Deferred Prosecution Agreements: the dangers for Directors and Officers

On 24 February 2014 Schedule 17 of the Crime and Courts Act 2013 came into force bringing a sea change in the prosecution of corporate entities accused of criminal malfeasance. Deferred Prosecution Agreements (“DPAs”) are now a tool in the prosecution of corporate crime and the prosecuting authorities have published a Code of Practice.

Corporate bodies may be keen to take advantage of these arrangements. However individual directors and officers will also need to consider their personal positions as the corporations will, as a term of a DPA, be required to assist in appropriate prosecutions of individuals.

Not only should directors and officers ensure that there is sufficient insurance cover to pay for advice and representation in criminal proceedings (whether innocent or guilty) but they will want to take independent advice as to the extent to which they should assist in internal enquiries and as to the conditions that should be imposed on such enquires, such as ensuring that all other interviews are available to them.

There are at least two ways in which statements taken in an internal enquiry may be significant. They may self incriminate the maker. Alternatively they may provide earlier consistent or inconsistent statements of employees who become witnesses for the Crown.

Common practice will see corporations engage the service of external counsel to undertake an internal investigation where allegations of impropriety arise; a key stage of these investigations is interviewing members of staff. Under current practice a particular benefit of the use of external counsel is that the investigation and any interview conducted therein will be covered by legal professional privilege (“LPP”).  LPP covering an internal investigation is likely to vest with the corporation and not with the individual – where a DPA is being considered as a disposal this may lead to substantially conflicting interests for an individual director or officer and the corporate entity.

Nothing in the Code of Practice can enforce a waiver of that privilege. This raises areas of concern for those interviewed and those against whom interviews may be used.

For those interviewed the prosecuting authorities offer small comfort stating that such interviews “would be governed by the laws of evidence which provide the appropriate protections on a case by case basis” This is a reference to the use of s.76 and s.78 Police and Criminal Evidence Act (“PACE”) 1984. Yet there is case law allowing the use of such interviews when the interview was not conducted as part of a criminal investigation and was so outside the protection of the PACE Codes of Practice unless inappropriate inducements were offered making an confession unreliable or the circumstances are found to be oppressive. The case law includes Sunders v UK 1996 ECHR 65 and R v Gill 2003 EWCA Crim 2256.

The Code notes that the co-operation and pro-activity of a corporation may give “considerable weight” into public interest factors against prosecution and thereby for a DPA disposal. The Code notes that co-operation “…will include identifying relevant witnesses, disclosing their accounts and the documents shown to them”. It is this “considerable weight” that may lead to the decision for a corporation to waive LPP over interviews undertaken as part of an internal investigation in an attempt to enter into a DPA, but it will be balanced against the commercial risks that may accrue to the company particularly in civil actions by competitors or agents.

Note to editors: Matthew Hardcastle is a criminal solicitor at TV Edwards. TV Edwards have 6 offices across London and also specialise in Family, Housing, Community Care and Mental Health Law. For further information please contact  Jane Pritchard on 0203 440 8202, 07786 15 11 66 or jane.pritchard@tvedwards.com.