“Failing to self disclose is like putting one bullet into a gun that has 1,000 chambers and pointing it at your head. Self-disclosure is like putting six bullets into a six shooter and pointing it at your leg.”
Jason Woodland of the London litigation boutique firm Peters & Peters opened a presentation on the dawn of deferred prosecutions in the UK with that anonymous quote.
There is real anxiety in the UK among corporations wondering how prosecutors will implement the new deferred prosecution law and whether corporations should self-disclose criminal wrongdoing to prosecutors armed with this new settlement tool.
There is no chance for a non prosecution agreement. And it’s much tougher for prosecutors in the UK to bring corporate crime charges.
“Prosecutors in England have always had difficulties in prosecuting corporates,” Woodland told Corporate Crime Reporter in an interview last week. “And that difficulty is more acute in England than it is in the United States. For a prosecution to be brought against the company here, the prosecutor has to show that there was a controlling mind at the company. And that has to be someone quite senior who either carried out the unlawful act or condoned this in some way. That has meant that prosecutions of corporates in England has been quite difficult. And the authorities, like the SFO, who are charged with prosecuting serious economic crime here have had a pretty tough time of it recently.”
In the United States, the Justice Department introduced the practice of deferred and non prosecution agreements. In England, it came about through an act of Parliament.
“There was a case in England that was a trigger point,” Woodland said. “In that case, the prosecutor had effectively agreed with a corporate on what the punishment should be. They took that suggestion to the judge, who was very unhappy indeed that effectively his hands had been tied by the prosecutor.”
Have there been any deferred prosecutions handed down yet?
“No,” Woodland said. “It’s very recent. I believe it was February 24 that they were introduced. I imagine that the authorities here, in particular the Serious Fraud Office, will be quite keen to get one under their belts to demonstrate to corporates that it is real and that they are prepared to negotiate in the right circumstances. So, I would imagine that they would be keen to get one done in the next couple of months. Corporates are going to be quite nervous about it. They will want to see one done before they take a jump and start negotiations.”
Was it controversial?
“I don’t think the principle of deferred prosecutions was controversial,” Woodland said. “Precisely how it was going to be implemented caused quite a bit of commentary here. Our view of how it works in the States is that sometimes prosecutors might chance their arm. They are concerned they might not have enough evidence to prosecute or to get a guilty verdict so they try and get something from the case by entering into a deferred prosecution agreement. It has been set up here in England to avoid that possibility. The prosecutor has to be satisfied that there is enough evidence to charge the company. Or, if the investigation continued, then enough evidence would come to light in a reasonable time frame.”
“It’s not something where the prosecutor can say — we haven’t got enough evidence to charge the corporate, let’s try and negotiate the deferred prosecution agreement.”
And unlike in the United States, where there is little judicial review of such agreements, in England, judicial review is written into the law.
“The court here will have to approve the deferred prosecution agreement,” Woodland says. “And it will have to give reasons why it approved the agreements. So, there will be much more significant oversight in England of these agreements than there is currently in the states.”
“When it is presented to the court, there are two hearings. The first hearing takes place once the negotiations have started but before terms are agreed to. And then there is a second review. Once the terms are agreed to, the prosecutor has to make an application to the court and the court has to decide that the terms of the agreement are fair, reasonable and proportionate. Only if the court agrees that the terms are fair, reasonable and proportionate will it approve the agreement and it goes through. If the court decides that the terms are not fair, reasonable and proportionate, then the parties have to carry on talking or the negotiations break off.”
If there is in fact sufficient evidence to bring a criminal case, why isn’t a criminal case brought?
“It comes down to time and expense of a prosecution,” Woodland says. “And weighing that against the serious nature of the crime, whether it is the first time the corporate has done it, whether it is a one off action by an employee, or whether it was a pattern of offending. They will also take into account whether the corporate reported it themselves to the authorities, or whether it came as a result of the authorities own investigations.”
“That links back to the quote in my presentation about self reporting. One of the factors that will come to the fore is whether the corporate self-reported the issue or whether the prosecutors had to go out and find it.”
“The decision as to whether to prosecute or to offer a deferred prosecution agreement will come down to the facts specific to that particular case. But certainly one of the things the prosecution will have in mind is whether the issue came to light as a result of a self-report by the corporate.”
Is it your sense that the corporations would have preferred not to have this law, or do they see it as they do here as a benefit?
“I certainly think they will see it as a benefit,” Woodland said. “There is no compulsion to negotiate a deferred prosecution agreement. And if the corporates take the view that there isn’t a case to answer and there is no wrongdoing, then you don’t enter into negotiations and you say to the prosecutors — if you think you have the evidence, prosecute us and we’ll defend it.”
“For those circumstances where there is maybe a gray area, or the corporate doesn’t want to emboil itself in a very high profile prosecution which may last for years and years and would rather do a deal, get all of the bad news out of the way quickly, put in place better compliance measures or monitors and move on, it’s just another way of achieving that. So, I think it’s going to be broadly welcomed.”
“But everything is so fact specific,” Woodland says. “Corporates — particular the huge conglomerates — have such a range of issues to think about. They need to think about reputational damage. They need to think about the impact on their trading ability. In Europe, for example, if a corporate is prosecuted for specific crimes, they might be barred from the EU procurement for a period. That’s why there is going to be an element of nervousness in being the first to enter into one of these agreements. Although there has been a code of practice published and there has been commentary about how the authorities are going to approach these agreements, until someone does it, until someone says with confidence that the authorities are prepared to negotiate sensibly about these things and don’t have unrealistic expectations in terms of compliance, fines, or confidence that the authorities aren’t just using this process as a fishing expedition, then there will be a reluctance to go ahead.”
[For the complete q/a transcript of the Interview with Jason Woodland, see 27 Corporate Crime Reporter 11(12), March 17, 2014, print edition.]