* Any views expressed in this opinion piece are those of the author and not of Thomson Reuters Foundation.
By Ian Leist QC
In March 2012, the UK’s Solicitor General, Edward Garnier QC, confirmed to Parliament that so-called Deferred Prosecution Agreements (DPAs) are to be added to the armoury of prosecutors in this jurisdiction by way of legislation to be introduced no later than Spring 2013.
The details of how these DPAs are to work in practice are as yet unclear but this is undoubtedly a welcome announcement, both for prosecutors and defence lawyers, following the Bribery Act 2010 and the Guidelines on civil settlements and self reporting.
The holy grail for prosecutors and defendants in complex commercial fraud cases is ‘certainty’ when settlements are sought. However, cases are notoriously fact sensitive, whilst trials are unpredictable, costly, time consuming and commercially distracting.
One key issue for the parties will be: ‘to what extent judges in England and Wales will be able to scrutinise these agreements?’ Of primary concern is that prosecutors and defendants will come to agreements which serve their own political and commercial interests at the expense of the public’s.
The Solicitor General confirmed that:
i. There would be no non-prosecution agreements, but only deferred prosecution agreements conditional on compliance with measures designed to avoid any repetition of misconduct
ii. The new regime would apply only to corporates, and not for individuals
This immediately questions the potential efficacy of this proposal since all recent public interest cases, in which plea bargains were criticized, involved individuals seeking to avoid immediate custodial sentences for their white collar crimes.
There exists long standing mistrust of plea bargaining in this country. The Lord Chief Justice made it clear in R v Dougall 2010 that “agreements between the prosecution and defence about the sentence to be imposed on a defendant are not to be countenanced.”
In the recent white collar crime case of Innospec (2010), Lord Justice Thomas explained that sentence must remain a matter for the judiciary so that the basis of any plea can be rigorously scrutinized by the judiciary in open court, “in the interests of transparency and good governance.”
A DPA, therefore, in short, may be a mechanism which strengthens the lawyers’ hands in reaching a negotiated settlement whilst observing the legal principle above. However, it is not going to remove the problem in cases involving individual exposure to custody where the key issue will still be the choice of charges brought by the Crown in determining the level of sentence.
One Rule for the Rich?
Mr Garnier recently admitted that he had learnt the lessons of Innospec and of BAE Systems - “we don’t want to get kicked around by the court again”.
He acknowledged that the UK courts had already made it very clear that prosecutors are not permitted to make so-called “private deals” with the defence and that sentencing was purely within the jurisdiction of the court.
Mr Garnier acknowledged that in order for DPAs to work, English judges would need to be involved at a much earlier stage of the criminal proceedings so that they could oversee the parties’ negotiations and indicate what the judge had in mind.
“…I am going to need judicial buy-in to deferred prosecution agreements and to ensure that judicial control is preserved for the judiciary…”
In the United States, such agreements are a long-standing prosecutorial tool. By 2007 there were 39 deferred prosecution agreements and non-prosecution agreements a year and agreements have been averaging at approximately 30 per year.
Consequently, there has been growth in the total amount of fines. The combined total for 2010 and 2011 was US$7.6 billion. The growth is consistent with the Department of Justice’s priorities in relation to Foreign Corrupt Practices Act, healthcare fraud and anti-trust.
According to a report by the U.S. law firm Gibson, Dunn & Crutcher, FCPA violations account for 45% of all economic crime prosecuted by the DOJ.
In the last year, a widely publicised argument between the Securities and Exchange Commission (SEC), Citigroup, a New York District judge and now the US Court of Appeal for the Second Circuit, has once again tested these important principles of private and public law.
In October 2011, the SEC filed an action against Citigroup in the New York District Court alleging securities fraud. The complaint was that Citigroup had recommended to investors a fund, while simultaneously taking a short position against the fund to protect its own profit.
On the same day, the SEC presented to the Court a consent judgment in which Citigroup, although not admitting any of the factual allegations complained of by the SEC, agreed to give up the $160m profit it had made from the fund plus interest and to pay a $95m fine. Citigroup also agreed to implement compliance measures designed to avoid any repetition of the conduct alleged but not admitted.
In brief, the Court - and this is always the root of judicial unhappiness - was presented with a fait accomplii agreed by the parties in private to be rubber stamped by the New York District court.
Because, however, in the view of the judge, there was neither analysis nor acceptance of the conduct the subject of the agreement, the proposed Order was ‘neither fair, nor reasonable, nor adequate, nor in the public interest’ the Court decided the agreement served only the interests of the parties.
As the judge noted, ‘…if the allegations … are true, this is a very good deal for Citigroup; and, even if they are untrue, it is a mild and most cost effective way of doing business.’ The $95m fine agreed by the SEC was ‘pocket change’ to an entity of the size of Citigroup. The only benefit to the SEC was a ‘quick headline’. The judge refused to endorse the Order and, instead directed the SEC to proceed to trial.
The SEC and Citigroup jointly appealed immediately, and on the 15 March 2012 the US Court of Appeals for the Second Circuit granted a stay pending the outcome of the appeal in September 2012. Expressing a preliminary view, the Appeal Court suggested that the judge was wrong to second guess the SEC’s discretionary and policy based decision to settle, taken by a statutory regulator charged with making that decision. Whether such an agreement was in the public and private interests of the parties lay with the body charged by statute with making that decision and the defendant itself, and not a judge.
The outcome of this case will be keenly awaited.
DPA’s are an almost inevitable step forward in this country in the search for effective, multinational and cross-jurisdiction settlements, but civil settlements ensuring successful ‘soft landings’ for corporates will still require careful piloting and professional management to avoid judicial criticism.
Ian Leist QC
Redmantle
Red Lion Chambers
