Deferred Prosecution Agreements: whose bargain?
Tesco PLC announced today, 28 March 2017, that its subsidiary, Tesco Stores Limited, has in principle reached a Deferred Prosecution Agreement (DPA) with the SFO regarding historic false accounting practices. The DPA requires final judicial approval and will be considered at a hearing on 10 April 2017. Under the terms of the DPA, the company will not be prosecuted provided the business meets certain conditions – including payment of a financial penalty of £129m.
DPAs have been available here since February 2014, albeit questions remain as to whether DPAs represent good value – for either the public or the business itself. The purpose is to provide a mechanism whereby an organisation can avoid prosecution by entering into an agreement on negotiated terms with a designated prosecutor.
Whilst DPAs are US-inspired, our domestic variant is distinct, not least in its requirement for judicial oversight. For example, a court must consider whether a proposed DPA is likely to be in the interests of justice, and whether its proposed terms are fair, reasonable and proportionate. If the agreement is not approved – then the route is clear for a prosecution.
A DPA is a matter for the discretion of the prosecutor – if a DPA can be negotiated with the defendant, charges are brought and then suspended for a set period subject to compliance with agreed conditions. Such conditions can include, for example: full disclosure of information to the prosecutor and full co-operation as regards the investigation of any employee; payment of compensation; financial penalties (set by reference to what a fine would be in the event of a guilty plea to the offence charged); remedial action to prevent repetition of the conduct; and disgorgement of any profit (remedying any benefit from the criminal act). Any breach of conditions within the set period can of course result in criminal proceedings being resumed.
The Court is more likely to find that a DPA is in the interest of justice if the culpability of the organisation is secondary to that of individuals (ie a failure to prevent criminality by employees as opposed to primary role in commission of offence). Regard will also be had to self-reporting, co-operation and subsequent 'self-cleaning' to minimise the risk of any repeat offending.
Whilst some regard DPAs as a way for corporates to 'buy' themselves out of prosecution, the penalties levied by DPAs to date – note the £497.25m imposed on Rolls-Royce in January 2017 – do not represent a soft option for businesses. Furthermore, the hurdle for a finding that a DPA is in the interests of justice is relatively high. Indeed, and without reference to any particular case, I would suggest that the circumstances in which a DPA may be appropriate are probably those in which a corporation may have a partial or complete defence available to some or all of the charges. Those familiar with advising organisations will recognise such features: good intentions and reasonable systems imperfectly enforced, isolated and unexpected actions of individuals who have not been monitored and so forth.
Appropriately deployed, DPAs should accommodate those very cases where a trial would be long, incredibly expensive and, more to the point, uncertain in outcome. Given the financial pressures on the criminal justice system, whilst DPAs of course represent a compromise, they may well represent good value. A bargain no less.