terms of the DPA per Paragraph 10 of Schedule 17 of the Crime and Courts Act 2013. Mr Justice William Davis acknowledged that “it is very unusual for a DPA to be approved on the basis that its terms might not be met”, but accepted that GSL’s circumstances were equally unusual. Of course, if GSL does not meet this (or any other) aspect of the DPA, criminal proceedings may flow against the company.

  • GSL was not made the subject of any other financial penalty (including contributing to the SFO’s costs) because the SFO was satisfied that GSL could not sensibly meet any penalty “over and above” the disgorgement sum.

GSL’s DPA only tells half the story for the SFO. Three former employees that were prosecuted for their alleged part in GSL’s offending were acquitted on 20 December 2019. The acquittals will make for further uncomfortable reading for the SFO, and will heap yet more scorn by critics, as it brings the total number of individuals that have recently been acquitted following prosecutions that fell out of previous DPAs (including the GSL DPA) to nine.

Further fuel will be added to the fire regarding the capability of the SFO successfully pursuing individuals. Lawyers may see a further rise in individuals challenging the SFO’s evidence at trial, which given the agency’s recent track record, may be a reasonable step for them to take.

In addition, further arguments will be raised that the DPA regime should be remodelled to afford those individuals with better protections. Attempts by three former Tesco executives who were recently prosecuted (and acquitted) on the back of Tesco’s DPA to redact their names from that DPA were unsuccessful as there is no mechanism for a court to retrospectively vary a DPA or to remove references to individuals wrongly identified in one.

That said, what is there to prevent a work-around to the problem? Changes could be made to the drafting of future DPAs so that two versions are agreed - one where individuals are not named in the event of an acquittal, and one where they are named as a result of a conviction. Pending any legislative changes, this approach may provide an immediate resolution to what has recently become a recurring problem.

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