On Feb. 23, 2018, a couple of months after the first French deferred prosecution agreement (CJIP - convention judiciaire d'intérêt public) in history was entered into between the French prosecutor office and HSBC Private Bank Suisse in relation to laundering of tax fraud proceeds, the first CJIPs for corruption charges have been approved by the vice president of the Nanterre Tribunal de grande instance.
What is the background of these cases?
In these two cases, the chief security officer of EDF – a French public company – blew the whistle to the police services after being informed by a third party that one employee from EDF's Purchase Directorate requested commissions from companies in exchange for the award, or the keeping, of public contracts.
Criminal proceedings were then initiated by the public prosecutor, followed by the launch of a judicial investigation. It was established that officers of Kaefer Wanner (KW) and SET Environnement paid commissions to this EDF employee for keeping, or being awarded, contracts for the maintenance of thermal power stations.
KW and SET Environnement acknowledged the corruption facts and agreed upon the criminal qualification attached to them. The investigating judge then decided to refer the two cases to the public prosecutor for the purposes of entering into CJIPs. An agreement was reached between the public prosecutor and the companies, and both CJIPs have been approved by the aforementioned court.
What are the terms of these CJIPs?
First, it should be noted that if parties reach an agreement on this procedure, the court may impose one or more of the following:
- Payment of a fine proportionate to the benefits that result from the identified malpractice, which can reach up to 30 percent of the legal entity's average turnover calculated over the previous three years
- Implementation of an anticorruption compliance program under the control of the French Anticorruption Agency (AFA – Agence française anticorruption) for a maximum of three years, and payment of expenses incurred by the AFA's recourse to experts and other qualified authorities up to an amount determined in the CJIP
- Payment of damages to the victims of the offense, if identified
In the KW and SET Environnement cases, the court imposed all three of the above sanctions, as follows:
1. Payment of a fine
KW and SET Environnement were fined up to the amount of the benefits that resulted from the identified malpractice, capped at 30 percent of their average turnover calculated over the previous three years, as expressly outlined in the CJIPs.
Moreover, and so far, while neither French law nor any French related sentencing guidelines provide for aggravating or mitigating factors to be referred to, the following factors were taken into account to reduce the amount of the fines:
- As aggravating factors:
- Duration of the facts
- Commission of the facts in the realm of a contractual relationship with an operator entrusted with public service missions
- As mitigating factors:
- Ddeparture and termination of involved employees, including management
- Cooperation with the investigation
- Changes in shareholding
- Changes in management resulting from either voluntary departures or disciplinary measures
- Strengthening of the company's compliance program in (i) appointing a general counsel, a chief compliance officer and an ethics' point of contact; (ii) creating an ethics website available to all the employees (which includes guides, practical questions, ethical rules); (iii) disseminating a whistleblower's charter; (iv) reinforcing measures to raise employee awareness of corruption and cartel risks; (v) updating the compliance program, notably by providing classroom and e-Learning trainings, mapping risks, designing an integrity guide, and implementing an additional whistleblowing system with an independent service provider that allows employees to report alleged malpractice by phone and anonymously, if so desired
Interestingly, it was further upheld in the KW case that the company did not self-report the facts to the authorities, although this was not explicitly used as an aggravating factor.
Consequently, a fine of €800,000 was imposed on SET Environnement, covering:
- €680,000 as disgorgement of profits
- €120,000 as a complementary penalty
A fine of €2,710,000 was imposed on KW, covering:
- €3,3 million as disgorgement of profits, such amount having likely been reduced to an unspecified amount
- An unspecified complementary penalty
2. Implementation of an anticorruption compliance program under the control of the AFA, or the AFA imposing monitorship over an existing program
SET Environnement was required to implement an anticorruption compliance program in accordance with French law, under the control of the AFA for two years.
As it had already set up an anticorruption compliance program, 18 months of AFA monitoring was imposed on KW.
Moreover, costs incurred by the AFA's recourse will be charged to both companies, limited to €290,000 for KW and €200,000 for SET Environnement.
3. Payment of damages to the victim
EDF filed suit against KW and SET ENVIRONNEMENT and was awarded, in both cases, the amount of €30,000 in damages.
What key takeaways from these CJIPs can be captured?
Prior to the CJIP entered into between the public prosecutor and HSBC Private Bank Suisse, suchagreements have not been entered into before the initiation of criminal proceedings, but rather after a criminal investigation had been open for the same facts. As a consequence, it is still not possible to determine what criteria the public prosecutor could use for proposing to enter into a CJIP before the initiation of criminal proceedings, although these two CJIPs closely refer, directly or indirectly, to some criteria notably used in the United States, including:
- Duration of the alleged facts
- Cooperation with the investigation
- Implementation of a compliance program
Moreover, what is striking and deserves mention is the fact that the aggravating and mitigating factors expressly referred to in these CJIPs do not appear to be used for the same purposes: They seem to be taken into account, in one case, only to determine the amount of the complementary penalty, and in the other, to define the amount of the fine composed of both the disgorgement of profits and the complementary penalty. Further clarification would therefore be welcomed.
In addition, these cases are a reminder that, under current French law, any kind of company accused of corruption, influence peddling, related offenses and laundering of tax fraud proceeds might be imposed, under a CJIP, to implement such a program, or be monitored by the AFA when a program was already set up.
Finally, it is worth noting that these cases were initiated through whistleblowing and that setting up a "whistleblower's charter" was expressly upheld in one of these CJIPs as an essential feature of an anticorruption compliance program. Let us also recall, in that respect, that the questionnaire used by the AFA1 when assessing the effectiveness of a company's compliance program gives high priority to whistleblowing mechanisms.
What's ahead of us?
These two cases highlight the major shift undertaken by the French Sapin II law when introducing the CJIP into French criminal procedures, this law having been issued, as a matter of fact, to effectively counter corruption and related offenses.
Moreover, as stated earlier it is noteworthy that an indirect signal is being given to potential whistleblowers: It is worth blowing the whistle since it can lead, at least, to CJIPs.
Consequently, as previously mentioned2, French legal entities would should become even more concerned about compliance issues in order to effectively prevent and detect corruption.
 See "The French Prosecutor Office Has Entered Into the First French DPA in History With HSBC Private Bank Suisse," 9 January 2018, Kramer Levin Alert.
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