‘Above & Beyond’? Serious Fraud Office Issues Corporate Co-Operation Guidance – Part I
The UK Serious Fraud Office (SFO) has issued its long-awaited guidance on corporate co-operation. For the first time in one place, the SFO has set out what in its view are ‘indicators of good [co-operation] practice’ for companies under investigation. This is a helpful clarification.
In its own words the SFO defines co-operation as going ‘above and beyond’.
The list of indicators of good co-operation practice is extensive and not, as the SFO itself points out, exhaustive. That said, the SFO acknowledges that each case turns on its own facts, and some indicators on the list may not apply in some cases, perhaps hinting at a little flexibility depending on specific circumstances.
Companies dealing with the SFO and/or identifying suspected wrongdoing in their organisation must therefore carefully consider the guidance and determine whether and/or to what extent they can meet the SFO’s co-operation requirements.
Companies should also review existing policies and procedures dealing with internal investigations in light of the new SFO guidance.
In this GT Alert we outline the key takeaways from the guidance.
A subsequent alert will look at how this latest guidance fits into the legal jigsaw when considering self-reporting suspected misconduct and/or dealing with the SFO.
In our experience, nearly all companies under investigation by law enforcement wish to co-operate with the SFO and consider they are doing so.
Why co-operate in the first place? Co-operating with an agency whose objective is to prosecute and convict those it is investigating may seem counterintuitive.
However, co-operation is, broadly speaking, perceived as creating an environment in which the best outcome possible for all involved may be achieved.
This could mean an invitation to enter into a deferred prosecution agreement (DPA) which enables resolution of criminal liability without conviction, or no further action based on an application of the UK’s Code for Crown Prosecutors.
Consequently, in order to minimise adverse investor reaction to learning that a company is being investigated by the SFO, investor and public relations professionals frequently recommend a statement along the lines that a company under investigation is co-operating.
In the opening paragraph of the new guidance the SFO describe co-operation as enabling it to “more quickly and reliably…understand the facts, obtain admissible evidence, and progress an investigation to the stage where the prosecutor can apply the law to the facts.”
The co-operation guidance is split into two main sections. The first relates to preserving and providing material (which itself is subdivided into six sections), and the second relates to witness accounts and waiving privilege.
In summary the guidance is the SFO’s wish list for how corporate investigations are conducted and how evidence is handled.
What Is, and Is Not, Co-Operation in the SFO’s View
Importantly, the SFO describes co-operation as “providing assistance to the SFO that goes above and beyond what the law requires” including “identifying suspected wrongdoing and criminal conduct together with the people responsible, regardless of their seniority or position…reporting this to the SFO within a reasonable time of the suspicions coming to light; and preserving available evidence and providing it promptly in an evidentially sound format.”
The guidance goes on to say that co-operation is “inconsistent with protecting specific individuals or unjustifiably blaming others; putting subjects on notice and creating a danger of tampering with evidence or testimony; silence about selected issues and tactical delay or information overloads”.
It will be important in applying these principles that the SFO behaves objectively to avoid good faith efforts by companies to co-operate being misinterpreted as non-co-operation by the SFO where, for example, there is a difference in viewpoint about a fact or matter.
Why the SFO Wants Specific Elements of the Co-Operation Guidance
The SFO is seeking to ensure that it gets the most reliable evidence possible and that any investigation can stand up to scrutiny and challenge, for example, in the event it prosecutes individuals who want to fight and will therefore put the SFO to proof, which can include challenging not only the reliability of the prosecution’s evidence but the credibility of the investigation as a whole.
What this means is that the SFO is essentially expecting companies to conduct investigations to a law enforcement standard, often at the SFO’s direction, observing all the rules of evidence that entails and being mindful of the SFO’s disclosure obligations.
This goes well beyond a basic internal investigation to ascertain what happened and has the potential to create tension between a company’s desire to co-operate with the SFO and its duties and obligations to its employees, shareholders, and often law enforcement agencies in other jurisdictions.
Witness Interviews and Privilege Waiver
Tension is likely to arise when determining whether to conduct employee interviews, whether to waive privilege over the notes of any interviews conducted, because in doing so the company could be leaving itself open to a risk of civil litigation or unnecessarily creating new documents which will be discoverable in civil litigation. U.S. practice and UK practice diverge significantly in this area.
The new guidance provides transparency as to how the SFO will consider co-operation going forward and makes clear that the full extent of the SFO’s guidance of corporate co-operation set out in the co-operation guidance will be burdensome for companies.
If a company is limited in its ability to co-operate, the onerous nature of co-operation as stated in the guidance must be considered early on and monitored. While the SFO’s co-operation guidance is clear, from time the time the position will be more nuanced depending on the facts of the case.
In Part II we will look at the wider considerations in which co-operation in accordance with the SFO’s co-operation guidance should be viewed.