April 2017 | Publication No. 17-04

In this article, Phillip Hoskin, a Director in our Sydney office, summarises last month’s Government Business Roundtable on Anti-Corruption. Law enforcement and business representatives discussed ways to foster cooperation, including proposed DPAs and developing a corporate culture of integrity.

What is a deferred prosecution agreement?

DPAs help law enforcement agencies tackle white-collar crime. Both the US and UK have achieved substantial settlements. DPAs are said to be transforming corporate culture. 

There are two important features of DPAs:

  1. Where a company or company officer have engaged in serious corporate crime, prosecutors can invite the company to negotiate an agreement to comply with a range of specified conditions. These conditions typically require the company to cooperate with any investigation, admit to agreed facts, pay a financial penalty, and implement a program to improve future compliance. No prosecution will occur in relation to the matters that were the subject of the DPA, as long as the company fulfils its obligations under the agreement. 
  2. A breach of the terms of a DPA may result in a prosecution or renegotiation of the DPA terms.

What offences would be included in an Australian DPA scheme?

The proposed Australian DPA scheme would apply only to companies (not individuals). DPAs would only be available for Commonwealth ‘serious corporate crime’ offences, such as:
  • Fraud
  • False accounting
  • Foreign bribery
  • Money laundering
  • Dealing with proceeds of crime
  • Forgery and related offences
  • Exportation and/or importation of prohibited or restricted goods
  • Specific offences under the Corporations Act
  • Any ancillary offence relating to which the DPA scheme explicitly applies
The Australian Government is assessing whether other types of crime (such as environmental crime, tax offences, cartel offences and offences under workplace health and safety legislation) should be included in a DPA scheme.


What is the proposed process?

The Australian Government proposes the following model for a DPA scheme:

1. Initiation of DPA negotiations
  • Whether to enter into DPA negotiations would be at the discretion of the Commonwealth Director of Public Prosecutions (CDPP). 
  • The DPA negotiation period would begin with a letter to the company offering to begin DPA negotiations.
2. Negotiation
  • The terms of a DPA would be determined by the CDPP and the company. The terms would be adapted to suit the particular case but might include requirements to pay financial penalties and the costs of administering the DPA; and an agreement to implement corporate compliance programs. 
  • An outcome of the negotiations could be the CDPP resolving either to take no action or to prosecute; either party abandoning negotiations; or the production of a final DPA for approval. 
3. Approval
  • A prosecutor would be required to make an application to a retired judge, seeking approval of the final terms of the DPA.
  • The retired judge would consider whether the DPA was in the interests of justice and whether the terms were fair, reasonable and proportionate.
  • If the retired judge approved the DPA, it would take effect and be published on the CDPP’s website. If the DPA was not approved, the parties would be able to negotiate further, or terminate the negotiations. 
4. Oversight and response to DPA breaches
  • If appropriate, independent monitors would be appointed at the company’s expense to ensure that the company complied with the DPA. The monitor would report to the CDPP.
  • The CDPP might attempt to address breaches of DPAs by providing the company with an opportunity to address the breach and/or renegotiate the terms of the DPA. 
  • If this did not resolve the breach, the CDPP might seek to resolve the matter by referring the breach to another party. It is undecided whether this would be the Director of the CDPP, a retired judge, or a court.
  • If this other party determined that the DPA had been materially breached, the CDPP might prosecute for the matters included in the DPA. 
5. Conclusion of a DPA

DPAs would be concluded by either:
  • A material breach of a DPA.
  • Fulfilment of the terms of the DPA and the subsequent undertaking by the CDPP not to prosecute the company in relation to the matters that were the subject of the DPA.
6. Other issues

Use of information
  • Material disclosed by the company during DPA negotiations would not be disclosed (other than to relevant enforcement and investigative agencies) or used in subsequent criminal or civil proceedings if it was created solely to facilitate, support, or record DPA negotiations.
  • Exceptions to this would include a company providing false, misleading, inaccurate or incomplete information during the negotiations. Also, if a company either breached the DPA or made a statement inconsistent with the disclosed material in a prosecution for some other offence.
Publication of DPAs
  • DPAs would normally be published in full, except, for example, where full publication would prejudice court proceedings. At the end of the DPA process the CDPP would publish details on how the company had complied with the DPA’s terms and conditions.
  • The CDPP might also be required to publish details of any breach, variation or termination of the agreement.
Use of DPA funds
  • DPAs are likely to include conditions that a company make payments – for example, to disgorge profits from their misconduct, or to provide restitution to victims.
  • A DPA might require the company to pay costs associated with establishing and monitoring the DPA.

What is a material breach of a DPA?

  • The Australian Government proposes that a material breach of a DPA might include:
  • The breach so significant that it is in the public interest to terminate the DPA and commence prosecution.
  • The company committing further criminal offences.
  • The breach such that the integrity of the DPA scheme could be significantly compromised if prosecution does not result.
  • Parties not agreeing on a response to an otherwise minor breach.
  • A pattern or sequence of minor breaches which, when assessed cumulatively, suggest that the company was not making sufficient efforts to meet its DPA obligations.
  • The company not otherwise appearing to be committed to its DPA obligations.

Why is the Australian Government proposing a DPA scheme?

The proposed DPA model is an important step in developing a new enforcement mechanism for serious corporate crime such as foreign bribery, fraud, and money laundering.

Corporate crime is estimated to cost Australia more than $8.5 billion a year, and accounts for about 40 per cent of the total cost of crime in Australia.

Corporate crime can increase costs for individual businesses, expose business to legal and reputational risks, create an uneven playing field and distort markets.

A DPA scheme would help law enforcement work with business to deal with corporate crime, providing an incentive for companies to come forward, and would give-prosecutors an extra tool.

A DPA scheme would also contribute towards Australia meeting its international obligations to combat corruption and related criminal conduct; and enable the Australian Government to use DPAs in international settlements with multinational companies.


Why does the Australian Government need to foster cooperation between business and law enforcement?

Commonwealth law enforcement faces challenges in effectively detecting, investigating and prosecuting serious corporate crime. Investigations can run for several years because of large volumes of complex data and negotiations over issues such as legal professional privilege. Evidence may be held overseas and therefore require investigators to go through mutual assistance processes. At the prosecution stage, court proceedings can be long and expensive.


Why is the proposed DPA scheme good for Australia?

An Australian DPA scheme for serious corporate crime should improve law enforcement’s ability to detect and pursue crimes committed by companies and help to compensate victims. It should help avoid lengthy and costly investigations and prosecutions, and provide greater certainty for companies seeking to report and resolve corporate misconduct. It would be compatible with the Government’s policy to tackle crime and ensure that our communities are strong and prosperous. It should also minimise impacts on innocent third parties, such as the employees of the company, its customers, suppliers and investors.


Does a DPA provide companies with a ‘free pass’ to commit serious corporate crime?

The Australian Government proposes to use DPAs carefully, taking into account other available enforcement and prosecution options. Safeguards included in the proposed model include that prosecutors could only offer a DPA where it is in the public interest to do so, and a final DPA could only be approved where its terms are found to be in the interests of justice.


What is a recent example of a DPA being used?

In 2016, investigations into corruption by Rolls-Royce resulted in it settling DPAs with the US and UK governments as well as a leniency agreement with the government of Brazil.1


Can you provide feedback on the proposed DPA model?

The Australian Government floated the proposal for the DPA scheme in a 2016 public discussion paper, which received overwhelming support.

On 31 March 2017, the Minister for Justice released a consultation model for a proposed Australian DPA scheme, with a deadline for responses of 1 May. The Australian Government invites comments on the proposed model, which will inform the introduction of the scheme later this year. The discussion paper can be found at https://www.ag.gov.au/Consultations/Pages/Deferred-prosecution-agreements-public-consultation.aspx
 
 
Endnotes
1. Australian Government Attorney-General’s Department 2017, Improving enforcement options for serious corporate crime, A proposed model for a Deferred Prosecution Agreement scheme in Australia, viewed 3 April 2017, https://www.ag.gov.au/Consultations/Documents/Deferred-prosecution-agreement-scheme/A-proposed-model-for-a-deferred-prosecution-agreement-scheme-in-australia.pdf