SFO Secures Deferred Prosecution Agreement and LIBOR
The UK Serious Fraud Office (SFO) will be celebrating after
securing two significant public wins last week; its long awaited
second Deferred Prosecution Agreement (DPA), and the conviction and
sentencing of four individuals for LIBOR manipulation.
After months of speculation, it was announced on Friday that a
second entity in the UK had entered into a DPA. The company,
which cannot be named due to ongoing criminal proceedings relating
to a number of its former employees, will pay financial orders of
£6.5 million (comprising a £6.2million disgorgement of
gross profits and a £350,000 financial penalty). This sum
includes a 50% discount on the sentencing guidelines' financial
penalty starting point, together with further discount to recognise
the precarious financial position of the company. £1.9
million of the disgorgement will also be paid by the company's
US registered parent company (without any liability, but
effectively as repayment of a significant proportion of the
dividends that it received from its subsidiary over the indictment
In addition to the financial terms of the agreement, the company
has agreed to continue to cooperate fully with the SFO and to
provide a report addressing all third party intermediary
transactions, and the completion and effectiveness of its existing
anti-bribery and corruption controls, policies and procedures
within twelve months of the DPA and every twelve months for its
duration. Friday's DPA followed the SFO's success
last Thursday in securing stiff sentences for four individuals for
their role in LIBOR manipulation. HHJ Leonard QC sentenced
the former Barclays Bank employees to a total of 17 years in
prison, with the individual sentences ranging from six and a half
years to 33 months. The four individuals join Tom Hayes,
convicted last year, who is serving 11 years for his role in LIBOR
Last week's developments demonstrate the continued march of
the criminal law into the business sphere. We note in particular
the following: the possibility of a business obtaining
through a DPA a discount on a financial penalty exceeding the usual
one third discount for a guilty plea. The Crime and Courts
Act 2013 provides in schedule 17 paragraph 5(4) that: "The
amount of any financial penalty agreed between the prosecutor and P
must be broadly comparable to the fine that a court would have
imposed on P on conviction for the alleged offence following a
guilty plea." The Code of Practice for DPAs, at
paragraph 8.4, records that "current guidelines provide
for a one third discount for a plea at the earliest
opportunity". This is the discount that Standard
Bank secured through its DPA, leading some commentators to question
the desirability of a DPA as opposed to prosecution and an early
guilty plea. Friday's DPA extended the 30% discount to
50% by way of additional mitigation as the admissions were made
"far in advance of the first reasonable opportunity"
after charge. The prospect of additional mitigation leading
to discounts of up to 50% opens up the possibility for businesses
of securing a more advantageous outcome through a DPA than a guilty
plea (which can only take place after charge). As a result
DPAs become a potentially attractive option.
the Court's recognition that further discounts may be
available if it is not considered to be in the interests of justice
for a company to be put into insolvency. In this case the
company had dismissed staff, self-reported the issue promptly, and
cooperated with the SFO, so that it was "effectively a
different entity from that which committed the
offence". The impact of a financial penalty on the
company's remaining staff, customers and local economy in these
circumstances were then also relevant factors in identifying a
penalty that was fair, reasonable and proportionate.
a willingness for juries to interpret as "dishonest"
(and therefore criminal) conduct in business which was widespread,
and perhaps tacitly accepted at the time by others in that
business. The test for dishonesty which the jury assesses
involves an objective element, being that of ordinary reasonable
and honest people. The Court of Appeal in the Tom Hayes case
confirmed that the standards of the LIBOR market or a group of
traders in that market is not relevant to that objective
standard. Applying that test to the former Barclays Bank
employees the jurors found that 3 of them were dishonest (the
fourth having already pleaded guilty). This in the context of
behaviour which was in plain sight, and without any direct personal
gain for the individuals. A stark reminder that reasonable
and honest people may consider as dishonest, activity which market
participants do not necessarily consider so.
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It was back in 1998 that Jack Straw, the then Home Secretary, asked the Law Commission to examine the law on fraud and whether a general offence of fraud would be an improvement to the body of criminal law.
The Fraud Act 2006, which represents the most radical change in the law of criminal fraud since the Theft Act 1968, came into force on January 15, 2007. We are now over a year into the new law, which seems a reasonable juncture to pose the question: has it had any impact?
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