'Cut penalties for fraudulent companies to make others admit wrongdoing'

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Dec 07, 2017
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Sir Edward Garnier, QC, introduced deferred prosecution agreements while he was solicitor-general


Discounts on penalties for companies that admit wrongdoing should be increased to encourage more to come forward, a former solicitor-general has said.

Sir Edward Garnier, QC, said that the discounts of 50 per cent could be raised to encourage more companies to enter deferred prosecution agreements (DPAs) in return for taking action to tackle fraud and pay compensation to victims.

“We need to be looking … to see if the court is prepared to approve even bigger discounts than the 50 per cent approved in XYZ and Rolls-Royce [two deferred prosecution cases] in order further to incentivise or encourage errant companies promptly to come forward with self-reports,” Sir Edward said.

He added that there “is still a risk that companies who know they have done wrong will calculate that it is worth trying to hide behind the difficulties for a prosecutor in the identification principle whilst perhaps letting the individuals who committed the crime or failed to prevent the crime take the hit.

“The DPA is part of our criminal justice system but it can be pragmatic too.”

Sir Edward introduced the deferred prosecution agreement into the English and Welsh justice systems while he was solicitor-general. Four deals have been brokered by the Serious Fraud Office: Standard Bank in 2015, XYZ in 2016, Rolls-Royce in January of this year and Tesco in April.

All were approved by the president of the Queen’s Bench Division, Sir Brian Leveson, as required by the Crime and Courts Act. And all largely involved allegations of failing to prevent bribery. 

Sir Edward told a meeting in London yesterday, organised by Exiger, a financial risk consultancy, that because the UK had turned its attention to building trade links outside the EU, “the need for us to maintain a reputation for the highest standards of business integrity is paramount”.

He said a gap in the law meant that prosecutors had to identify the person who was the “directing mind and will of the company”.

“The difficulty in satisfying the ‘identification principle’ has led to cases where only individuals, but not their employers, have been charged, for example in the phone hacking scandal,” he said.

“The need to prove this principle, developed in the 19th century when most English companies were run by fewer than half a dozen people, is plainly an inhibiting factor when prosecutors are considering cases involving large, complex companies with international and country boards, operating around the world.” 

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