Avoid DPAs American-style

Before DPAs become law, we should scope out the pitfalls in the US system and learn from them quickly


Deferred Prosecution Agreements (DPAs) will now be part of the law of England and Wales, so we must pay attention to the American experience and heed the warning signs.

DPAs should be used as a complementary tool in the prosecutor’s arsenal, not a ‘catch-all’ means to avoid pursuing criminal prosecutions in situations where there may be a clear public interest in doing so.

The judiciary has an important role to play in examining DPAs thoroughly to ensure they are in the interests of justice. While we should welcome the potential to introduce greater flexibility and pragmatism into the law, the prosecutors and courts must be careful not to further public perception that white collar crime is treated less seriously than other crime.

Although there is evidence that the use of DPAs in the US has enriched the public purse by imposing huge penalties on corporates and avoiding lengthy prosecutions, this is not the same thing as ensuring justice has been done.

In the US system, the court is required to examine the proposed DPA to assess whether it is fair, reasonable, adequate and in the public interest. However, in practice the courts have often swiftly approved the terms of DPAs, leading to suggestions that the role of the judge is to rubber-stamp the settlement. Increasingly, however, its judiciary is refusing to act as ciphers and are asking penetrating questions of the parties, and in some instances even refusing to approve the settlements.

The US Securities Exchange Commission (SEC) has been waiting many weeks for a decision from Judge John Gleeson regarding its DPA with HSBC. The potentially record-setting $1.92bn (£1.23bn) settlement would enable HSBC to escape prosecution for money laundering. The judge has requested both parties make detailed representations as to why the DPA is in the public interest. His is not a solitary voice.

In April, Judge Marrerro rejected a $600m settlement between the SEC and SAC Capital Management for insider-trading allegations, and recently, District Judge Terence Boyle kept the SEC and WakeMed in suspense for weeks before approving the $8m settlement involving false Medicare billing.

Rather than rubber-stamp the DPA, Boyle pressed the prosecutor in court: why are they not charging the people at the top? Is this deal in the public interest?

Furthermore, there have been accusations that the prolific use of DPAs by the SEC has created a prosecution-free zone for large banks.

When Judge Emmet Sullivan was considering a proposed settlement between the SEC and Barclays after it engaged in business with countries facing sanctions by the US, he stated: “This concerns the court, and it should concern the government too.”

Another effect of DPAs in the US has been that SEC operatives have become involved in the day-to-day management of major US companies. Similar powers could be part of the UK regime which has the potential to see off the SFO to assert sweeping powers over the daily running of FTSE 100 companies.