DPAs are no cosy option

Deferred prosecution agreements offer companies speed and finality, but they are tough penalties too

Neil O'May

The Government’s rollout of deferred prosecution agreements (DPAs) has now been debated in the House of Lords and will return for further parliamentary scrutiny shortly.

Far from restricting DPAs, the legislators suggested the regime should be further extended to individuals – a position the Government will resist. It is likely that once the details and guidance fall into place DPAs will become law in the latter part of 2013, with the first ­cases following soon after.

There are two questions of perception that will influence whether DPAs achieve their potential; will the public consider them to really do justice and what incentive will corporates have to participate in an essentially voluntary process?

On the first question the Government must work hard to dispel the myth, prevalent in much recent commentary, that DPAs will be a soft option. Placed in their political context, this view must be wrong. The new justice secretary has taken time to redeliver his message that his ministry will be “tough on crime” – a message endorsed by the Prime Minister in his recent speech on justice.

This Government must be keenly aware that if there is any sense that corporate offenders will have special arrangements entitling them to bespoke leniency, it will infect their whole criminal justice policy. There is no part of the Coalition that wants to be branded ‘Tough On Crime – except when it is committed by big companies’.

In its current form it should not be hard to identify a DPA as a painful penalty. It is, after all, a judge-approved sanction to dispose of a criminal indictment. This level of scrutiny should dispel the notion that prosecutors and defendant companies will be striking the cosy deals that have been so widely criticised in the past. We know from the draft legislation that any financial penalty will be in the same ballpark as the fine following a plea of guilty in a full prosecution.

Will corporates be interested in DPAs? Following the restatement of SFO guidelines on prosecution, there was a suggestion that any real incentive to engage with the process had evaporated, particularly as there can be no expectation of leniency for self-reporting.

But this is approaching the issue from the wrong angle. DPAs cannot be compared to the alternative approach of doing nothing – a DPA must be compared to a criminal prosecution. It is a brave, or perhaps a foolhardy, company that is aware of wrongdoing but opts to conceal it, imagining it will not come to light. The risks of increased incentives for whistleblowers or an investigation into a counterparty are far too great, in most cases. In reality, DPAs offer the two things that companies crave most and that are so frequently absent in the current regime – speed and finality.

Criminal investigations can take years, all the while hampering share prices and operations irrespective of the final outcome. So much better, surely, for a company to consider self-reporting, agree a DPA ­swiftly and bring closure to its ­legacy issues, clearing the way to concentrate on its core business.