Tom Baker speaks to corporate crime specialists as Freshfields advises supermarket on UK’s fourth-ever DPA and hires top SFO lawyer
Last month the fourth deferred prosecution agreement (DPA) in UK history was approved by judge Sir Brian Leveson, enabling Tesco to pay a £129m fine and escape criminal charges relating to the false accounting scandal of 2014.
The DPA has brought to an end a two-year long investigation process. Thus far, only a small group of specialist firms have been called upon to act on these alternatives to prosecution, cornering a lucrative market.
In the case of Tesco, Freshfields Bruckhaus Deringer and Kingsley Napley were enlisted to negotiate a settlement with the Serious Fraud Office (SFO) with the Magic Circle firm fielding a team of disputes partners comprising Andrew Austin, Ian Taylor and Ali Sallaway. Kingsley Napley’s team was led by head of criminal litigation Stephen Parkinson.
Other DPAs have seen Herbert Smith Freehills (HSF) advise ICBC Standard Bank on the first UK DPA in late 2015, with disputes partner Rod Fletcher leading for the firm. In January 2017, Slaughter and May partners Richard Swallow and Jonathan Clark advised Rolls-Royce as it agreed a £497.3m DPA with the SFO, also approved by Leveson.
Clifford Chance commercial litigator Simon Davis says: ‘DPAs are a very sensible way for a company and the prosecuting authority to reach an arrangement where they don’t end up entangled for years in complicated areas of law and fact. As seen from Rolls-Royce and Tesco, it should be appropriate for a company if it chooses to co-operate with the authorities to reach some kind of certainty.’
Keystone Law consultant solicitor Claire Shaw, who spent eight years as an SFO prosecutor, notes that DPAs are a growing trend among clients and adds: ‘Rolls-Royce saved 50% on what they would have spent if they fought against their claim. The C-suite hears those numbers and thinks: “That’s a no-brainer.”‘
‘In the early days of course you’re going to have people saying “we have US lawyers telling you how the DPA works” but I’d take that with a pinch of salt.’
Simon Davis, Clifford Chance
A recent government consultation on corporate crime liability has given some industry players food for thought. The proposed reforms would see new laws put in place to make it easier for corporate executives to be prosecuted for white-collar crimes.
‘The general consensus is that corporate liability needs to be looked at,’ says Shaw. ‘Nowadays it must be so easy for people at the top of a culture, who must know what is going on, to just remove themselves from emails and phone calls so there’s no paper trail to them. With the burden of proof being so high, you can’t often make that quantum leap.’
Switching sides
The news in April that Freshfields had hired former SFO head of bribery and corruption Ben Morgan highlights the ongoing drive among firms keen to strengthen their white-collar teams. But does hiring from regulators really give firms a cutting edge? One City partner who worked on a DPA says: ‘Some more fringe US firms in the London market have thought that’s the way to go here and so have hired ex-SFO people. The problem is, historically they haven’t been very good.’
Shaw notes: ‘You do have to have a bit of savviness to give commercial clients confidence that you’re not just an ivory-tower ex-prosecutor. There are quite a lot of law firms that are finding that out.’
Parkinson adds: ‘There’s definitely an advantage to having a former SFO person joining your firm. They understand the SFO mindset.
‘However, that knowledge and experience can become dated very quickly. David Green is going to step down this time next year and each director has a very different approach.
‘It can be useful to a firm to have lawyers with a prosecution background, but defending companies and individuals requires different skills, so the best combination involves joining former prosecutors with established criminal defence practitioners.’
Considering the US origins of DPAs, some firms may be inclined to hire lawyers from across the Atlantic to provide specific expertise on a relatively new area of law for UK lawyers. Quinn Emanuel Urquhart & Sullivan litigation partner Ted Greeno says: ‘For anything involving the cross-jurisdictional issues that are likely to come up in the US and the UK, you need both English and US lawyers with the right type of expertise.’
However, Davis argues: ‘In the early days of course you’re going to have people saying “we have US lawyers telling you how the DPA works” but I’d take that with a pinch of salt. Frankly, this is a very UK-shaped system with the judge having greater involvement and the rules of the game being set out very clearly by Leveson.’
tom.baker@legalease.co.uk