The recent acquittal of the Sarclad executives throws into doubt the prosecution of individuals following a deferred prosecution agreement (DPA) and the suitability of the DPA process as a whole.
The Serious Fraud Office (SFO) reached a DPA with Sarclad Ltd, a medium sized steel tech business based in Yorkshire, in July 2016, following a self-report in January 2013. Sarclad accepted the charges of corruption, and failure to prevent bribery, by the systematic use of bribes to secure contracts. As a result of the DPA, Sarclad agreed to pay financial orders in excess of £6.5 million.
Our client Michael Sorby (former managing director), Adrian Leek (former sales manager) and David Justice (former sales manager) were subsequently accused of bribery and conspiracy to corrupt. On the 16th July 2019, following a ten-week trial in Southwark Crown Court, where the evidence gathered during that investigation was thoroughly tested, all three were acquitted of these charges. Mr. Sorby having been acquitted of the conspiracy to bribe at an earlier stage in the proceedings, on the direction of the trial judge, who ruled there was no evidence of Mr. Sorby’s involvement.
The acquittals of the defendants, and particularly that of Mr. Sorby following the judge’s ruling, are expected to raise questions about Sarclad’s DPA with the SFO, for example, should it have been agreed within the DPA that Mr. Sorby was the controlling mind of the company with the leading role in a conspiracy to bribe when the trial judge ruled there was no evidence of Mr. Sorby’s involvement in any such conspiracy?
The charges followed an investigation by the SFO which adopted an investigation undertaken by solicitors for The Heico Group, the US parent company of Sarclad. That internal investigation led Sarclad and the SFO to reach the DPA in 2016.
The SFO’s decisions with regard to the DPA and the decision to prosecute were based on a misunderstanding of the business practices at Sarclad. Dan Stowers, a partner at Shoosmiths who represented Mr. Sorby comments: “The SFO was too ready to accept a version of events presented to them by the lawyers for Heico rather than undertaking an independent investigation of their own. Their haste led to an unnecessary, misguided and unsuccessful prosecution.”
Dan comments further:
“What is apparent is that the consideration of the direction and results of an internal investigation require experience and objectivity. This is particularly acute in circumstances where the interests of the ‘corporate suspect’ who instruct the investigating lawyers are likely to be, or may be, in conflict with the human individuals who may be or are under investigation. In this case the corporate concerned was in discussion with the SFO over the terms of the DPA whilst individuals were under investigation and for a period of time after the prosecution of the individuals had commenced. The problem was compounded in this case by the SFO’s limited oversight of evidence being gathered by the corporate suspect, at the SFO’s request (through the use of section 2 powers). A large amount of the evidence passed through the investigating lawyers hands before being passed on to the SFO, who subsequently used that material in their prosecution.
So what can be concluded from the verdicts in this case?
- The initial conclusions of an investigation should be challenged rather than accepted and simply used to direct further ‘narrow’ investigations. Alternative explanations or reasonable lines of enquiry should be investigated. The use of independent counsel at an early stage provides a level of independent consideration and objectivity. A lack of objectivity cannot be cured later on.
- Issues with legal privilege must be addressed at the start of an investigation and throughout the period of any prosecution.
- Issues with disclosure must also be addressed at the start of an investigation and throughout.
- It may be the investigation and, if necessary, prosecution of individuals should precede a DPA and not follow one.
History now shows us that the prosecution of individuals following a DPA is fraught with difficulty.