In a press release dated 22 October 2020, the Serious Fraud Office (SFO) announced that it had reached an agreement in principle regarding a Deferred Prosecution Agreement (DPA) with Airline Services Ltd (ASL). This agreement is subject to approval from the Court, which will be sought from Mrs Justice May at a public hearing at Southwark Crown Court, sitting at the Royal Courts of Justice, on 30 October 2020. Subject to the approval, the SFO have stated that the DPA will conclude its investigation into ASL and its conduct.
On one level, this is business as usual and follows the procedural steps for a DPA to progress from negotiation to preliminary hearing and approval. However, what is unusual is that this announcement is the first time that the SFO’s investigation into ASL has been made known to the public and there are no details available about the investigation, in particular the type of misconduct and the criminal offences which form the DPA. In previous DPAs, the SFO had announced and published on its website that there was an investigation in progress against the corporate (and sometimes individuals as well) often with a high level summary of the focus of the investigation, for example on allegations of fraud, bribery and corruption. The fact of the investigation has sometimes been in the public domain for many months, if not years before a DPA has been announced.
So is the ASL announcement demonstrating a new trend in how the SFO is publishing details of its investigations or is this just a feature of the facts related to this particular company and investigation? We should be better informed once the final hearing takes place on 30 October 2020, however in the meantime it is an opportunity to review the tension between confidentiality and transparency in SFO investigations and in the DPA process.
Transparency of SFO investigations
The SFO’s website states that it provides “as much information as we can without compromising law enforcement work, prejudicing the right of defendants to a fair trial, or causing avoidable reputational damage or harm to individuals or businesses under investigation. In practice the amount of information we can provide, particularly about cases which are in the investigation stage, is usually very limited.”
In reality, what is made public, when and by who is dealt with on a case by case basis in light of the relevant circumstances.
Early on in a case during what is called the vetting process when the SFO may be making preliminary enquiries to decide whether a case falls under its remit and, if it does, whether it is a matter where an investigation should be opened, there will be nothing on the website or any public confirmation or denial about an investigation. The length of the vetting process depends on a number of factors, including whether the matter has already been made public and how the matter has come to the SFO’s attention, for example a self-report from the company or through a whistle blower, or through reporting in the media of a potential financial scandal.
The next phase is when the SFO’s criminal investigation is officially opened and there is potentially a longer period where, at some point, a decision may be made to make the investigation public. This may be for operational reasons (for example if it is in the public interest in order to gather witnesses). Sometimes steps taken by the SFO in the investigation, such as arrests or searches, means that news of the criminal investigation comes into the public domain, and the SFO will confirm the existence of the investigation if asked. There may also be circumstances where the company makes the matter public itself, for example if it has regulatory reporting obligations (such as a publicly listed company) and considers it has sufficient information to be “market-sensitive information” which requires it to inform the market. In such cases the company would be wise to co-ordinate with the SFO, who will confirm the fact and focus of the investigation after the market has been informed. Non-listed companies may also want to make the information public as a way of keeping an element of control on the timing and content of any related news story, although there should be careful consideration about what should be contained in any such announcement and attempted coordination with the SFO.
However there are some cases, in particular where there is a confidential or under cover element, where the trigger for the SFO to announce a specific investigation may only be once there has been a decision to prosecute and a company or individual has been charged with an offence.
Transparency in the DPA process
An important feature of DPAs is transparency and judicial and public scrutiny. In order to achieve this at the end of the process there is publication of the core documents including the DPA, the Statement of Facts, the preliminary judgement and full judgment.
The Statement of Facts gives particulars relating to each alleged offence with reference to key documents which are attached to the published document. It is this Statement which enables the court to agree the terms of the DPA as the court does not have the power to adjudicate upon factual differences in DPA proceedings. The Code of Practice states that there is no requirement for formal admission of guilt in respect of the offences charged by the indictment but it does require admission to the contents and meaning of key documents referred to in the statement of facts.
The DPA sets out the terms with which the company must comply including why the terms are fair, reasonable and proportionate in the particular set of facts. Those terms will usually include payment of a financial penalty, disgorgement of profit, a form of redress or compensation for victims (or, if not included, why they are not appropriate in the current case), co-operation with related investigations or prosecutions (for example against individuals), the recovery of reasonable investigation and prosecution costs and any remediation programme or monitorship required. There will also be time scales through which payments and actions must be made to avoid there being a breach of the terms of the DPA, which could ultimately lead to the termination of the DPA and a prosecution to ensue.
Confidentiality in the DPA process
Confidentiality is also an important feature of the DPA process, for a number of reasons:
- It is a matter for the prosecutor’s discretion whether to offer a company the opportunity to enter into DPA negotiations. The factors that the prosecutor may take into account when deciding whether to enter into a DPA are set out in the Joint Code of Practice on DPAs.
- DPAs are entirely voluntary agreements for both parties and so either party can walk away at any point up until they are finalised. Ultimately it is for the court to approve the arrangement before it can be finalised and made public.
- In order to initiate the DPA negotiations, the prosecutor will send a letter of invitation. If the company agrees to engage in those negotiations, there will be a further letter setting out the conduct of the discussions which will include a number of undertakings including;
- the confidentiality of the fact that DPA negotiations are taking place; and
- the confidentiality of information provided by the prosecutor and the company in the course of the negotiations.
Without this level of confidentiality the DPA process could be undermined. It is only as the DPA process moves from negotiations to settlement that the court is engaged to approve any agreement.
Confidentiality and transparency in the court process
The DPA process involves two hearings, the Preliminary hearing which is an application to approve a proposal to enter into an agreement and is held in private. The prosecution will provide documents including the proposed indictment, statement of facts, proposed terms and expiry date of the DPA, the defendant’s written consent to the proposal and why it is likely to be in the interests of justice and that the proposed terms are fair, reasonable and proportionate. On the basis that the court approves the proposal, there then follows a public hearing which is the application to approve the terms of the agreement. During this hearing the details of the application and statement of facts are made public and the documents are published afterwards, subject to any order to delay publication in order to avoid prejudicing any related proceedings, most notably any prosecution of individuals.
The particular features of the ASL DPA will become more apparent following the public hearing on 30 October, however the dynamic between transparency and confidentiality in the DPA process is something that needs to be carefully navigated for all DPAs on a case by case basis.
For further information on the issues raised in this blog, please contact a member of our Corporate Crime team.
About the author
Louise Hodges is a specialist in corporate crime, financial crime, FCA investigations, and serious and complex fraud. She is widely recognised as a leader in this field and leads Kingsley Napley LLP's cross practice financial services team and internal investigations team.
Louise has particular experience in advising corporates on issues of corporate crime, bribery and corruption and fraud offences including advice in relation to internal investigations. These cases tend to be multi-jurisdictional, complex and of high value and frequently involve support from KN's employment and dispute resolution teams. She advised Tesco in connection with their Deferred Prosecution Agreement.