The United Kingdom Secures Second Deferred Prosecution Agreement
25 July 2016
On 8 July 2016, the Serious Fraud Office (“SFO”) received approval from the English court to enter into its second Deferred Prosecution Agreement (“DPA”) since their introduction in the United Kingdom in February 2014. The DPA relates to bribery offences committed by an unnamed U.K. company (“Company XYZ”) and comes less than a year after the SFO’s first DPA with ICBC Standard Bank PLC (“Standard Bank”) in November 2015.
Company XYZ has so far not been named due to ongoing legal proceedings concerning individuals employed by Company XYZ, but the court describes it as a small to medium sized U.K. enterprise, with a US-registered parent, which derives its profits mainly from exports to Asian markets.
The charges against Company XYZ relate to offences committed between June 2004 and June 2012 in which some of its employees and agents were involved in the offering and/or payment of bribes to secure 28 contracts in foreign jurisdictions. The implicated contracts generated £6.5 million in gross profits for the company.
Company XYZ was facing an indictment alleging conspiracy to bribe and conspiracy to corrupt under legislation that pre-dates the Bribery Act 2010 (“Bribery Act”) and failure to prevent bribery under Section 7 of the Bribery Act. Under the terms of the DPA, the indictment was suspended and Company XYZ has been ordered to pay £6.2 million in disgorgement of profits and £325,000 in financial penalties. Company XYZ’s US parent has agreed to pay £1.9 million of the disgorgement of profits (a proportion of the total dividends it received from its subsidiary during the period of misconduct).
Lord Justice Brian Leveson acknowledged that the financial penalty of £325,000 was relatively modest and that this figure was reached due to: (i) Company XYZ having demonstrated its limited financial resources and the real risk of a higher penalty forcing the company into insolvency; and (ii) the level of self-reporting and cooperation provided by the company to authorities. In fact, the Director of the SFO, David Green, specifically noted the SFO’s willingness to make allowances for the company’s financial restraints and the significant level of cooperation shown by Company XYZ through its “exemplary cooperation”.
As in the case of the Standard Bank DPA, the importance of incentivising self-reporting and cooperation was a prominent part of the court’s decision to approve a DPA for Company XYZ. In both cases, Lord Justice Leveson noted the “promptness of the self-report” as a factor in favour of granting a DPA. The judgments also used almost identical language to describe the way in which Standard Bank and Company XYZ demonstrated cooperation with the SFO, including providing oral summaries of first accounts of interviewees, facilitating the interview of current employees, and providing timely and complete responses to requests for further information and material.
While the United Kingdom’s track record on DPAs is still in the early stages of development, this second DPA provides companies with further clarity on the expectations of the SFO and the English court, particularly with respect to self-reporting and cooperation, and the circumstances in which prosecutors will favour resolution via DPA over prosecution.