The future of plea-bargaining agreements

25 May 2010

A debate organised by the Fraud Advisory Panel casted doubts on the future for plea-bargaining agreements in fraud cases following the recent cases of Innnospec and Mr John Dougall of Depuy where the SFO was criticised for tying the hand of the Court by agreeing with the defendants the sentences and fines to be levied in return for co-operation.

The system in the UK was contrasted with that in the USA where plea-bargains are common and are assisted by the existence of comprehensive sentencing guidlines (including fines for corporate defendants) which simply do not exist in the UK. In the absence of certatinty for defendants and their advisors it was felt that few would want to take advantage of the SFO's proposals for self-reporting in return for leniency.

In the Innospec case, prosecuted in the UK by the SFO, Innospec agreed to plead guilty to a charge of Conspiracy to Corrupt under S1 Criminal Law Act 1977 relating to bribes paid in Indonesia amounting to an estimated $8m on contracts worth $160m and a joint submission was made to the UK courts as to the level of fine to be imposed. Innospec's financial position meant that the company would only be able to pay total fines of some $40m, a fraction of those that might be imposed, if it were to be able to continue trading. The fine was to be apportioned between the US and the UK with the UK's share being $12.7m, structured partly as a confisaction order and partly as a civil recovery order. Lord Justice Thomas made it clear that it was beyond the powers of the SFO to itself agree the level of fine, this being a matter for the Court although the SFO submitted that the level of fine had not in fact been agreed, merely a proposal made to the Court taking account of Innospec's circumstances.

Read the full Innospec sentencing remarks here

In the case of Mr Dougall, he had entered into a plea agreement under s73 SOCPA 2005 and the SFO asked that he receive only a suspended sentence (which must therefore be of 12 months or less). The Court declined and imposed a custodial sentence of twelve months but this was overturned on appeal. Whilst the Court of Appeal recognised the criminality of corruption and re-iterated that it is for the Court to determine sentence, in particular noting that the SFO's recommending a suspended sentence inherently restricted the length of sentence to twelve months, it determined that in this case a suspended 12 month entence was appropriate in order to reward the defendant for entering into the SOCPA agreement.

Read the full Court of Appeal judgment here

The major test of the SFO's plea bargains will come with the BAE trial at which the agreement for a £30million fine, much less than the extent of the alleged wrong-doing, will be subject to judicial scrutiny. The case may come to court within the next few months.