Bribery Act & Proceeds of Crime - Written by on Friday, August 26, 2011 5:17 - 1 Comment

UK Plea Bargains should be considered – but they are not the only reason for low Self Reporting no’s

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A recent story in the Financial Times revealed that only 10 companies had Self Reported to the SFO since an initiative originally announced by the SFO in 2009.

Richard Alderman, called the response to date ‘quite disappointing’.

The FT article has generated some commentary the gist of which is that an inability to undertake a binding plea bargain between the prosecutor and the defendant mean that there is a little incentive to self report in the UK.

We disagree this is the only reason.

The articles point to the US Deferred Prosecution Agreement model as a panacea solution for the UK.

In the US, so the argument goes, corporates (and individuals) can receive certainty in the level of penalty they may suffer from the SEC and the DOJ.  This, it is argued, encourages self reporting.

Self Reporting in the US will not guarantee a Deferred Prosecution Agreement

The US system does NOT guarantee a Deferred Prosecution Agreement on the date of the self report as Alice Fisher,  assistant attorney general in the US Justice Department’s criminal division readily confirmed in this recent and interesting article.

On top of this during the course of an investigation the threat of a criminal indictment hangs over corporates like the Sword of Damocles. The effects of an indictment alone in the US can be devastating and close down businesses long before any criminal court verdict (which could be Not Guilty after all…as was ultimately the case for Arthur Andersen).

It is true to say that since the collapse of Arthur Andersen US prosecutors have been wary of punishing innocent employees for the conduct of a few unethical employees by indicting, convicting and closing down a business.

Similar policy issues will ultimately apply in the UK.

Against that back drop the difference between the UK and US system appears paper thin when it comes to motivation for a Self Report.  In reality in the US a Self Report will be very carefully considered because it triggers a process over which the corporate or individual will cease to have control.

In the UK the SFO have signalled that they will look to settle corporate bribery cases civilly using UK money laundering laws as their preferred option with a Civil Recovery Order under Part V of the Proceeds of Crime Act. They have done so in a number of recent cases, for example, Kellogg and Macmillan.  

We welcome this approach which does not require a criminal conviction nor any acknowledgement of wrongdoing and provides a significant degree of flexibility which the US system does not have.

As a result it is hard to see that the lack of a Plea Bargain system itself is the only cause of the lack of the UK Self Reports (we will consider the possible reasons for the low Self Reporting numbers in another piece).

Why then do we need plea bargaining or at the very least certainty on sentencing?

There are two primary reasons:

First, it would be useful for corporates to be able to enter into Plea Bargains in a criminal prosecution context (as opposed to the civil settlements referenced above) for reasons of certainty in cases where a civil settlement is unlikely to be acceptable to the SFO on the basis that it falls outside the criteria it originally published in 2009. 

We do not think that Plea Bargain agreements should replace the current Civil Settlement regime.  Instead they could simply be an additional tool.

Second, the US has ability to offer defendants certainty through its Plea Bargaining system in circumstances where the UK cannot.

This leads to regulatory arbitrage.

Faced with the possibility of the UK and the US prosecuting it is possible for the defendant to trump the UK system by simply entering into a plea agreement in relation to all the offences in the US.  The principle of double jeopardy means that the defendant will not be subject to UK prosecution for the same offences.

The upshot?  The UK loses out. This cannot be right.

Image © Crown Copyright 2011

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James Vine (@JamesPSVine)
Aug 26, 2011 5:35

For the full picture on MW Kellogg, try Googling Jeffery Tesler and maybe even Dick Cheney

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