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.