Yesterday was a significant day for the SFO as its Deferred
Prosecution Agreement (DPA) with Rolls-Royce PLC was given the seal
of approval by Sir Brian Leveson.
The resolution is the highest ever enforcement action against a
company in the UK for criminal conduct. The fine, totalling
£497m, comprises a disgorgement of profit
(£258,170,000) and a financial penalty (£239,082,645).
Rolls-Royce must also pay the SFO's costs (approximately
£13m). The fine incorporates a discount of 50% reflecting the
"extraordinary cooperation" of Rolls-Royce
during the investigation.
The indictment (suspended for the term of the DPA) identifies
conduct which stands at the most serious end of the scale - 12
counts of conspiracy to corrupt, false accounting and failure to
prevent bribery are detailed in the Statement of Facts spanning a
period of 25 years and multiple jurisdictions, depicting a company
where bribery and corruption went to the core of its business.
This is the third DPA that the SFO has secured (the previous two
Standard Chartered in 2015 and
XYZ plc in 2016). This is the first DPA entered into by the SFO
which sees them take a coordinated approach with international
prosecutors. This has resulted in Rolls-Royce entering into a DPA
with the US Department of Justice (DoJ) costing Rolls-Royce $170m
(£141m), and a leniency agreement with Brazil's
Ministerio Publico Federal (MPF) resulting in a further fine of
It is notable Rolls-Royce have secured a DPA in circumstances
where they did not proactively self-report, something to which
great weight was attached in the context of the previous two DPAs.
Rather, the SFO approached Rolls-Royce in the first instance and it
was at this point that cooperation was prompted.
While a failure to self-report is clearly not fatal to a company
being offered a DPA, certain factors at play in the Rolls-Royce
case allowed Sir Leveson to overcome this shortcoming. In
After being approached by the SFO Rolls-Royce engaged in the
investigation on a proactive and comprehensive basis. Rolls-Royce
are commended in Sir Leveson's judgment, and also by Sir Edward
Garnier QC acting for the SFO, for their "extraordinary
cooperation" which included a comprehensive internal
investigation, the results of which were made available to the SFO,
and a waiver of any claim for legal professional privilege on a
limited basis. They also brought to light conduct which otherwise
may not have been exposed;
The conduct complained of concerned former senior management,
and this factor weighed heavily in Rolls-Royce's favour.
Rolls-Royce adequately demonstrated to the SFO and the court that
the new senior management in place were not responsible for running
the company during the relevant period and they were now committed
to instigating wholesale changes to the strategic direction of the
company, including implementing a new compliance regime.
The potential for Rolls-Royce, and third party interests, to be
adversely effected in the future should they have been prosecuted
and faced public procurement bans in multiple jurisdictions appears
to have driven the assessment of the "interests of
justice" in approving a DPA.
It is also notable that, in addition to unlocking access to a
DPA, the "extraordinary cooperation" secured
Rolls-Royce a discount of 50% on the potential penalty. The DPA
guidelines provide for a discount of one third, but a further
discount of 16.7% was approved by Sir Leveson. In view of the
discount of in excess of one third that was also approved in the
XYZ plc DPA in 2016, expectations of businesses may be raised by
these developments. A discount of in excess of one third
potentially makes a DPA more attractive than an early guilty
We also note that a condition of the DPA is that Rolls-Royce
fully cooperates in assisting the SFO as required with the
prosecution of its former employees. This highlights the
potentially competing interests of companies and their senior
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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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