On Jan 15, home affairs and law minister K Shanmugam told lawyers assembled for a dialogue session that Singapore would consider introducing such a framework too. “It is about time we had DPAs here, where corporates can be taken to task and [where] they could pay a much higher sum compared to what the criminal law provides,” Shanmugam said at the “Modernising Criminal Justice: New Developments in Criminal Procedure” dialogue at The Arts House.
DPAs have been in use in the US for more than 20 years. They were introduced in the UK in 2014, and in France last year. DPAs are intended to encourage corporations to cooperate with law enforcers. The framework typically allows the public prosecutor to dismiss the charges a company faces, provided the company agrees to certain undertakings. They are usually accompanied by a public admission of facts relating to a case and a financial penalty.
Are DPAs a better means of dealing with errant companies than toughening existing criminal laws? What are the disadvantages that need to be thought through? What does it mean for the corporate sector?
Senior counsel Thio Shen Yi, joint managing partner at TSMP Law Corp, says DPAs and tougher laws are not mutually exclusive. “They give both the prosecution and defence counsel more options,” Thio says. “DPAs can be a useful tool in enhancing good corporate citizenship. The company in question has an opportunity to pay a financial penance, as well as be a market example of implementing good corporate safeguards and practices. In the long term, we want to encourage good corporate behaviour. And DPAs by their nature are able to incorporate diverse sentencing aims in one package: punishment, rehabilitation and deterrence.”
Remy Choo Zheng Xi, director at law firm Peter Low & Choo, calls the DPA “a potentially game-changing tool for shaping corporate responsibility if utilised wisely and well”. As an example of how this can work, Choo points to the UK Serious Fraud Office’s investigation into a corruption case involving Rolls-Royce in 2012. “The SFO started investigating allegations of corruption by Rolls-Royce personnel — in some cases, senior management and directors — across several countries in Asia and Africa. Realising that it was in the company’s best interest to fully cooperate with the SFO to obtain the least damaging DPA possible, Rolls-Royce embarked on an extensive independent internal audit and disclosure process that gave investigators access to over 30 million documents, which even the SFO recognised it might otherwise have had to spend considerable public resources attempting to get access to.”
Philip Fong, managing partner at Eversheds Harry Elias, points out that DPAs also enable prosecutors to impose certain conditions on errant companies on top of making them cough up huge fines. For example, the defendant company could also be ordered to compensate victims who suffered financial loss. Or, it can be made to institute a more robust compliance framework. “DPAs thus can advance the public interest significantly by ensuring that corporate offences are dealt with in the most appropriate manner, and not necessarily by imposing hefty monetary sanctions,” says Fong.
What has the experience of other countries been in prosecuting white-collar criminals? What are the consequences they have faced with the increased use of DPAs?
Evolving prosecution methods
An article in The New Yorker last year provided an interesting outline of how US prosecutors began levelling charges against companies. A landmark case was that of United Brands. After Eli Black, the company’s then chairman, took his own life in 1975, it was discovered that he had authorised a bribe for the president of Honduras. Unable to charge Black for the crime, the authorities pursued United Brands itself. The company eventually pleaded guilty to conspiracy and wire fraud, and paid a fine of US$15,000. The United Brands case was cited by the US Congress when it passed the Foreign Corrupt Practices Act in 1977.
US prosecutors subsequently began charging not just white-collar criminals but their companies too. For instance, in the 1980s, it wasn’t just Michael Milken and other individuals at Drexel Burnham Lambert who were charged for suspected stock manipulation and insider trading but the firm itself. This eventually led to unintended consequences. In 2002, after Enron imploded, its accounting firm Arthur Andersen was convicted of obstruction of justice and lost its licence. As a result, tens of thousands of arguably innocent employees lost their livelihood.
In the years that followed, US prosecutors began relying more on DPAs to exact hefty financial penalties but allow companies to remain in business. But this system had its detractors too. Notably, the large fines imposed on companies were said to be achieving little more than penalising shareholders.
‘Chickenshit’ prosecutors?
Now, one emerging criticism of DPAs is that they are a disincentive for prosecutors to pursue criminal cases against corporate executives. When companies are very large and decisionmaking is diffuse, it can be difficult for a prosecutor to win a criminal case alleging wrongdoing by an individual. DPAs, by contrast, are almost risk-free for a prosecutor. According to The New Yorker piece, prosecution of white-collar criminals in the US has hit a 20-year low.
In his book The Chickenshit Club: Why the Justice Department Fails to Prosecute Executives, author Jesse Eisinger recounts a speech given by James Comey to young prosecutors when he took over as US Attorney for the Southern District of New York in 2002. “Who here has never had an acquittal or a hung jury?” he asked. To those who raised their hands, he said: “You are members of what we like to call the Chickenshit Club.”
Comey, who was dismissed as director of the Federal Bureau of Investigation by US President Donald Trump last year after he refused to let the Russia investigation go, was exhorting prosecutors under him to have the courage to take on tough cases, and stretch their capacity to gather the necessary evidence to bring criminals to book. With DPAs, prosecutors are often handed the information they need effectively in exchange for not bringing charges against a company.
A number of lawyers in Singapore say DPAs will not lead to such issues here, though. Choo of Peter Low & Choo says it is unlikely that corporate executives will get off scot-free. “What a DPA does is it incentivises corporations to weed out individual criminal wrongdoing for the greater good of the corporate entity,” he says.
DPAs are not an easy way out for errant companies either, says Fong of Eversheds Harry Elias. A defendant company will first have to convince the Attorney-General’s Chambers that it should be allowed to enter into a DPA rather than be prosecuted. “Furthermore, even if the AGC agrees to a DPA, the DPA must be approved by the High Court before it takes effect. Based on the information available, it does not appear that the DPA provides amnesty for individuals or that [entering into] a DPA will automatically absolve individual offenders from any prosecution,” Fong says.
TSMP’s Thio adds that structuring and negotiating DPAs also require unique skill sets. “Prosecutors will have to work through policy and commercial considerations, consider market impact and benefit. The agreements will have more complexity than the more binary question of guilty or not guilty. This develops better prosecutors in the long run.”
Case against conviction
Whatever their limitations, DPAs have come into existence because they address certain needs of the legal system. More countries are considering adopting DPAs, says Yeoh Lian Chuan, counsel at Allen & Overy. Canada, for instance, recently announced a public consultation on the matter. And Australia is expected to debate its introduction in Parliament next month. “So, it’s not a peculiar Singapore innovation,” Yeoh says, adding that DPAs work to penalise a corporation. “A corporation by its nature can’t be jailed, so the penalty will usually be either financial — for instance, a fine — or administrative, such as the withdrawal of a licence or a business restriction.” Both DPAs and criminal convictions provide for this. “In both cases, the corporation has been hit where it hurts: in the pocket.”
The difference between the two is that a DPA does not result in a conviction. “It is, of course, true that a conviction carries a more serious connotation in terms of reputation. But the question then is whether it is necessary or useful to always pursue conviction just to impose the consequence of, for example, a reputational hit on the corporation,” Yeoh continues. “Of course, pursuit of a conviction may be needed to deal with particularly serious egregious breaches. Thus, DPAs are not a complete substitute for prosecution and conviction. [However], obtaining remedies through a DPA short of conviction may serve the public interest because a meaningful financial penalty is still exacted, time and expense of prosecution are reduced, and weaknesses in the corporation’s existing processes can still be addressed through behavioural remedies in the DPA.”
Yeoh also emphasises that, even without a DPA, it is currently possible for certain offences to be “compounded” by a fine. “[This] is also a remedy short of a conviction. So, the DPA mechanism is not novel from the perspective of being able to exact remedies without conviction. Indeed, a DPA is arguably more serious, transparent and public.”
Effective enforcement
Eugene Tan, associate professor of law at Singapore Management University (SMU), says the effectiveness of DPAs really boils down to how they are implemented or used. “If prosecutors are less incentivised to go hard on companies, the problem lies with the prosecutors rather than the DPAs,” he says. “Any robust DPA regime will have judicial oversight as a cornerstone. The prosecutors will prepare the DPA. The courts ensure that the DPAs are in the public interest and that it is imposed on a company appropriately. It is the courts that provide the checks and balances to the prosecutors’ wide discretionary power.”
Thio of TSMP adds that transparency in the statements accompanying DPAs will be important. “I hope that the imposition of DPAs will be applied as transparently as possible so that we understand how and why certain outcomes are reached,” he says.
Once entered into, DPAs must also be strictly enforced. “DPAs have teeth; the key is ensuring strict compliance,” SMU’s Tan says. “The key is for the authorities to hold companies that enter into DPAs to the obligations imposed on them by those agreements.
“Where a breach of a DPA has occurred, the prosecution can impose an additional monetary penalty, or additional compliance, or remedial measures. They can also pursue charges based on the conduct covered by the agreement itself — the very conduct that the company had tried to resolve through the DPA. Put simply, DPAs cannot be ignored or followed partially. There are criminal consequences for a breach of the DPA.”
This article appeared in Issue 814 (Jan 22) of The Edge Singapore
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