Cooperating cos. could avoid prosecution under new leniency scheme
Financial Services June 11, 2018 9:14 pm By Miklos Bolza | Sydney

The government has released a draft code of practice for a new deferred prosecution scheme under which corporations could avoid charges in exchange for self-reporting serious corporate crimes.

The new code will encourage greater cooperation with authorities, the Attorney-General said.

“Corporate crime can be difficult to identify and easy to conceal. The Deferred Prosecution Agreement scheme gives prosecutors and investigators an extra tool they can use to hold companies to account for serious corporate crime.”

The draft code touts the benefits of DPAs for companies, including risk mitigation and reduced courtroom costs.

“The scheme offers corporations greater certainty of outcome when compared to litigation, and an opportunity to avoid some of the costs associated with lengthy criminal investigations and trial processes. A corporation may also choose to seek a DPA to, for example: a. assist the corporation to proactively identify and address wrongdoing within the corporation b. support the directors’ compliance with their statutory and fiduciary duties to act in the best interests of the corporation, and c. limit corporate criminal liability by proactively identifying misconduct and preventing further offending,” the draft code said.

Under the scheme, the Commonwealth Director of Public Prosecutions can invite corporations to negotiate an agreement and comply with certain conditions if they are alleged to have committed a corporate crime. The CDPP will only enter into negotiations if it is in the public interest to do so.

Other factors it will look at include whether the conduct was self-reported; the quality and timeliness of the self-report; whether there’s a history of breaches of regulatory action against the company; whether the alleged breaches are part of the company’s business practices or culture; whether the company has taken steps to address the misconduct; whether the company has been subject to previous warnings; whether there was a significant level of harm caused by the misconduct; and whether the company withheld material information, among other factors.

Conditions placed against firms could include paying financial penalties, offering compensation for victims, entering a compliance program, offering evidence against individuals, admitting to certain facts, and cooperating with an investigation.

Any party can withdraw from a DPA prior to its approval.

“Similar schemes have been used to great effect in the UK and the USA,” the Attorney-General said. “For example, in 2017 Rolls Royce agreed to a DPA in the UK requiring the payment of a penalty of £497.25 million.”

If a company fulfils the conditions laid out in a DPA, it will not be prosecuted for the offenses detailed in the agreement. Culpable individuals will not be protected by a DPA, however, even though their misconduct is associated with that of the corporation.

While companies that breach a DPA will be given a chance to rectify their mistake, further contraventions will result in criminal proceedings.

Breaches that may be eligible for a DPA include violations of certain section of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006, the Autonomous Sanctions Act 2011, the Charter of the United Nations Act 1945, the Corporations Act 2001 and the Criminal Code Act 1995.

In negotiating and enforcing the DPAs, the CDPP said it work alongside the Australian Federal Police, the Australian Securities and Investments Commission, the Australian Transaction Reports and Analysis Centre, and the Australian Taxation Office.

The government is now seeking community feedback to finalise the Code before publication. Submissions can be sent to the Attorney-General on or before July 9.

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Miklos Bolza

Miklos Bolza has been a journalist for three years. He has written for a variety of publications, including NZ Lawyer, HRD Australia, and Australian Broker. He is currently the Sydney court reporter for Lawyerly.