A new enforcement tool to deal with serious corporate crimes could soon be introduced into Australian corporate criminal law. Dominique Hogan-Doran SC reports.
A new enforcement tool to deal with serious corporate crimes (ie fraud, bribery, and money-laundering) could soon be introduced into Australian corporate criminal law. Known as “deferred prosecution agreements”, DPAs allow companies to avoid prosecution by paying a fine and submitting to certain conditions for a period of probation, after accepting responsibility for wrongdoing.
In a public discussion paper released on 16 March 2016, the Commonwealth Minister for Justice called for submissions on:
- the utility of an Australian DPA scheme for serious corporate crime;
- the range of corporate misconduct for which a DPA may be sought (presumably limited by the scope of Commonwealth legislative power);
- possible parties to a DPA (should they be allowed for individuals as well as corporations?);
- the extent of judicial involvement in approving and supervising DPAs;
- the kinds of guidance that would enhance predictability and certainty for corporations invited to enter into a DPA;
- whether DPAs should be made public;
- the terms to be required in a DPA; and
- the consequences for breach of a DPA.
DPAs have been common practice in the United States for many years, where DPAs can be sought more broadly in relation to any type of crime, or where the defendant is an individual. The first corporate DPAs in the United States date back to the early 1990s and have proven popular with the authorities there. Recent DPAs include:
- US Department of Justice & Total DPA (2013) re conspiracy to violate the anti-bribery provisions of the Foreign Corrupt Practices Act, related false book offences and inadequate internal controls;
- US Securities & Exchange Commission & PBSJ Corporation DPA (2015) re offers and promises of payment and other benefits to certain Qatari government officials in order to secure two multi-million dollar development contracts in Qatar and Morocco.
In the US, prosecutors have significant discretion in agreeing the terms of a DPA, and face little judicial oversight – as confirmed in a ruling this month of the U.S. Court of Appeals for the D.C. Circuit rejecting an argument that the Department of Justice was too lenient with Fokker Services BV, a Dutch aerospace firm accused of making more than 1,000 illegal shipments of parts and components to Iran and other sanctioned countries from 2005 to 2010.
DPAs were only introduced into England and Wales in 2014 - through a new Schedule 17 to the Crime and Courts Act 2013. There, DPAs face a much greater level of judicial scrutiny, requiring Court approval. Court approval is granted only when satisfied that the terms of a DPA are fair, reasonable and proportionate, and in the interests of justice.
The first DPA was approved in November 2015 between the Serious Fraud Office and Standard Bank in relation to alleged failure to prevent bribery under the UK Bribery Act 2010. As a result of the DPA, Standard Bank will pay financial orders of US$25.2 million and will be required to pay the Government of Tanzania a further US$7 million in compensation.
Why an Australian DPA Scheme?
Corporate crime is estimated to cost Australia more than $8.5 billion pa and account for 40% of the total cost of crime in Australia. The increasing global nature of business has added complexity, making detection and investigation of suspected criminal conduct even more challenging.
An Australian DPA scheme could offer a clearly structured and transparent process for companies, allowing them to avoid the time, cost and uncertainty associated with drawn out investigations and prosecutions, provided they are willing in return to provide cooperation with the prosecutor, payment of financial penalties and implementation of improved compliance programs.
From the regulatory viewpoint, it would allow prosecutors to obtain enforcement outcomes more cost-effectively.
What might a DPA Process look like?
Following the UK model it could involve 4 stages:
Stage one: awareness of a potential DPA
There will need to be a trigger to make the prosecutor aware of a potential criminal course of conduct by a commercial organisation that could be the subject of a DPA. That may arise in different ways:
- self-report by the company;
- a whistle-blower
- a prosecutor’s own initial investigation.
Stage two: invitation by the prosecutor to enter into DPA negotiations
In the UK, if the prosecutor decides to offer the company the opportunity to enter into DPA negotiations, it will do so by way of a formal letter of invitation outlining the basis on which negotiations will proceed. During this stage the particulars of the alleged offending need to be established and potentially appropriate terms discussed.
Stage three: potential DPA agreed by the prosecutor and the organisation
When considering whether a DPA may be appropriate a prosecutor could be required to take into account a range of factors, such as those contained in the Serious Fraud Offices’ Deferred Prosecution Agreements Code of Practice and the guidance included in the Code for Crown Prosecutors and the Joint Prosecution Guidance of the Director of the SFO and the Director of Public Prosecutions on the Bribery Act 2010. A public interest factor in favour of prosecution could be if there is a history of similar conduct (including prior criminal, civil and regulatory enforcement actions against it). A public interest factor against prosecution could be if there has been a genuinely proactive approach adopted by the corporate management team when the offending is brought to their notice, involving self-reporting and remedial actions.
Stage four: court approval
The fourth stage court approval process could begin with a Preliminary Hearing, held in private in order to preserve confidentiality at an early stage. The timing of a preliminary hearing would vary on a case by case basis. The application with supporting documents (including a statement of facts) would be submitted to the court before the preliminary hearing; and the prosecutor would apply to the Court for a declaration that: (a) entering into a DPA with the organisation is “likely to be in the interests of justice,” and (b) “the proposed terms of the DPA are fair, reasonable and proportionate.” At the subsequent Final Hearing, the prosecutor would then apply to the Court for a declaration that the DPA is in the interests of justice, and the terms of the DPA are fair, reasonable and proportionate. If the DPA is approved, the court would give its declaration to that effect in an open final hearing.
The Discussion Paper raises some interesting collateral issues to the introduction of a new DPA Scheme in Australia. For example, to what extent will information disclosed during negotiations for a DPA be able to be used in future proceedings against the defendant? The discussion paper acknowledges that “[w]hile there are sound policy reasons why prosecutors should not be prevented from doing so, that approach would give the prosecution significant bargaining power over the defendant in the process”.
Another issue is to what extent details of a corporation’s own internal investigations must be provided to the prosecutor in negotiations, and what status those documents would have? In Australia currently, that kind of material will often be subject to legal professional privilege and excluded from production to any regulatory investigator or prosecutor. While commonplace in jurisdictions such as the United States, that would represent a significant change to current Australian practice.
Consultations close on 2 May 2016 (see template submission).
9 April 2016
Dominique Hogan-Doran SC is an Australian barrister. She has acted in a range of corruption and bribery investigations and hearings, most recently for the NSW Mine Subsidence Board in Operation Tunic investigation by the Independent Commission Against Corruption.
Liability limited pursuant to a scheme approved under Professional Standards Legislation.