DPAs were introduced in Schedule 17 of the Crime and Courts Act 2013. The Schedule contains a requirement that the DPP and the Director of the SFO jointly issue a Code giving guidance for prosecutors on a number of matters, including the general principles to be applied in determining whether a DPA is likely to be appropriate in a given case.
A draft Code was published at the end of June and a consultation process, inviting comments from interested individuals and organisations, is currently under way.
When will a DPA be an appropriate disposal?
The document states that the ‘starting point’ for determining whether a DPA will be appropriate is to apply a two-stage process, namely an evidential and a public interest test
Evidential test: this will be satisfied if either
(a) the evidence discloses a reasonable prospect of
(b) there is a reasonable suspicion that the commercial
organisation has committed the offence, and there are reasonable grounds for believing that a continued investigation would provide further evidence within a reasonable period of time, such that all the evidence would disclose a reasonable prospect of conviction.
Public Interest test: this will be satisfied if the prosecutor concludes that the public interest can be properly served by not prosecuting but by entering into a DPA in accordance with a number of criteria
Relevant Criteria for making the determination
The draft Code identifies a number of criteria which will be relevant to the public interest test and these include the following:
(i) seriousness of the offence
(ii) a history of similar conduct and /or subsequent failure to take adequate responsive action;
(iii) whether the conduct alleged was part of the established business practices of the company;
(iv) whether at the time of the offence the company had an effective corporate compliance programme;
(v) failure to report wrongdoing within a reasonable period;
(vi) failure to report such wrongdoing properly and fully;
(vii) the adversity of the impact on the economic reputation of England and Wales;
(viii) severe economic harm to victims of wrongdoing;
(ix) a genuinely proactive approach involving self-reporting and remedial actions;
(x) the existence of a genuinely proactive and effective corporate compliance programme;
(xi) whether the offending represents isolated actions by individuals
(xii) whether the offending was recent, whether the company in its current form is different for example with regard to its operation, corporate structures or processes and whether culpable individuals had left or been dismissed.
(xiii) The adverse effect of a conviction for a company under other jurisdictions, for example the exclusion from participating in public contracts within the EU
(xiv) How early a company self reports and the totality of the information provided to the prosecutor
Applying the criteria
Prosecutors are required under the draft Code to undertake a careful and fair balancing exercise of the factors that tend to support a prosecution and those that do not.
This is an exercise of discretion and it is stated that a prosecution will usually take place unless there are public interest factors against prosecution which clearly outweigh those tending in favour of prosecution.
Process for invitation to enter into DPA negotiations
The process will be initiated by a formal letter of invitation to the company to enter into DPA negotiations and it is emphasised that all such negotiations must be transparent.
Following agreement by the company to engage in such negotiations, the prosecutor should send a letter setting out how discussion will be conducted and in particular giving undertakings regarding
(a) the confidentiality of the facts that DPA negotiations
are taking place;
(b) the confidentiality of information provided by both
parties in the course of the negotiations and the use which may be made of such material in the event of any subsequent criminal proceedings.
Nothing is said, however, about the approach of the DPP and the SFO to the subsequent disclosing of information so obtained to other prosecuting or regulating authorities either at home or overseas.
The draft Code makes a number of statements with regard to the question of what might be included in the terms of a DPA.
It states that the terms may consist of a combination of requirements and in particular that the financial terms may include compensating victims, payment of a financial penalty, payment of the prosecutor’s costs, donations to charities and disgorgement of profits.
This raises the question of the basis upon which a financial penalty is to be computed under a DPA regime.
It is probable that this will be very much driven by the approach eventually adopted regarding the sentencing of organisations convicted in courts of financial crimes.
The only punishment available for an organisation convicted of financial crime is a fine and there is currently no sentencing guideline available to the courts.
However, also published at the end of June was a draft guideline regarding sentencing in cases of fraud, bribery and money laundering.
The consultation document suggests a staged approach, as follows:
Step One Compensation
It is suggested that where it is appropriate to make a compensation order and where the means of the offender are limited, such an order should take priority over the payment of a fine.
Whether or not such an order is made, the court should proceed to the next step.
Step Two Determining the offence category
(a) Culpability factors
The three levels of culpability will be the same as for individuals, namely high, medium and lesser and the document sets out a number of factors which may be relevant to each level of culpability.
(b) Harm factors
This is represented by a financial figure corresponding to the amount the corporate gained (or intended to gain) from the offence.
The guide does not put forward a prescriptive method of arriving at the harm figure but suggests that the figure might be assessed on the basis of the actual gross amount obtained (or loss avoided) or intended to be obtained (or avoided) by the offender as a result of the offence.
In cases of bribery, this will normally be the gross profit from the contract(s) obtained, retained or sought as a result of the offending.
It is also suggested that an alternative measure for offences under section 7 of the Bribery Act might be the likely cost avoided by failing to put in place adequate measures to prevent bribery.
Step Three Starting points and category ranges
Each of the three culpability categories will have a defined starting point and a set category range.
For instance, it is suggested that for a case involving high culpability the starting point should be 300% with a category range of 250% to 400%.
If in such as case where the harm figure has been assessed at, say, £1m, the starting point would be £1million x 3 (£3 million) and the range would be from £1million x 2.5 (£2.5m) and £1 million x 4 (£4 million).
This system is broadly based upon the one operating in the US.
Having identified the starting point, the court will determine where in the category range the fine should fall, depending on the presence of factors increasing seriousness and factors which reduce seriousness or reflect personal mitigation.
Step Four Adjustment of Fine
The purpose of this step is to provide the sentencing court with sufficient flexibility to ensure that the sentence fulfils the objectives of punishment, deterrence and the removal of gain in a fair and proportionate way.
To this end it will be necessary to consider the size and means of the offender, because this will have a major bearing on the impact of the sentence.
Although these guidelines are set in the context of court proceedings, it is very likely that they will be regarded as a template by prosecutors when determining the appropriate financial penalties to be incorporated in DPAs.