Plea Bargain Sets New Enforcement Era in U.K.

Prosecution of corporate fraud has just taken a giant step forward in the United Kingdom.

The case against Mabey & Johnson, a construction firm accused of using bribes to win business, made history earlier this month when the company agreed to plead guilty to charges filed by the British government’s Serious Fraud Office. It is the first time a corporation in the United Kingdom has ever settled a fraud investigation via plea bargain, and many believe the case will be a landmark for future anti-fraud enforcement in the country.

Unlike the United States and many other countries, Britain has never formally permitted plea bargains; defense lawyers and prosecutors could discuss a plea informally, but no legal protocols existed for how those talks should occur and agreements were not binding on a trial judge. Reforms adopted earlier this year finally paved the way for a plea-bargaining process much more along U.S. lines, and Mabey & Johnson ended up being the first case tried under the new system.

In an exclusive interview with Compliance Week, Richard Alderman, head of the Serious Fraud Office, said he is delighted with the outcome and hopes the new enforcement regime will allow his office and other British regulators to take a more muscular approach with corporate wrongdoers.

Alderman

“The feedback that I have received in the last few weeks is that corporations are starting to sit up and notice,” he says. “They see that the SFO is now able to produce results.”

The particulars of the Mabey & Johnson case aren’t terribly unusual unto themselves. After an internal investigation, the company informed the SFO in 2008 that it may have resorted to corruption to win contracts in Jamaica, Ghana, and Iraq. Since then, five of its eight directors have resigned, and at a court hearing earlier this month the company said it would plead guilty to a set of charges agreed with the SFO. Mabey & Johnson also agreed to pay a financial penalty and legal costs and to hire an independent compliance monitor. (Exact terms of the deal will not be known until a judge considers the agreement and sentences the company later this year.)

“We don’t want heavy-handed monitoring. We want a light touch.”

—Richard Alderman,

Director,

Serious Fraud Office

The framework that allows the plea deal was created in May, when the Office of the Attorney General published new rules allowing “plea discussions’—which are essentially the same as plea bargains in the United States, although the British dislike the word “bargaining” since judges still have final say over any deal. Until then, the Crown had shied away from endorsing a formal “bargaining” process because that might undermine the independence of judges or put undue pressure on defendants to plead guilty.

Informal talks about pleading guilty have happened in Britain for years, but those conversations rarely reduced the cost or time of investigations. Talk about the scope of charges, for example, usually only took place after a defendant had been charged—when most of the investigation costs had already been incurred. Informal talks often had no proper record of what was discussed, and advocates for both sides could discuss pleas without the victim’s or defendant’s knowledge.

According to the attorney general’s office, those obstacles have led to a legal scene in Britain quite different from that of similar countries. In the United States, for example, 98 percent of all criminal offenders plead guilty; in Canada, the figure is 94 percent. But only 66 percent of defendants plead guilty in Britain. And defendants in fraud cases are particularly likely either to plead guilty late in the legal process or take their chances at trial, the attorney general’s office says.

INITIATING PLEA DISCUSSIONS

When and with whom discussions should be initiated and conducted:

Where he or she believes it advantageous to do so, the prosecutor may initiate

plea discussions with any person who is being prosecuted or investigated with

a view to prosecution in connection with a serious or complex fraud, and who is

legally represented. The prosecutor will not initiate plea discussions with a

defendant who is not legally represented. If the prosecutor receives an

approach from such a defendant, he or she may enter into discussions if

satisfied that it is appropriate to do so.

Where proceedings have not yet been instituted, the prosecutor should not

initiate plea discussions until he or she and the investigating officer are satisfied

that the suspect’s criminality is known. This will not usually be the case until

after the suspect has been interviewed under caution.

The prosecutor should be alert to any attempt by the defendant to use pleadiscussions as a means of delaying the investigation or prosecution, and

should not initiate or continue discussions where the defendant’s commitment

to the process is in doubt. The prosecutor should ensure that the position is

preserved during plea discussions by, for example, restraining assets in

anticipation of the making of a confiscation order. Where a defendant declines

to take part in plea discussions, the prosecutor should not make a second

approach unless there is a material change in circumstances.

Invitation letter

In order to initiate the plea discussions, the prosecutor will send the defendant’s

representatives a letter which:

Asks whether the defense wish to enter into discussions in accordance with

these Guidelines; and

Sets a deadline for a response from the defense.

Terms and conditions letter

Where the defense agree to engage in plea discussions, the prosecutor should

send them a letter setting out the way in which the discussions will be

conducted. This letter should deal with:

The confidentiality of information provided by the prosecutor and defendant

in the course of the plea discussions;

The use which may be made by the prosecutor of information provided by

the defendant; and

The practical means by which the discussions will be conducted.

Confidentiality and use of information

In relation to confidentiality, the prosecutor will indicate that he or she intends to

provide an undertaking to the effect that the fact that the defendant has taken

part in the plea discussions, and any information provided by the defence in the

course of the plea discussions will be treated as confidential and will not be

disclosed to any other party other than for the purposes of the plea discussions

and plea agreement (applying these Guidelines), or as required by law. The

undertaking will make it clear that the law in relation to the disclosure of unused

material may require the prosecutor to provide information about the plea

discussions to another defendant in criminal proceedings.

The prosecutor will require the defendant’s legal representative to provide an

undertaking to the effect that information provided by the prosecutor in the

course of the plea discussions will be treated as confidential and will not be

disclosed to any other party, other than for the purposes of the plea discussion

and plea agreement or as required by law.

In relation to the use of information, the prosecutor will indicate that he or she

intends to undertake not to rely upon the fact that the defendant has taken part

in the plea discussions, or any information provided by the defendant in the

course of the discussions, as evidence in any prosecution of that defendant for

the offenses under investigation, should the discussions fail. However, this

undertaking will make it clear that the prosecutor is not prevented from:

Relying upon a concluded and signed plea agreement as confession

evidence or as admissions;

Relying upon any evidence obtained from enquiries made as a result of the

provision of information by the defendant;

Relying upon information provided by the defendant as evidence against

him or her in any prosecution for an offense other than the fraud which is

the subject of the plea discussion and any offense which is consequent

upon it, such as money laundering; and

Relying upon information provided by the defendant in a prosecution of any

other person for any offense (so far as the rules of evidence allow).

In exceptional circumstances the prosecutor may agree to different terms

regarding the confidentiality and use of information. However, the prosecutor

must not surrender the ability to rely upon a concluded and signed plea

agreement as evidence against the defendant. The prosecutor may reserve the

right to bring other charges (additional to those to which the defendant has

indicated a willingness to plead guilty) in specific circumstances, for example if

substantial new information comes to light at a later stage, the plea agreement

is rejected by the court, or the defendant fails to honour the agreement.

Until the issues of confidentiality and use of information have been agreed to

the satisfaction of both parties, and the agreement reflected in signed

undertakings, the prosecutor must not continue with the substantive plea

discussions.

Source

Full Text of Guidance of Attorney General (March 18, 2009).

Plea Bargains, U.K.-Style

Britain’s version of the plea bargain starts with the prosecutor inviting the defendant to take part. Prosecutors can only extend the invitation “once they are satisfied that the suspect’s criminality is known”—that is, it can’t be a fishing exercise. If the suspect agrees, the prosecutor then sets out the formal conditions that will govern the talks. These are not set in stone, but certain principles apply. For example, discussions must remain confidential, and if negotiations fail, the prosecutor cannot use the fact as evidence of guilt at trial.

The prosecutor then lays out the allegations against the suspect, the relevant evidence, and a list of proposed charges. The evidence does not have to be admissible at this stage, nor need the prosecutor reveal all evidence he has, as long as he doesn’t mislead the suspect. The parties can then agree to a plea and discuss the appropriate sentence.

The parties then submit a signed plea agreement to the court, a joint submission on sentence and sentencing considerations, all the material the parties exchanged in their talks, and the minutes of any meetings. The court then decides whether to accept the agreement and what sentence to impose.

Rod Fletcher, regulatory expert at the law firm Russell Jones & Walker, says deciding how to respond to a plea invitation will involve a “balancing act” for defendants as the prosecutor does not have to reveal all its evidence. And it remains to be seen how judges will use their discretion to accept or reject agreements, he adds. Chris Warren-Smith, head of the regulatory practice at lawyers Fulbright & Jaworski, says the rules are reasonably clear, although he’ll be watching to see how they are implemented in practice.

Alderman says the agencies most likely to use the framework—the SFO, the British tax authority, and a specialist fraud unit at the Crown Prosecution Service—have conferred to make sure they apply the new approach consistently. (Since the rules apply only to serious, complex fraud cases, it’s unlikely that other British enforcement agencies will encounter cases where they can use the rules as well.) And while the framework is similar to U.S. deferred-prosecution agreements, Alderman says the American version has several elements he does not want to emulate.

Foremost, Alderman says, he does not want independent compliance monitors to become “obtrusive and expensive” in Britain. “Not all cases will require a compliance monitor. In those that do, we want to make sure that the cost of the monitor is proportional,” he says. “We don’t want heavy-handed monitoring. We want a light touch.”

Alderman also stresses that he does not want British companies pressured into waiving attorney-client privilege as a way to show they are cooperating. “I’ve not pressed on any cases to see material that is covered by professional privilege,” he says.

Alderman also notes that his office cannot fine a company, in contrast to many U.S. enforcement agencies. The British legal system has crucial differences in corporate liability, as well. In the United States, a person acting on behalf of a corporation can make the business criminally liable; in Britain, only “the controlling mind”—typically the board or senior executives—can incur liability. “That is an absolutely massive difference,” Alderman says.

Changing the liability standard or empowering the SFO to fine corporations would be substantial political moves, and require action in Parliament. For now, plea bargains fit within Alderman’s wider strategy of encouraging companies to self-report corruption cases—a point on which it has just issued new guidance.

The policy: Those that come forward early will be handled as a civil rather than criminal cases, where possible, he says, and given “the opportunity to manage, with us, the issues and any publicity proactively.”