The
The settlement with
The facts
The SFO's investigation related to the provision of electronic monitoring services provided under contracts with the
The DPA
Under the DPA, proceedings have been commenced and immediately paused in respect of three counts of fraud under section 2 of the Fraud Act 2006. These proceedings will be discontinued if G4S complies with all the conditions set out in the DPA, namely:
- Payment of a financial penalty of Ł38,513,277 and the SFO's costs of Ł5,952,711;
- Agreement to an extensive programme of review, assessment and reporting on its internal controls, policies and procedures (performance against which is to be guaranteed by its parent company,
G4S plc ).
The DPA will be in effect for three years from
Setting the financial terms of the DPA, Mr
Key messages
Even delayed co-operation can bring a DPA
Davis J noted in his judgment that G4S's co-operation with the SFO's investigation had been "less than full". Whilst G4S had co-operated from the outset, the level of its co-operation initially was less than after
This can be contrasted with the case of
"Extraordinary co-operation" means full and timely co-operation
In previous DPAs, financial penalties imposed have been reduced by up to 50 per cent where the corporate organisations concerned have been able to show that they have demonstrated "extraordinary co-operation".
In this case, approving a 40 per cent reduction to the financial penalty (the starting point being one third), Davis J commented that G4S's co-operation, whilst "unusually wide" in scope, could not be described as "extraordinary" until
Setting the level of reduction at this level provides some further clarity to corporate organisations assessing when and how to co-operate with a view to concluding a DPA. In this case, the financial penalty imposed was approximately Ł6.4 million higher than it may have been had the same approach to co-operation been adopted at an early stage. Total investigation and remediation costs will also be higher as a result of the approach taken. The documents released in connection with DPAs to date do not completely reflect the competing legal and commercial considerations for boards deciding how to handle negotiations. However, in this case, the ongoing and contemplated civil litigation in relation to the same facts and a wish to observe the SFO's and the Court's approach to similar cases may have contributed to decisions to "wait and see".
Limited waiver of legal professional privilege and access to materials from internal investigations confirmed as important ingredients of co-operation
As other corporate organisations have in previous cases, from
The SFO's Corporate Co-operation Guidance, published in
In Serious Fraud Office v ENRC [2018] EWCA Civ 2006, Sir
Further clarity on the "interests of justice" test
Davis J noted that dishonest activity in the course of carrying out business under a public contract results in a substantial adverse impact on public confidence in the process, and that the company had engaged in dishonest conduct over a number of years. He found that this, coupled with the company's co-operation coming late in the day, weighed in favour of prosecution. However, reflecting similar decisions in other DPAs conducted to date, in finding that a DPA was appropriate in the circumstances he noted that these factors were counterbalanced by the company's (albeit delayed) substantial co-operation, remedial measures taken and promised, the fact that the offending conduct occurred under previous directors or managers, the disproportionate consequences of prosecution on various parties including employees and shareholders, and the relative age of the conduct.
Eligibility for procurement processes front of mind during negotiations
As was the case with other companies with which the SFO has recently reached DPAs, including Serco and Rolls-Royce, a significant portion of G4S's revenue is dependent on public procurement. This will have been front of mind for G4S when dealing with the SFO. A conviction for fraud, in these circumstances, would not have resulted in mandatory exclusion from public procurement processes. However, corporate organisations which have agreed DPAs may be excluded from such processes under discretionary criteria set out in the Public Contracts Regulations 2015 in the
Consideration of evidence from the
Remediation is key
The SFO's decision to enter into DPA discussions, and in particular the finding that to do so was in the interests of justice, rested heavily on significant ongoing remediation efforts undertaken by
Remediation efforts in this case include substantial changes to the company's senior management, the creation of a board Risk Committee, a change in reporting lines and expansion of the group audit function with an increased emphasis on risk assessment.
A guarantee of oversight by a parent company in respect of ongoing compliance was a novel feature of the Serco DPA. Its repetition here demonstrates that the SFO may rely on this model in the future to secure the best possible outcomes from DPAs in terms of ensuring that subjects are good corporate citizens of the future.
Davis J further commented that the remedial steps which have been and will be taken "can only be enforced under the aegis of a DPA" and that "the public interest in the remedial steps is very high".
SFO indicating its commitment to monitorships
Many commentators expected the use of monitors to increase under
This case bears out the predictions: an external and independent "Reviewer" (a monitor in all but name) will be appointed, through a process similar to that used in
This represents a departure from earlier
Originally published
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