DPAs: Get out of Jail Free Cards for Corporate Executives?

November 25, 2020

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3 min read

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What's going on here?

In an unprecedented move, the Serious Fraud Office (SFO) has publicised a previously confidential chapter from its “internal” Operations Manual regarding its Deferred Prosecution Agreements (DPAs). The given reason for the release was “transparency” but many feel it was an attempt to halt plummeting prosecution rates, proving the SFO is fighting a losing battle against corporate fraud.

What does this mean?

DPAs just became the weapon of choice for UK prosecutors. Imported from the US, where they are widely used, DPAs are effectively plea-bargain deals, but for companies, not individuals.

Negotiated by the SFO or CPS, a judicially approved DPA allows a corporate entity to admit its involvement in criminal behaviour, enacted by its senior executives as the “controlling minds”. The cooperating company will escape prosecution in exchange for a hefty fine and a warning never to do it again.

DPAs are available to companies at fault who self-report the wrongdoing or admit to any wrongdoing that is revealed by whistleblowers. Rolls Royce, Tesco, G4 and Airbus are just four companies whose corporate criminality forced them into a DPA.    

Despite being touted to become one of the UK’s most powerful weapons in the fight against bribery and corruption, DPAs are starting to lose traction – and supporters. Many now believe that rather than reducing crime, they are encouraging top executives to act with impunity.

The explosion in corporate fraud, coupled with the UK’s financial constraints has seen the enforcement of executive criminal accountability fall dramatically since the 2008 financial crash. Pushing DPAs inevitably became the second-best option.    

The SFO’s new chief, Anglo-American ex FBI lawyer Lisa Osofsky, believes DPAs are “capable of not only punishing corporates for criminality, but also making sure the company rehabilitates and becomes a better corporate citizen”. But this viewpoint does not sit comfortably with everyone.

What's the big picture effect?

It seems crime, when committed within the walls of a corporate giant, is just too difficult to stop. Something senior executives, abusing the sacrosanct veil of incorporation to hide criminal behaviour, are using to their advantage. But calls for big businesses, and those who run them, to be treated like everyone else in society are getting louder on both sides of the pond.

Despite the “executives” doing the crime, often no individuals are held responsible. This raises two fundamental questions for society: Do we offer this same apparent leniency to normal criminals? And what about the other corporate fraud cases that go unpunished?  

White collar crime is happening on an extraordinary scale. Yet only nine DPAs have been granted since their introduction in 2014. Many other costly SFO investigations against top executives and companies have been dropped along the way. Investigating corporate crime is notoriously time consuming, costly and largely unsuccessful. Indeed, many feel DPAs are being used as a small ‘win’ in a sea of enforcement failings.

Police budget cuts and stretched resources may be part of the problem, but is it right to accept a lower bar of accountability just because an investigation is complex? Or should there be improvements in the UK’s investigative capability? Clearly, if individuals in management positions knew they were going to be held personally accountable for any illegitimate funds and processes they procure; white collar crime would not seem quite so attractive.      

There is growing discontent of the system in the UK. But in the US, patience with the unjust leniency of DPAs has run out. In 2018, after years of campaigning, US Senator Elizabeth Warren oversaw the enactment of the new, crazy-but-aptly-named, “Ending Too Big to Jail” Act. Heralding in more resources of investigation, tighter control over executives, continuous rules of compliance and judicial oversight. The US is finally getting tough on those personally responsible for corporate crimes.      

The new US legislation is a tough “Act” to follow. But if the UK wants to restore public confidence in the justice system, showing it is not “one rule for them…”, the SFO needs to be given considerably bigger teeth. Only when criminals hiding behind the cloak of respectability become “once bitten, twice shy”, will statistics change for the better.

It’s a fundamental principle in the UK that no one is above the law. Perhaps 2021 is the year we see corporate executives held to that same standard.

Report written by Denise Atwell

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