White Collar and Corporate Crime in the UK Legal System - Coursework Example

White Collar and Corporate Crime in the UK Legal System Introduction As the second largest financial centre in the world after NewYork City, London enhances the UK’s global standing and also plays a major role in the country’s economic growth. The three most important factors contributing to London’s, and the UK’s, success are centuries of stability, professional quality, and the rule of law (Wang & Holtfreter, 2012: p166). As a result, the UK can ill afford for its reputation to suffer as a result of market manipulation, corruption, and fraud. A financially reputable city is important for the UK’s economy, as well as its democracy. Both major parties, indeed, have supported the need for up-to-date legislation on corporate crime, well-resourced government agencies to tackle white-collar crime, and robust penalties for those found guilty of these crimes. However, Arnulf and Gottschalk (2013: 103) notes that the Serious Fraud Office has not kept up with the criminals, particularly with conviction rates declining by 20% between 2010 and 2013, as well as costly mistakes in pursuing the criminals. For example, the absence of deferred prosecution agreements in the UK legal system, despite their success as prosecutorial tools in corruption and fraud crimes in the US legal system, is questionable (Dion, 2009: p440). This paper will argue that the UK legal system should address this deficiency if it is to pose a serious deterrent to white-collar and corporate crime. White-Collar and Corporate Crime in the UK Legal System Gottschalk and Smith (2011: p303) opine that the UK legal system’s current position on white-collar and corporate crime is thought provoking, noting the presence of numerous regulatory and criminal sanctions for criminals including the Fraud Act 2006, Money Laundering Regulations 2007, and Bribery Act 2010. However, the problem does not lie in the absence of applicable and prosecutable law, but with the relative inefficiencies and ineffectiveness of the noted laws, especially due to their relative inflexibility. Although the present system has been reliable in the past, it does raise some primary conflicts in the contemporary commercial world. With regards to self-reporting required by current UK law, there is a conflict between discouragement and incentives (McGurrin et al, 2013: p9). An incentive is required if organizations are to self-report to the authorities on incidences of wrong-doing. Organizations in the US are able to benefit from DPAs through dismissal or deference of criminal prosecution, provided they agree to account for profits, pay compensation, pay fines, accounts for future action to the DoJ, and/or agrees to monitoring by relevant agencies. As a result, the self-reporting system in the US offers some comfort for companies regarding the range of sanctions regulators can impose (Shover & Grabosky, 2010: p431). However, the UK legal system has a starker position, in which corporations are dealt severe sanctions whether they self-report or not. Normally, criminal prosecution and subsequent conviction are the primary options available to authorities in case of an admission (Barak, 2013: p66). Such a severe instrument for enforcement discourages corporations from self-reporting with, for example, the Serious Fraud Office limited in the actions it can take. The SFO can either proceed with prosecution under civil law or prosecute self-reporters to secure a criminal ruling. Some corporations, for instance, would view the mandatory debarment from contracts across the EU that comes with a bribery conviction, as a death sentence and would not self-report (Edelbacher et al, 2012: p50). The Utilities Contracts Regulations 2006 and the Public Contracts Regulations mandate contracting authorities to exclude service providers, contractors, and suppliers convicted of fraud, bribery, and corruption from public contracts. Companies operating in any of these sectors would not find any incentive to self-report and would, instead, attempt to cover up their crime under the current UK legal system (Gounev & Ruggiero, 2012: p71). Another conflict arises regarding the current sentencing requirements in UK law for corporate crimes, specifically between certainty and judicial independence. All modern and successful justice systems are founded on their judiciary’s independence and, in the UK; the judge has sole responsibility for sentencing an offender (Muncie & McLaughlin, 2001: p50). Judges in the UK are required by the Criminal Justice Act 2003 to consider reduction of crime by deterrence or otherwise, punishment, public protection, rehabilitation, and victim restitution when sentencing. Whereas the prosecutor is allowed to assist in expounding on guidelines and tariffs for the judges, this is as far as they can go. Plea bargains, as established in the US legal system, are not provided for in any of the UK’s legal mechanisms (Simpson, 2013: p319). The UK legal system perceives the provision of corporations with assurances on potential sentencing outcome as usurping, and/or undermining judicial discretion on sentencing. The endorsement of plea agreements as a practice is deplore, mostly for the notion that plea agreements will be “rubber stamped”. The US legal system adopts an alternative approach, which is best evidenced in cases involving the Securities and Exchange Commission. In this case, for example, the court will examine any plea agreement to ensure it is in the public interest, adequate, reasonable, and fair (Dervan, 2011: p370). In SEC v. Citigroup Global Markets Inc, for example, the appellate court endorsed sweeping discretionary powers for the SEC, which allowed them to make decisions regarding charging and settling with offenders (Gottschalk, 2012: p174). The language of this ruling was surprisingly supportive of giving the SEC authority to utilize internal administrative processes, while avoiding frequent resorts to courts. The scrutiny applied by the judge ensures that the plea agreement does not evolve in a vacuum of judicial legal interpretation. Indeed, the Foreign Corrupt practices Act, over 30 years after its enactment, has only resulted in two corporate cases being contested (Maguire et al, 2012: p44). However, the UK legal system seldom uses plea bargaining, specifically due to the absence of legislative powers. In addition, UK courts have opposed the notion of plea agreements that limit their powers of sentencing. In R V. Innospec, for example, the presiding judge Lord Justice Thomas emphasized that sentencing is vested in the court and that the SFO had no power to make global settlement agreements or plea bargains (Pontell & Geis, 2014: p77). Even if UK courts adopted plea agreements, negotiated criminal plea agreements under the present system would not protect offenders from collateral sequences related to corruption, bribery, or fraud conviction. For instance, debarment from public procuring contracts in the EU and confiscation of unlawful conduct proceeds would still apply. Finally, Walklate (2007: p37) also identifies a conflict in current UK law on corporate crime, specifically related to what he terms as closed-door agreements v openness. One of UK law’s most established doctrines is that justice is done and, just as importantly, that justice must be seen to be done. In camera justice often cites public interest as a fundamental concern, at least as contemplated by the UK’s legislature. Most critics of DPAs as used in the US argue that the DoJ has been opaque in how DPAs are used, undermining any appearances of an equitable and fair justice system. Still, as Beresford et al (2005: p70) point out; corporations rarely come forward if their “dirty laundry” is likely to be aired publicly. Indeed, few corporations in the UK are willing to divulge even minor discretions, especially where share prices and/or standing are at risk. As a result, the need or incentive to enable organizations self-report, as well as confidently explore their options sans any subsequent prejudice to their position, remains a priority for the legal system to successfully tackle white-collar and corporate crime (Gilligan, 2012: p501). Proposal for a Deferred Prosecution Agreement in the UK The UK legal system should seek to balance interests and conflicts identified above, while also ensuring it incorporates interested parties. In addition, the UK legal system should also, relevantly, seek to increase the flexibility of prosecutors in achieving the best outcomes for offenders and victims, as well as to work alongside existing mechanisms of civil proceedings, criminal prosecution, and tackling crime (Grabosky & Shover, 2010: p649). However, and most importantly, it should do so in a manner that does not alter the principle of judicial oversight and independence. Public interest requires that the final arbiter in issues like appropriate sentencing is the judge and the courts, which are a cornerstone of the legal system, which Newburn (2012: p71) argues, cannot be abrogated. A question, thus, arises as to whether a DPA would be warranted in solving the UK legal system’s apparent inefficiency to deal with corporate crime in the contemporary business world. In a DAP, the prosecutor would have more flexibility and discretion in considering its appropriateness through their investigations (Tombs, 2014: p589). In the course of these investigations, the prosecutor seeking to use a DPA would have to take several factors into account. For example, he/she would have to regard the seriousness and nature of the crime or offense, the premeditation level and any attempts at a cover-up, and how widespread the wrongdoing was in the corporation and the number of senior perpetrators involved (Cullen, 2011: p39). Moreover, using a DPA would require a prosecutor in the UK legal system to consider potential and actual losses to innocent victims, as well as the likely effect of prosecution on the financial health of the organization. The prosecutor would also be required to take into account the type of action or sanction used in other jurisdictions when dealing with a similar issue (Gottschalk, 2014: p166), while also considering actions that the guilty corporation has taken to remedy the situation. Additionally, previous convictions and any previous use of a DPA with the corporation would come into play. Finally, the prosecutor would also have to consider the corporation’s commitment to following through on the remedies, improving compliance, restitution of benefits, and recovery of benefits (Lord, 2014: 109). Subject to a voluntary agreement on a DPA by the involved parties, the UK legal system contemplates that a judge should be engaged on identification of criminal offenses, as well as the drawing up of charges (Petter, 2011: p306). The prosecutor and the corporation, at this point, would present essential information to the judge in private, including a statement of facts agreed on such as the DPA’s time period and a draft indictment. In such a case, it should be noted that the corporation would not contest any admissions or facts given at a later point during proceedings (Van Slyke & Bales, 2012: p229). The UK legal system would then have to tailor other DPA terms to present circumstances. These include potential financial sanctions and penalties, victim restitution, and disgorgement of profits. In addition, other circumstances to be considered would include the replacement of offenders from positions of management and/or their withdrawal from the markets. Finally, it should also consider implementing proper anti-fraud and anti-corruption procedures, policies, or training with independent, periodic monitoring (Braithwaite, 2010: p623). The judge would have to be involved in the early part of the process and informed throughout, enabling them to direct required steps and decide on the suitability of a DPA. Subject to preliminary judicial approval in case a DPA was introduced in the UK legal system, involved parties would agree to the DPA’s terms that would be presented to the court, along with formal mention of the indictment or charge (Gobert & Pascal, 2011: p61). In this case, unlike the use of DPAs in the US legal system, the judge would determine the DPA’s final content taking into account whether approving it would serve the interest of justice, as well as whether it is proportionate, reasonable, and fair. If need arises to renegotiate a DPA as originally set out, or if a DPA is breached, the judge would also have to assume a critical and pivotal role (Hall & Winlow, 2012: p46). If the DPA needs to be varied when new circumstances arise, the judge is presented with the mitigating circumstances and makes a choice to approve or decline proposed variations by the prosecutor and the corporation. In order not to antagonize the courts, any alleged DPA breach must be put to the judge, rather than dealt with by the prosecutor as in the US legal system, for determination via a criminal test beyond reasonable doubt. The judge, in this case, would determine a breach and amend, terminate, or extend the DPA with additional sanctions where needed (Pemberton et al, 2012: p269). Introduction of a DPA to the UK legal system has only been proposed formally recently by the Ministry of Justice and, despite still being in its infancy (Tully, 2010: p30), the response has been mixed at best. It may be viewed as a revenue-generating exercise because it only targets corporations and not individuals, especially since corporations possess financial resources that can be used to avoid heavy sanctions. However, the fact that the system cannot imprison a corporation means that DPAs with punitive monetary policies should deter white-collar and corporate crime (Peter, 2012: p43). In addition, difficulties faced by prosecutors in litigating the modern, sophisticated corporation require special treatment. The ability of multi-national investigations to share information could mean that disclosure in one EU state could result in adverse consequences in other countries where a corporation operates (Levi, 2013: p38). While this may be a negative for some corporations, the international and sophisticated nature of modern white-collar and corporate crime makes this a positive for prosecutors (Gottschalk & Solli-Soether, 2011: p99). 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