Thought leadership from our experts

Recent white collar crime developments

The latter part of 2015 has witnessed some important developments in the area of corporate crime. Here are the main highlights from my perspective.

The first deferred prosecution agreement ("DPA")

On 30 November, the first DPA between the Serious Fraud Office and Standard Bank Plc. was approved by Sir Brian Leveson, President of the Queen's Bench Division.

The agreement relates to the failure of the bank to prevent corruption by a subsidiary in Tanzania, Stanbic Bank. Between 2012 and 2013, Stanbic paid bribes of USD$6 million to officials in in connection with the raising of USD$600 million for the Tanzanian government. The terms of the DPA involve compensation and interest to the Tanzanian Government of $7million, disgorgement of profits of $8.4million, and a fine of $16.8million, together with costs.

This was the first time section 7 of the Bribery Act 2010 has been used successfully to bring a company to court for failure to prevent corruption. David Green QC said afterwards that the DPA would "serve as a template for future agreements". He added that the judgment provided "very helpful guidance to those advising corporates".

There were a number of features of this case that made it a very safe one for the SFO to bring before the courts. In particular, the offence involved a single transaction rather than widespread criminality. It was reported to the SFO by the Bank as soon as it was discovered. The Bank then cooperated fully in the subsequent investigation. There have been significant changes at the top of the Bank since the offence was committed.

David Green has signalled that he expects two more DPA's by the end of February and there have been reports that up to 10 companies have self-reported as a result of the first DPA. But against that it should be recognised that there will not be many cases that will satisfy the criteria in the DPA Code of practice as convincingly as the Standard case. The SFO is likely to be cautious about the cases that it chooses to take forward as DPA's for some time to come.

Corporate liability extension rejected

In the autumn, the government announced that it would not proceed with the proposed extension of the corporate criminal offence of failure to prevent bribery under section 7 of the Bribery Act to encompass a wider range of economic crime.

David Green had first suggested in 2012 that the section 7 offence be extended to encompass a wider range of criminality, and the government initially appeared minded to adopt his proposal. The introduction of the new offence was included in the Conservative party's 2015 general election manifesto.

However, the consultation process revealed that there was little evidence that corporate economic wrongdoing was going unpunished. There were also concerns that the compliance cost to business of putting in place further controls was disproportionate to any benefit that might be achieved by an extension of section 7. The change in tack is therefore not as unexpected as it might have seemed to some.

The Yates memo

In September, the US Department of Justice ("DoJ") issued a memorandum to Federal Prosecutors on Individual Accountability for Corporate Wrongdoing (the so-called "Yates memo").

Sally Yates summarised the essence of her memo thus: "We mean it when we say, 'You have got to cough up the individuals'". The Yates memo set out the six key steps to strengthen the DoJ's pursuit of individual corporate wrongdoing, including that for any cooperation credit, companies must provide to the DoJ all relevant facts relating to the individuals responsible for the misconduct.

Although there was some hype at the time of its publication, the Yates memo was largely a restatement of DOJ best practice. Corporate cooperation, and credit for that cooperation, is already a key feature in the SFO's approach to prosecutions and DPAs. It is though becoming increasingly clear that corporates that withhold information about key individuals will not be considered to be cooperative and will be less likely to be invited to enter into a DPA. Indeed, it could be said that co-operation is the underlying theme of white collar criminal law developments over the past year.

The SFO's challenging attitude to legal advisers….

In February, the High Court in Lord and others v SFO [2015] EWHC 865 (Admin) ruled that the SFO could prevent legal advisers from attending a section 2 interview where there was a real risk of prejudice to the investigation. The court accepted submissions by the SFO that it was reasonable for the SFO to consider that there could be such a risk where lawyers for the company being investigated were present during a witness interview.

Post-Lord, the SFO has taken a more assertive approach to section 2 interviews, seeking to impose conditions on the attendance of independent legal advisers which have been unreasonably restrictive. Many believe that the SFO have taken a wrong-headed approach; in particular failing to recognise that ILA's help witnesses to provide a more coherent and accurate account than if they are simply bounced into an interview. In 2016, many practitioners hope that the SFO will draw back from further confrontation.

….but the SFO is on an upward curve

The SFO achieved the conviction of Tom Hayes in the first LIBOR trial earlier this year. Expectations around the trial were greatly hyped, though given the fact that Hayes had confessed his criminality in 80 hours of taped interviews before changing his mind, a failure by the SFO would have tried the patience of even its greatest supporters. More generally, the SFO's conviction rate in 2014/5 was reported by it to be 78% by defendant with 18 defendants in 9 cases successfully prosecuted. The second LIBOR trial is currently in court and the Sweett Group has recently accepted its guilt in the second section 7 case to be brought to justice. Meanwhile, investigations in a number of high profile cases, including Forex, Rolls-Royce, GlaxoSmithKline, Barclays Bank, ENRC and GPT have yet to result in decisions. There have been recent, as yet unconfirmed, reports that David Green will be staying at the organisation for a further two years. Overall, from the SFO's perspective, 2015 has been a successful year. Mr Green is widely credited with improving morale at the SFO. He has been successful in his aim of investigating the most serious and complex fraud allegations. However, the final verdict on his tenure will have to await the outcome of the blockbuster cases that he has tackled.