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Definitive Guideline published for sentencing corporates

28 February 2014

To coincide with Deferred Prosecution Agreements (DPAs) going live earlier this week, the Sentencing Council recently published a Definitive Guideline on the appropriate penalties for corporates convicted of fraud, bribery and money laundering.

You may be thinking that the penalties for convicted corporates are irrelevant in the context of DPAs because, provided that the corporate complies with the terms of the DPA then, upon its expiry, the criminal proceedings against the corporate will be discontinued, so no sentencing exercise will ever arise.

That is right so far as it goes, but the legislation relating to DPAs provides specifically that the amount of any financial penalty agreed between the prosecutor and the corporate must be broadly comparable to the fine that a court would have imposed on the corporate upon conviction for the alleged offence following a guilty plea.

Accordingly, the Definitive Guideline is relevant to DPAs and any well advised corporate should be very mindful of how the different levels of culpability and harm will translate into financial penalties under the Definitive Guideline.

With that in mind, I would expect the statement of facts concerning the alleged criminality which forms an essential element of the DPA to be heavily negotiated, not least because if the DPA is breached by the corporate and the corporate is then prosecuted, the statement of facts will be treated as an admission by the corporate.

Without wishing to scaremonger, where the level of culpability of the corporate is high, then the starting point for the financial penalty against the corporate is 300% of the number representing the harm caused by the relevant conduct, with a range of 250% - 400% of that number. Broadly, the harm figure is the amount obtained or intended to be obtained (or loss avoided or intended to be avoided) by the relevant conduct.

To put this in context, let's take the corporate offence of failure to prevent bribery by way of example.  If the corporate has a culture of wilful disregard of the commission of bribery offences by employees or agents and it has made no effort to put effective systems in place (and, therefore, would have no realistic prospect of being able to make out the so-called "adequate procedures" defence) then this would fall within the category of high culpability and expose the corporate to the application of the high percentages stated above.

Interestingly, although the Definitive Guideline states that the appropriate harm figure for bribery offences will normally be the gross profit from the contract obtained, retained or sought as a result of the offending behaviour, for the corporate offence of failure to prevent bribery, an alternative measure may be the likely cost avoided by failing to put in place appropriate measures to prevent bribery. There is, however, no indication of which measure should prevail.

The Definitive Guideline applies to sentences handed down on or after 1 October 2014 regardless of the date of offence. Whilst corporate prosecutions are likely to remain comparatively rare unless the bar is lowered for establishing corporate criminal liability, financial penalties under DPAs and those meted out to corporates convicted of criminal offences at trial are likely to inform each other and should be borne in mind by any corporate which finds itself on the wrong end of a prosecution, deferred or otherwise.

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