deferred prosecution agreements

The Serious Fraud Office’s strategy for 2024 to 2029 indicates aspiration to be a more effective agency and to incentivise personnel.

By Nathan Seltzer, Pamela Reddy, Clare Nida, and Annie Birch

On 18 April 2024, the UK’s Serious Fraud Office (SFO) published an ambitious, albeit high-level, five-year plan (the Plan), setting out its proposed framework to address the increasingly complex landscape of serious fraud, bribery, and corruption. The Plan indicates Nick Ephgrave’s ambitions as the new director

By Stuart Alford QC, Daniel Smith and Yasmina Borhani

Following a two-year investigation, Tesco PLC has announced that its subsidiary Tesco Stores Limited (Tesco Ltd) had agreed in principle the terms of a Deferred Prosecution Agreement (DPA) withM&A - Chess Board the UK Serious Fraud Office (SFO), subject to final judicial approval at a hearing scheduled for 10 April 2017 before Sir Brian Leveson PC.  The DPA would result in Tesco Ltd paying a £129m fine to the SFO, together with the SFO’s costs.  It is also likely to include an admission of criminal liability and an agreed statement of facts, albeit publication of details may be withheld to avoid prejudicing the ongoing prosecution of former Tesco executives.

SFO investigation

The SFO launched its investigation into Tesco Ltd’s accounting practices in October 2014, after the company announced on 22 September 2014 that it had overstated its profits by £263m between February and September 2014, a figure which Tesco Ltd later revised to £326m.

In September 2016, the SFO charged three former Tesco executives with offences of fraud and false accounting. These defendants are due to stand trial at Southwark Crown Court in September 2017.

By Daniel Smith, Clare Nida and Yasmina Borhani

The UK’s growing focus on corporate criminal liability was seen in two recent pieces of news.

Last Friday the government announced a consultation on extending the reach of corporate criminal liability to additional economic crimes, in order to avoid the current English law requirement to identify a “directing mind and will” of the company (i.e. the most senior management) to prove corporate liability, which has proved a hurdle in prosecuting large corporates. As is well known, the UK Bribery Act 2010 introduced the corporate offence of failure to prevent bribery which bypasses this hurdle, and already, an offence of failure to prevent tax evasion is making its way through parliament, to which the government is now considering adding fraud, false accounting and money-laundering.

Just as that consultation was being launched, the already existing reality of criminal liability for bribery was being felt by Rolls Royce. Following a three year investigation, the company reached a £497 million settlement with the Serious Fraud Office (SFO).

By Stuart Alford QC and Daniel Smith peviews4

Deferred prosecution agreements (DPAs) became part of the prosecutors’ toolbox in 2014, allowing for settlement instead of bringing a case to trial. Recent statements from the Serious Fraud Office (SFO) indicate an increasing willingness to seek DPAs. The SFO has concluded two DPAs so far, and we expect more in the next few months and beyond. This change in emphasis in prosecuting corporate criminal offences, together with encouragement for organisations to self-report, should incentivise the SFO to focus on corporate offending. This will ease the SFO’s investigatory burden, which we then anticipate will free up its resources to open (and close) more cases against companies.

For prospective deals, PE houses should continue careful vetting of new acquisitions, and ensure compliance with anti-bribery and corruption best practice. Where issues are uncovered on done deals, firms will need to navigate through this new form of prosecution. For exits, resolving issues via a DPA may be useful if a firm is planning a sale, as a looming trial may disrupt the exit process and depress price. DPAs are perceived as a less painful alternative, offering greater certainty and control over the ultimate outcome, and a speedier resolution than a criminal trial. However, in our view, DPAs also present significant challenges for PE.