It has long been a problem for criminal prosecutors that corporate crime is difficult to detect. The criminal act can remain concealed and the effects of the crime may not be felt for some time. The criminal authorities have come up with various ways to encourage reporting of corporate crime, from the protection of whistle blowers and more recently the introduction of Deferred Prosecution Agreements.
Since the introduction of DPAs in the UK in 2014, and the inexorable move towards the criminalisation of corporate wrongdoing, the Boards of corporates and their legal advisers have strived to obtain guidance and clarity on how, when faced with the discovery of possible criminal wrongdoing within their organisation, they deal with it.
The Serious Fraud Office quickly issued a Code of Practice for DPAs which, inter alia, set out the framework in which the prosecutor would approach the question of whether a DPA was appropriate means of disposing of the matter. Self-reporting and co-operation by the corporate are commonly regarded as the essential elements for entry into the realms of DPAs. The message from the SFO has been relatively clear for some time: come and tell us something we don't know and work with us in good faith to investigate the matter and the chances are you'll qualify. Simple, right? Well, perhaps not.
The Code of Practice gave co-operation top billing as a factor tending against prosecution (and thus towards a DPA):
"Considerable weight may be given to a genuinely proactive approach adopted by [the organisation's] management team when the offending is brought to their notice, involving within a reasonable time of the offending coming to light reporting [the organisation's] offending otherwise unknown to the prosecutor and taking remedial actions including, where appropriate, compensating victims. In applying this factor the prosecutor needs to establish whether sufficient information about the operation and conduct of [the organisation] has been supplied in order to assess whether [the organisation] has been co-operative. Co-operation will include identifying relevant witnesses, disclosing their accounts and the documents shown to them. Where practicable it will involve making the witnesses available for interview when requested. It will further include providing a report in respect of any internal investigation including source documents."
The SFO clearly envisaged in the Code that some investigation will have been carried out by the corporate and that it will have reached a view on what has happened and in most, if not all cases, will have obtained legal advice and assistance in the conduct of that investigation.
The obvious question then arises, that once the decision has been made to self-report, what exactly does co-operation look like? What has been quite clear for some time now is that the corporate does not define or control what co-operation looks like. There is a natural tendency in these circumstances for the corporate to try to control the flow of information; to provide what it wants to provide and withhold information and documentation that perhaps might implicate people higher up the chain or open up other channels of investigation that it wants to avoid. The corporate may have even tried to structure the investigation so as to be able to claim legal privilege over notes of interviews. This is not co-operation.
True co-operation, so far as the prosecutor is concerned, means the corporate must let the prosecutor in, virtually unhindered. As only the SFO gets to decide whether or not a DPA is appropriate, to all intents and purposes, it is really only the SFO's view on co-operation that matters. The SFO has made this clear for some time.
On 6 August 2019, the SFO issued its Corporate Co-operation Guidance (here). It sets out, in plain language what co-operation is, and what it isn't:
"Co-operation means providing assistance to the SFO that goes above and beyond what the law requires. It includes: identifying suspected wrong-doing and criminal conduct together with the people responsible, regardless of their seniority or position in the organisation; reporting this to the SFO within a reasonable time of the suspicions coming to light; and preserving available evidence and providing it promptly in an evidentially sound format."
"Genuine co-operation is inconsistent with: protecting specific individuals or unjustifiably blaming others; putting subjects on notice and creating danger of tampering with evidence or testimony; silence about selected issues; and tactical delay or information overloads."
The detailed indicators of good practice set out in the Guidance amount to not much more than how any responsible corporate receiving sound legal advice will conduct an investigation into suspected wrongdoing. What is important for corporates to understand is that the SFO will determine what it wants, when it wants it and how it wants it. It wants to ensure evidence is admissible because it wants to be able to use it in the investigation and prosecution of individual wrongdoing.
The question of the maintenance of legal privilege remains vexed and the Guidance does little to disguise the SFO's open attack on the principle. For instance:
- As a matter of good general practice the organisation should, "promptly provide a schedule of documents withheld on the basis of privilege, including the basis for asserting privilege." If an organisation decides to assert legal privilege over relevant material (such as first accounts, internal investigation interviews or other documents) the SFO may challenge that assertion where it considers it necessary or appropriate to do so.
- The onus is on the organisation to properly establish the existence of a valid privilege claim.
- "During the investigation, if the organisation claims privilege, it will be expected to provide certification by independent counsel that the material in question is privileged."
The Guidance is helpful, but it is not ground-breaking and nor is it comprehensive or prescriptive. In fact, the most helpful part of the Guidance is, arguably, the succinct statements (as set out above) about what is and what is not co-operation.
The Guidance acknowledges that "The very nature of co-operation means that no checklist exists that can cover every case" and that co-operation does not guarantee any particular outcome. The Guidance doesn't particularly help corporates determine when to self-report and what level of investigation it should carry out before doing so. More comfort lies in the fact that the SFO, under its new Director, Lisa Osofsky, is seeking to encourage corporates, more than ever, to self-report and co-operate to enable the SFO to deal effectively with the corporate through DPAs and in its prosecution of individuals. That approach, in conjunction with the Code and Guidance will, it is hoped, bring about a level of uniformity of approach. It will, however, remain the case that whether and when to self-report, and how to conduct a pre-report investigation will remain a matter of good judgment exercised by corporates in conjunction with their professional advisers.
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