Jennifer Wells: The U.K.’s deferred prosecution agreements are instructive for the SNC-Lavalin drama
|Toronto Star 15 Feb 2019 at 11:28|
I offer you this quote from Ben Morgan, the former joint head of bribery and corruption in the U.K’s Serious Fraud Office, as a handy rejoinder this weekend should you find yourself trapped in conversation about the merits of deferred prosecution agreements. Should you be on the side of SNC-Lavalin — or simply in the mood to dig in for the sake of argument — this is the sound bite for you.
No doubt the brass at SNC-Lavalin have scrutinized the deferred prosecution agreements in the U.K., and especially that of Rolls-Royce, Jennifer Wells writes. (Guillaume Lavalla / AFP file photo)
Mr. Morgan was not, as you would surmise, referring to the engineering bulwark of Quebec Inc., but rather the DPA entered into between the Serious Fraud Office and Rolls-Royce Plc. The U.K. legislation, and the Rolls-Royce case in particular, is instructive for a host of reasons germane to the mess our own prime minister finds himself in today, including either the principled stance of Jody Wilson-Reybould, or her miseducation, depending on which side of the fence you sit.
Consider, first, the long and thoughtful journey taken by the British government’s Ministry of Justice, including a public consultation period in the spring of 2012 that drew submissions from the likes of the Bond Anti-Corruption Group, which warned that such agreements should not “become a soft option for companies or a cheap option for prosecutors.” Transparency International UK, in its 13-page submission, stated broad support for the initiative, with qualifiers, including an insistence on transparency and judicial oversight. The justice ministry released its report in response to those submissions in October 2012.
The U.K. was eager to follow in the footsteps of the U.S., where the deep case history of DPAs reaches back to the early 1990s, ramping up markedly in the past decade. It was not so eager to follow the U.S. example in outcomes, however, where numerous cases have drawn excoriating criticisms of the courts for being too lenient, anemic, little more than a rubber stamp or, in one case, evincing all the prosecutorial rigour of a potted plant. An attempt by a U.S. District Court Judge two years ago to reject what he deemed a too light agreement was overruled by a higher court, reaffirming the U.S.’s rubber stamping reputation.
The Serious Fraud Office saw DPAs as a means to improve its enforcement record in bribery cases specifically, save expenses on the litigation side and add speed to the process. And took note of potential fault lines. One of the key distinguishing features between the U.S. and the U.K. is the latter’s judicial independence in affirming that the terms of the agreement are reasonable and fair.
All of this sounds a lot like the SNC-Lavalin drama, including, to some degree, our own government’s public consultation, launched in September 2017. (SNC-Lavalin’s own submission — suppress any note of surprise here — asserts that the perception that DPAs could “buy their way out of trouble” simply has no merit.)
Or should I say “remediation agreement,” the government’s preferred language.
I will leave it to those expert in the ways of Ottawa to explain why this amendment to the Criminal Code was shoehorned into Bill C-74 between changes to Canada Pension Plan contribution rates and the duty on cannabis products. Certainly the finance committee seemed surprised in a “what’s-all-this-then” sort of way. Greg Fergus, the Liberal MP for Hull-Aylmer, offered a concise summary: “In a sense, then, if I steal $10, I’m in trouble, but if steal $10 million, I can work this out.”
A perfectly reasonable point.
And let’s note here that the word “deferred” reminds the corporate entity that should it fail to comply with the terms of the agreement, prosecution awaits. Remediation? Not so much. SNC-Lavalin submitted that non-compliance should be addressed by giving the non-compliant corporation chance after chance after chance to fix its own corporate behaviour.
No doubt the brass at SNC-Lavalin have scrutinized the deferred prosecution agreements in the U.K., and especially that of Rolls-Royce. The fraud office’s four-year investigation into systemic corruption at the company extended to more than 30 million documents and seven countries, from payoffs greasing aero engine sales in Indonesia to gas compression equipment sales in Russia. The corrupt behaviour extended across a quarter century.
Without being able to bid on public procurement contracts, as much as 30 per cent of Rolls-Royce’s order book was at risk, and that, said the Right Honourable Sir Brian Leveson in his judgment, would threaten the viability of the company. The ripple effects, the collateral damage, would be enormous — Rolls-Royce employs more than 50,000 people. The agreement Leveson signed off on in January 2017 included disgorgement and penalties of more than £500 million ($852 million, including the full costs of the investigation), which rose to more than £670 million when offences in the U.S. and Brazil were added in. The agreement includes the independent monitoring of an ongoing compliance program, including effective anti-bribery and corruption policies.
Is that justice?
There were loud voices in the U.K. arguing that the fraud office should have taken the route of prosecution instead. Robert Barrington, executive director of Transparency International, wrote at the time that the financial penalty was relatively painless for a company of such size and that if individual prosecutions didn’t follow, it will look as though Rolls-Royce got off too lightly. The fraud office “needs to find a way to couple the prosecution of individuals to a DPA,” he wrote. That hasn’t happened.
In recent months, fraud cases against former executives at Tesco Stores Ltd., which reached its own DPA with the fraud office two years ago, collapsed for lack of evidence. The SFO has suffered reputationally as a result.
What do I take from all of this? That the U.K. is working hard to get this right. There’s great public discussion. That the use of such agreements will likely grow in the criminal corporate sphere. That they are still a work in progress.
Good news! There’s a Commons justice committee ready to examine the new remediation agreement regime. Surely there will be questions about the flaccidity of some of the legislative language, from the “optional content,” including independent monitoring, which should be mandatory, to the penalties paid for a breach in the agreement. Perhaps if the committee does its work well it will be able to answer this question: what precisely would a prosecution of SNC-Lavalin achieve that a DPA would not?