1 May 2017

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Submission of the Justice and International Mission Unit, Synod of Victoria and Tasmania, Uniting Church in Australia on the proposed model for a Deferred Prosecution Agreement scheme in Australia

The Justice and International Mission Unit, Synod of Victoria and Tasmania, Uniting Church in Australia, welcomesthe opportunity to provide a submission on the proposed model for a Deferred Prosecution Agreement (DPA) scheme in Australia. The Unit continues to cautiously support the introduction of such a scheme provided that it is designed to not allow individuals or corporations to escape being held to account for serious criminal activity, while encouraging greater detection of such criminal activity. The Unit also sees DPA’s as part of a suite of measures needed to deter, detect and prosecute corporate criminal behaviour with additional measures being whistleblower protection and reward in the private sector, a public beneficial ownership register and making it easier to for law enforcement agencies to prosecute foreign bribery and money laundering offences.

The Unit strongly supports that an Australian DPA only be accessible to companies and not individuals, as per our previous submission. DPAs should not allow those responsible for serious criminal activity to escape justice.

The Unit also supports the proposed list of crimes to which a DPA would apply and would support serious environmental crime, tax evasion, tax avoidance, cartel offence and serious illegal workplace health and safety activities to also be included. The Unit notes that Lend Lease entered into a Deferred Prosecution Agreement with the US Department of Justice and agreed to pay US$56 million in 2012 in relation to fraud offences.[1]

The Unit believes that any bid rigging activity should also be covered, given that the parent companies of construction companies in Australia have been prosecuted for bid rigging overseas. For example, Obayashi the owners of Built Holdings was allegedly involved in bid rigging in Japan in 2007.[2] Obayashi was again accused of bid rigging in February 2016 by the Japanese Fair Trade Commission.[3] Obayashi Road Corporation was ordered to cease work between 6 January 2017 and 21 March 2017 due to violations of anti-trust laws.[4] Obayashi also had to pay a 120 million yen fine from the Japanese Fair Trade Commission.[5]

As another example, in October 2016 WBHO, the owner of Probuild Constructions in Australia, was required forced to pay a fine in South Africa related to tender rigging.[6] We note that on the positive side, WBHO acted as the whistleblower in the case.

The Unit supports that the decision to enter into DPA negotiations should be at the discretion of the prosecutors. The Unit also supports that the DPA negotiation period should begin once a prosecutor extends a formal letter to the company offering to begin DPA negotiations. The Unit agrees that factors that should be considered by the Commonwealth Director of Public Prosecutions (CDPP) in being willing to negotiate a DPA include:

  • That the company self-reported the criminal activity and has genuinely cooperated with any investigation and pre-negotiation discussions;
  • That the company has provided complete and accurate details about the corporate and individual criminal activity;
  • The likeliness of success in the negotiations;
  • The company’s past conduct;
  • The company’s role in the criminal activity; and
  • The company’s apparent willingness to cooperate once it detected the criminal behaviour.

However, the Unit believes that the Government should make it clear that a DPA offered to a company that knew of the serious criminal activity and choose not to disclose it and is offered a DPA for subsequent cooperation after law enforcement detected the crime will be less generous than a DPA where the company alerted law enforcement to the criminal activity. The Unit share the concern of Corruption Watch UK that the DPA negotiated with Rolls Royce will encourage companies to conceal the criminal activity until it is detected by law enforcement and only then offer cooperation.[7]

The Unit agrees that the prosecutors should conduct DPA negotiations as they see fit within guidance provided by the Prosecution Policy. However, the prosecutors should be required to take into account those who were impacted by the criminal activity of the company and/or its employees in negotiating the restitution and penalty in the DPA. UK Corruption Watch has pointed out that the recent DPA with Rolls Royce made specific mention of concerns about the impact on innocent employees of the company and shareholders, but made no mention of the victims of Rolls Royce’s criminal activity.[8]Further, it appears the Rolls Royce DPA did not accept any input from prosecuting authorities in the countries where the bribes were paid and it would appear no real assessment of the harm from Rolls Royce’s corruption was assessed.[9] The Unit opposes consideration of factors such as the impact for the defence industry, which was a consideration in a lower penalty in the Rolls Royce DPA.[10]

The Unit is concerned that information provided by the company during a DPA negotiation not be subject to exemption from subsequent use in a future prosecution, if the material is then subsequently obtained by another way by a law enforcement agency or prosecutor. Simply, DPA negotiations need to be protected from being misused as a mechanism by which company personnel are able to have evidence of the criminal activity be exempted from any future prosecution by deliberately introducing the information into the negotiations for that purpose.

The Unit agrees that any proposed DPA fairly and accurately reflects the severity of the company’s alleged offending. The Unit agrees that company personnel involved in DPA negotiations must not disclose information provided to them by the prosecutor or an investigative agency. The Unit is concerned that there be safeguards in the negotiation guidelines to protect against employees of the company that were involved in the criminal conduct using DPA negotiations as a fishing expedition to try and understand how strong any case is against them.

The Unit believes there should be penalties for company personnel that knowingly or recklessly provide false or misleading information during a DPA negotiation. The company personnel involved in the negotiations should be required to fully cooperate with any investigations that are conducted during the course of the negotiations.

The Unit agrees that at a minimum a DPA should require:

  • An agreed statement of the facts outlining the particulars relating to each offence and details of any financial gain or loss, with supporting material;
  • The company’s formal admission of criminal liability for specified offences, consistent with any relevant laws of evidence;
  • The company’s agreement to fully co-operate with any investigation relating to the matters outlined in the DPA;
  • Provisions for the termination of the DPA if the company engages in a material breach of the terms of the DPA;
  • An agreement to make the DPA publicly accessible after it has been approved by a retired judge; and
  • An agreement to publish the DPA and agreed statement of facts on the CDPP’s website, unless exceptional circumstances exist.

The Unit agrees that the prosecutor must be satisfied of the following factors before finalising a draft DPA:

  • There are reasonable grounds based on admissible evidence to believe that a relevant offence has been committed by the company;
  • The full extent of the company’s offending has been identified throughout the course of the negotiations; and
  • The public interest would be served by the prosecutor entering into a DPA, including consideration of the public interest in pursuing a DPA compared to available prosecution options.

The Unit is unclear where a prosecutor should need to be satisfied there are reasonable grounds for believing that a continued investigation would provide further admissible evidence within a reasonable period of time, such that there would be a reasonable prospect of securing conviction should prosecution be commenced in relation to the matters contained in the DPA before finalising a draft DPA. Given the prosecutor needs to already believe the company has committed an offence, it is unclear to the Unit why the prosecutor would then need to take into account the likelihood of a successful prosecution.

The Unit supports a retired judge being required to give final approval to the DPA, provided that it is a retired judge from a list of judges that have been screened as being appropriate to make such a determination. The Unit agrees the judge should assess the DPA to determine whether its terms are in the interests of justice and are fair, reasonable and proportionate. Independent oversight would be preferable in the interests of justice than having the office of the CDPP negotiate the DPA and approve it.

The Unit supports the appointment of independent monitors to oversee the implementation of the DPA at the company’s expense, to ensure that the company adheres to the terms of the DPA. While the company should fund the independent monitor, the employment of the independent monitor should rest with the CDPP.

Where the CDPP believes there has been a material breach of the DPA, the CDPP should have the discretion to terminate the DPA and start a prosecution, as an additional option to allowing the company the opportunity to remedy the breach or renegotiate the DPA. As noted in the discussion paper, granting the Director of the CDPP the power to determine whether a ‘material breach’ has occurred would accord with the CDPP’s traditional function of determining whether there is sufficient evidence of offending to commence a prosecution. This is consistent with the powers law enforcement agencies have when they issue an enforceable undertaking. The Unit believes that DPAs should be regarded as more analogous to enforceable undertakings than a contract that needs adjudication. For example, if AUSTRAC enters into an enforceable undertaking with a company for money laundering offences and AUSTRAC then forms a view the company has breached the enforceable undertaking, it does not need to seek the permission of a retired judge or a court to proceed to pursuing a prosecution.

The Unit would prefer that a DPA required the company to formally admit to criminal liability for the specified offences that the DPA covered.

The Unit supports that a company should not be able to retrieve funds allocated in accordance with a DPA if the agreement is subsequently terminated.

The Unit supports that the DPA scheme be reviewed after two years.

The Unit believes that law enforcement agencies should be able to recover costs related to the investigation of the company and its employees and of the negotiations of the DPA through the terms of the DPA as is the case in the UK.[11]

Dr Mark Zirnsak

Director

Justice and International Mission Unit

Synod of Victoria and Tasmania

Uniting Church in Australia

Phone: (03) 9251 5265

1

[1] and the FBI media release detailing the case

[2]

[3]

[4]

[5]

[6] and

[7] Corruption Watch UK, ‘Failure of Nerve: The SFO’s Settlement with Rolls Royce’.

[8] Corruption Watch UK, ‘Failure of Nerve: The SFO’s Settlement with Rolls Royce’.

[9] Corruption Watch UK, ‘Failure of Nerve: The SFO’s Settlement with Rolls Royce’.

[10] EY, ‘Fraud Investigation & Dispute Services. UK Bribery Digest’, February 2017, p. 14.

[11] EY, ‘Fraud Investigation & Dispute Services. UK Bribery Digest’, February 2017, pp. 12.