Obtaining A Dpa

With deferred prosecution agreements (DPA’s) becoming more
common, Aziz Rahman considers how a company under investigation can enhance its
chances of obtaining one in order to avoid prosecution.

The Rolls-Royce and Tesco deferred prosecution agreements
(DPA’s) made the headlines earlier this year. And both companies were happy to
accept them.

Rolls-Royce paid a total of £671M to settle allegations that
it used bribes to land export contracts, while Tesco paid £129M as a penalty
for having misreported its profits.

Big penalties, certainly. But, crucially, for both
companies, it was a price worth paying, as obtaining a DPA means the company
will not face a criminal prosecution.

There must be many companies being investigated – or that
fear they will be investigated – that would gladly accept a DPA as an
alternative to prosecution. But DPA’s are not given out liberally by the authorities.
If a company wants one, therefore, it has to know how to manage its affairs
when an investigation commences.

Agreement

DPA’s were introduced under the provisions of Schedule 17 of
the Crime and Courts Act 2013. They are available to the Crown Prosecution
Service (CPS) and the Serious Fraud Office (SFO).

A DPA is an agreement reached (under the supervision of a
judge) between a prosecutor and an organisation which could be prosecuted. It
allows a prosecution to be suspended for a defined period provided that the
organisation meets certain specified conditions.

A company must admit the criminal behaviour and agree to
work under certain conditions that the SFO or CPS decides to impose. Such
conditions include alterations to working practices, staff changes, paying
fines or introducing anti-corruption measures.

If the company continues to meet these conditions for a set
length of time, it avoids prosecution. If it does not meet them, it is
prosecuted.

Option

The authorities will only offer a DPA to a company under
investigation if they believe it is a more suitable course of action than a
prosecution. A large part of this will depend on whether the company has shown
a genuine will to put right the wrongdoing and prevent it happening again.

A company at the centre of wrongdoing will need to seek specialist
legal advice as early as possible. Such an expert can assess the wrongdoing, advise
on how to report it to the authorities – if the authorities are not already
aware of it – and help devise procedures to prevent it happening again.

Such an approach can help the company prevent further
wrongdoing. But what can it do to prove it is worthy of a DPA?

Co-operation

If a company is to have any chance of obtaining a DPA, it
has to co-operate fully with the investigators.

In the case of Rolls-Royce, it did not self-report its
wrongdoing to the SFO: that information came from third parties. But once this
was out in the open, it did all it could to assist the SFO in its
investigations.

We know this was an important factor because, in the
settlement, it is explained that the aircraft manufacturer’s “extraordinary
co-operation’’ was the reason it had been granted a DPA. Such co-operation not
only helped Rolls-Royce obtain a DPA; it also counted towards the 50% discount
on the size of the financial penalty imposed on the firm

No co-operation (or not enough in the eyes of the
authorities) would have meant no DPA. The settlement calls Rolls-Royce’s
co-operation “highly material’’ to the interests of justice – which is why it
gained a DPA instead of being prosecuted. This is a clear indicator of the
value of co-operation.

Culture Change

A DPA is only likely to be offered if the SFO (or CPS)
recognises that there have been fundamental changes in the way the company
under investigation operates.

If we take Rolls-Royce as an example again, the settlement
declared that the aircraft giant is “no longer the company that once it was’’.

During the investigation, Rolls-Royce introduced anti-bribery
measures, carried out its own investigations, reviewed its ethics and
compliance policies and training and re-examined its approach to due diligence,
risk assessment and relationships with intermediaries.

The SFO viewed these actions as proof that Rolls-Royce was
genuine in its desire and attempts to bring about a culture change in the way
it does business. There is little doubt that if the SFO had seen Rolls-Royce’s
actions as window dressing to pay lip service to the idea that it was intent on
changing the way it worked, there would have been little or no chance of a DPA
being granted.

Personnel

A genuine and demonstrable desire to do business in a
better, more principled way can only improve the likelihood of a DPA being
offered.

This approach can include changes in personnel. Rolls Royce
disciplined 38 people and by the time the DPA was concluded all the senior
executives who had been in charge during the period under investigation had
departed.

Similarly, Tesco saw a number of senior departures, with
Chief Executive Dave Lewis stating “We have worked hard to make Tesco a
different company’’.

Changes at board level and senior management level are an
indicator of alterations to a company’s culture, which show that a company is
serious about correcting its wrongs. Which enhances its chances of a DPA.

Negotiation

The approaches outlined above are important when it comes to
the possibility of a company obtaining a DPA.

But it is also important that a company takes the right
approach during negotiations. This does not mean “playing hardball’’, as that
would probably work against the company. What it does mean is emphasising some
significant factors that may tilt investigators towards favouring a DPA.

It can be no coincidence that while Rolls-Royce was being
investigated, the SFO was made aware that the company employed 50,000 people
and that any prosecution of the firm may harm these jobs, as well as the wider
UK defence industry and its supply chain.

Not every firm under investigation can make such claims. But
they may well have their own set of circumstances that can be explained and
emphasised in order to convince investigators of the value of a DPA.