Accountability for the acts and omissions of those who did so much to contribute to our current economic woes is a central issue in today’s political debate. There is real anger amongst the public that no-one has been brought to book for wrongdoing. I believe that part of the problem lies with our poor record in investigating and dealing with corporate fraud. It is not just a question of accountability. Our failure to detect and deal with financial crime inevitably has a negative effect upon business confidence, whether amongst businesses already based in the UK or amongst potential investors into our country. Our inability to deal with serious corporate fraud is not only an affront to justice, but it is holding us back economically. The notion that the ongoing debate about the way in which we investigate and prosecute corporate and commercial fraud should be a niche issue for the lawyers is one that needs burying, and burying quickly.
It is estimated that the cost of fraud in the UK is £30bn a year. The Serious Fraud Office (SFO) is the public body that has the main responsibility for the prosecution of serious fraud. The average cost of every investigation mounted by the SFO costs £910k, which is an astonishing sum, and only 17 trials were held in 2010/2011 as a result of the SFO’s work. Recently, the SFO has come under sustained criticism for its conduct in a number of cases, and serious questions have been raised about its ability to conduct proper fraud investigations. A new Director has been appointed, and the SFO has also enlisted the services of a former Senior Circuit Judge with great experience that no doubt is proving to be of great value. More, however, needs to be done. The way that we tackle serious and complex fraud in the UK needs a serious reassessment. I believe that if the SFO cannot prove its worth soon, then it should be replaced.
For inspiration, a look across the Atlantic can be helpful. In the United States, the anti-fraud authorities use ‘plea bargains’ to bring a prompt resolution to a case. This is an agreement between the prosecutor and defendant whereby the defendant agrees to plead guilty to a particular charge in return for some concession from the prosecutor. In England and Wales, there remain serious concerns about the danger that undue influences in the process can lead to innocent defendants pleading guilty, threatening the integrity of the system.
The uses of plea indications or plea bargaining processes are not unknown to our courts. For some years now, the seeking of so-called “Goodyear” indications by the Defence in open court has been permitted. Where a judge deems it appropriate, the maximum sentence that would be imposed if the Defendant pleaded Guilty is indicated and a decision is then made by the Defendant whether or not to plead Guilty. If the Defendant still pursues a not guilty plea, the “Goodyear” indication is not binding. Under the Serious Organised Crime and Police Act 2005, formal procedures were set in place for sentencing reductions to be imposed upon Defendants who assisted the police and prosecuting authorities with their investigations.
Deferred prosecution agreements (DPAs), another American invention, present a further alternative to plea bargains. DPAs allow criminal prosecution to be deferred pending certain terms and conditions being agreed (and adhered to) following a formal indictment at court. This would allow companies to accept their criminality more easily and thereby avoid the cost on all sides of a full prosecution. This Summer, the Government conducted a formal consultation exercise into the use of DPAs and I hope that we shall see their use adopted here.
What does concern me, however, is that DPAs are used in the USA against a backdrop of robust investigation and enforcement of the criminal law. Commercial enterprises enjoy the freedoms of business the US way, but will often face rigorous prosecution and steep sentences for criminality. The free market is rigorously patrolled, and in such an environment, DPAs are seen as an attractive alternative. The low number of prosecutions that are currently being brought for alleged serious and complex fraud in the UK provides a very different context. Can we really say that, here in the UK, the “stick” of criminal prosecution is truly a strong contrast to the DPA “carrot”?
US style rigour when it comes to investigations would, I believe, also help persuade those tempted to walk on the wrong side of the law not to take that course and would also provide the public with much-needed reassurance. This approach, together with enhanced plea negotiations and DPAs, carefully applied, offer a real way forward in the best traditions of our system of justice.