Britain’s Serious Fraud Office (SFO) has been able to deploy civil recovery powers under part V of the Proceeds of Crime Act 2002 since April 2008. The £2.25m Balfour Beatty settlement six months later over payment irregularities at its Egyptian subsidiary was the first use of these powers.
Thus, the self reporting/settlement model was born, providing encouragement for corporations to self-report cases of overseas corruption in the hope of a non-criminal outcome and reputational damage limitation.
This world of co-operation was reinforced by the SFO’s own 2009 guidance, ‘Approach to dealing with overseas corruption’, which encouraged self-reporting and offered corporations benefits such as ‘effective and proportionate sanctions’, being seen to have acted responsibly and avoiding mandatory debarment provisions.

Cash strapped

The regime also saved the cash strapped and under-resourced SFO a lot of time and money, especially as the internal investigation of a self-reporting corporation is self-funded. It also avoided the potential embarrassment of any further failed corruption prosecutions.
Although prosecution has remained an option, since 2008 there have been seven civil settlements for corporate corruption, as opposed to three prosecutions. These latter were Mabey and Johnson, BAe Tanzania and the now renowned Innospec, in which in exchange for an early guilty plea to charges of conspiracy to corrupt and the corporate’s ongoing co-operation, the SFO proposed a lesser fine as part of a proposed global settlement.
Lord Justice Thomas’ strongly worded comments on Innospec in 2010 drew the battle lines between the SFO and the judiciary. He reminded the SFO that, among other things, it could not legally enter into an agreement affixing the penalty for an offence, and that resources allocated to the negotiation of what he saw as an inadequate proposed fine should have more properly been made available for fines, confiscation or compensation. He stressed the need for openness and transparency.

Prosecution on the menu

David Green took up the mantle as SFO director in March 2012. Given his exclusively prosecution background, it was not surprising that SFO guidance encouraging corporate self-reporting was soon replaced with a self-reporting statement last October, which is unrecognisable from its predecessor. Now it seems that prosecution is back on the menu, governed by the Crown Prosecutor’s full code test, guidance on corporate prosecutions and the joint prosecution guidance for the Bribery Act 2010.
The tone is more sombre and the old world of engagement, discussion and settlement including ‘effective and proportionate sanctions’ is a distant memory. Even if a corporation manages to avoid prosecution following a self-report under the current regime, there is still a threat of prosecution for unreported violations and this information being shared with foreign jurisdictions.
Perhaps Mr Green wanted to show the world that the previously impotent SFO means business, buoyed by the new armoury of the Bribery Act 2010. But the change of focus is curious considering the SFO saw its budget falling to £39.5 million in 2011 from £44m in 2008/9 and further reducing to £30.5m in 2014/15.

Deferred agreements

So why in light of this change in culture and focus would a corporation approach the SFO in the hope of a civil settlement when the likelihood of one is rare?
Following the Innopec case and a Ministry of Justice public consultation in 2012 led by then-Solicitor General Edward Garnier QC, the Crime and Courts Bill has emerged. This has just reached House of Commons committee stage and sets out the framework for deferred prosecution agreements (DPAs) where elements of the US system are replicated.
The bill lists the types of offences for which a DPA may be utilised, including offences under the Bribery Act 2010. DPAs offer corporations wishing to resolve any bribery and corruption issues (which have occurred after 1 July 2011) to self-report to the prosecution and negotiate a bespoke set of terms that will be scrutinised by the judiciary. These terms can include a financial penalty, reparation to victims, implementation of a compliance programme and disgorgement of profits or benefits, some of which are common to a part V settlement. However, it is likely that following implementation of DPAs, the less stringent part V settlements will be rare although technically still available.

Timing is everything

If DPAs cover Bribery Act offences, what bribery and corruption will the SFO have left to prosecute? Offences under the Prevention of Corruption Acts predating the Bribery Act are not listed as offences for which a DPA can be used, and it well known how unsuccessful those prosecutions have been historically. It may be that part V settlements will need to be wheeled out for this purpose.
It is difficult to see how a corporation faced with David Green’s new prosecution focus would offer itself up by self-reporting. A corporate would surely be better taking advantage of a DPA (once available), which at least provides the certainty of a non-criminal outcome (should all go to plan) than self-reporting in the current lacuna. However, DPAs are not expected to be available until 2014.
Assuming the Courts and Crime Bill is passed as it stands, a self-reporting corporation may take advantage of its provisions extending the DPA regime to conduct prior to its enactment. The trick is not to report too soon. As in so much of human existence, timing is everything.