The use of information to discern and control risk

2 Medi, 2014 | Areithiau

Alun Milford, General Counsel, at the Cambridge Symposium on Economic Crime 2014, Jesus College, Cambridge.

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I am grateful for the opportunity to speak again at this symposium.

The SFO exists to investigate and prosecute serious or complex fraud, bribery or corruption. We use information to get at the truth and to ensure the fair trial of those we prosecute. To achieve those goals we want free access to relevant information and, in recognition of the strong public interest in them, we have been given powers to do so by Parliament.

Let us review briefly the framework within which we operate in our criminal investigations. We are empowered to receive information about fraud, bribery or corruption. Information comes to us from whistle-blowers and disgruntled business rivals, from overseas law enforcement and the wider intelligence network we plug into. A Department of Justice colleague remarked that angry spouses were a common source of tip offs for them. Sometimes, we receive information from companies about their own businesses. Any such source can give us, or more particularly the Director, reasonable grounds to suspect the commission of an offence involving serious fraud, bribery or corruption and, with it, the power to open a criminal investigation.

Once we have opened such an investigation, we can obtain warrants permitting entry onto premises, after which we can search for and seize relevant materials. We can serve notices compelling the supply of documents or answers to our questions. Indeed, in cases involving bribery and corruption, we can serve such notices even before a criminal investigation has been opened. These are strong powers. And, of course, we do not operate them in isolation from the wider criminal law.

For us, one of the most important tools to be found there is the ability to agree with suspects or defendants a clear basis on which they could assist us, particularly in the provision of information. Intelligence is helpful, but more helpful still is the provision of evidence to the court: giving information not just to us but to the jury too. Why do defendants co-operate in this way?

Some are contrite and, having found themselves embroiled in events they had not planned or in a toxic corporate culture, might simply want now to do the right thing. Others have more practical considerations and decide to help us because they calculate it is advantageous to them to do so. Unsurprisingly, I think they are right. By their very nature our cases involve serious offending of a kind that can attract severe sentences. Sentencing is a matter entirely for the judiciary, and so prosecutors are in no position to make assurances about outcomes. However, the courts have made clear that co-operation of the kind envisaged in SOCPA, particularly sections 73 and 74, concerning a defendant’s supply of information both to the SFO and to a jury, can make a real difference in sentence.

The extent to which co-operation by the provision of information is forthcoming is entirely in the hands of the suspect. First, there is never an obligation to self- incriminate. Second, whatever information is supplied will be checked by the SFO investigation. Dishonest or deliberately incomplete information, given in the guise of co- operation, will rightly be seen as an attempt to mislead.

Having said this, there are almost always advantages to be gained by dealing honestly with investigators. In particular: honest explanations whether given by companies or individuals may, upon further investigation, lead to decisions not to prosecute at all; in the case of individuals, the courts have consistently repaid full co-operation with lenient sentences.

Take an example from the law reports. Robert Dougall was a 44 year old man of previous good character when he pleaded guilty to a single count of conspiracy to make corrupt payments. He had been a marketing director for DePuy, a subsidiary of Johnson and Johnson, which sold prosthetics to the Greek healthcare system. For a period of just under four years, the company made sales there of just under £20 million. To achieve those sales, it paid £4.5 million in bribes to health officials, doctors and surgeons. The object was to retain DePuy’s market share in Greece. But the costs of the bribes were passed on to the customer, and ultimately were borne by the Greek taxpayer. In practical terms, it meant that orthopaedic products cost significantly more in Greece than elsewhere in Europe. For example, the average price across Europe for a prosthetic knee was about £2,200. In Greece, it cost twice that, £4,400. When confronted by the SFO with his role in this conspiracy, Mr Dougall was co-operative from the outset and provided substantial assistance to the authorities here and in the US. Having entered into a section 73 agreement, he agreed to give evidence against others. He pleaded guilty at the first available opportunity and was sentenced to twelve months imprisonment. On appeal, the Court of Appeal upheld the sentence length, but held that, in the particular circumstances of the case, the term of imprisonment could be suspended. I draw two passages from that judgment to your attention. First, on the nature of so-called white-collar criminality, the Lord Chief Justice said,

For all the respectable and reputable fronts that many fraudsters and corrupt businessmen may present, they are criminals. What is sometimes described as white collar crime or commercial crime taking the form of fraud and corruption in particular is crime. …We need to take care, however, not to … be persuaded that somehow or other those who commit fraud or corruption should not be ordered to serve prison sentences because such sentences should be reserved for those they would regard as common criminals. Once convicted, those are the ranks that they join…”

But this was a criminal who had done all he could to co-operate, and that went a long way to allowing the Court of Appeal to suspend his term of imprisonment. As the Lord Chief Justice made clear,

“We are not to be misunderstood as saying that in circumstances like those we have outlined here, a suspended sentence must always be ordered. What we indicate is that where the appropriate sentence for a defendant whose level of criminality, and features of mitigation, combined with a guilty plea, and full co-operation with the authorities investigating a major crime involving fraud or corruption, with all the consequent burdens of complying with his part of the SOCPA agreement, would be 12 months’ imprisonment or less, the argument that the sentence should be suspended is very powerful. This result will normally follow.”

Companies too can be suspects in our cases and they will also rightly expect that their co-operation is rewarded, for this is, as always, an important mitigating factor to be taken into account in the sentencing guidelines. We also now have Deferred Prosecution Agreements (DPAs) as a way dealing with a company short of convicting it. When considering whether a company should be invited to enter into a DPA, co-operation by that company will just be one of several major factors to take into consideration. These will include the past history of the company, its efforts to clear out the stables, its willingness to pay compensation (where appropriate) and a suitable penalty, and its arrangements to ensure future compliance. As regards co-operation, it is difficult to imagine that a DPA will ever be appropriate where there has been none, and the attitude of the SFO will always be influenced by whether the company has co-operated providing information (including evidence) which is accurate and as complete as circumstances genuinely allow.

DPAs were conceived in part as a way of incentivising companies to report suspected criminality for which they might be liable and then to co-operate with the SFO. The hallmark of co-operation in such cases will be the free supply of relevant information I referred to at the outset. So, we would expect a company to preserve information and to make it available to us. If external lawyers or accountants have been instructed to conduct an investigation we would want the relevant documents they unearthed drawn to our attention to assist us at the outset of our own enquiries. We would want also to the see the account of any witnesses spoken to by those conducting the enquiry. All these points are made in the DPA Code of Practice, which the Director will have regard to when deciding whether or not to invite a company to enter into a DPA. Of course even if the company wishes to take up that invitation, a court will have to sanction both the principle and the contents of the ensuing agreement. Quite how a judge will approach this task we will have to wait and see. Given however that the legislative scheme requires judges to cast an independent eye over the proposed arrangements and that any application for judicial approval of a DPA will be a joint one, I am working on the basis that the judge dealing would want to look long and hard both into the offending and the full extent of the co-operation given in order to be satisfied that the application is well-founded. This will be very different to a consent order in civil proceedings, therefore.

I have spoken so far about our need for information, the strong public interest in us getting it. I accept of course that this is not the only public interest at play here. Whilst our statutory schemes allow us to overcome third party rights to or obligations of confidence, the law draws a line where legal professional privilege is concerned. This is a substantive rule of law developed by the courts in recognition of the powerful public interest in allowing those within this jurisdiction full and proper access to the courts. Its rationale is to be found in the rule of law therefore. In balancing the public interest in ascertaining the truth and ensuring that legal advice can be freely sought and given, the courts have decided that the absolute confidence between lawyer and client should prevail. As Sir James Knight-Bruce V-C put it in 1846, “Truth, like all other good things, may be loved unwisely – may be pursued too keenly – may cost too much.”

Whilst we have no interest whatsoever in the advice lawyers give their clients, corporate or otherwise, we are very interested in what third parties to the corporate client might tell the company about the events under investigation. Privilege is frequently claimed over those accounts. Whether or not privilege actually applies depends on the particular facts of the case. Whilst, of course, we are free to speak to those witnesses ourselves, we are hindered in that endeavour if we do so without knowing their first account of events. It impacts on our ability to assess their credibility and potentially to call them as witnesses in subsequent trials. Even where we have considered ourselves capable of calling such witnesses, we have become embroiled in hard-fought applications to stay the trials as an abuse of process on the basis that we could not give disclosure of first witness accounts. That we have, to date, defeated those claims does not mean that they or a version of them could never succeed: like privilege, all depends on the facts of the case.

Let me be clear. We are simply not interested in communications between client and lawyer on questions of liability or rights. Our interest is focussed on facts: the accounts of witnesses spoken to in corporate investigations. We do not regard ourselves as constrained from asking for them. What if they are denied us?

1.We will view as uncooperative false or exaggerated claims of privilege, and we are prepared to litigate over them: to do otherwise would be to fail in our duty to investigate crime.

2.If a company’s assertion of privilege is well-made out, then we will not hold that against the company: to do otherwise would be inconsistent with the substantive protection privilege offers.

3.By the same token if, notwithstanding the existence of a well-made out claim to privilege, a company gives up the witness accounts we seek, then we will view that as a significant mark of co-operation: here again, to do otherwise would be inconsistent with the substantive protection privilege offers.