Tag Archives: DPA

The French system of law is changing through DPAs.

This week, White Collar Post features a guest post from Frédéric Ruppert(1) and Maria Lancri(2)

One year after the enactment of the Sapin II Law, that set up the French Anticorruption Agency “AFA” and authorized Deferred Prosecution Agreements “DPA” à la française, the first DPA was approved by the Paris Tribunal.

Although the investigation started years before the Sapin II Law enactment and the matter involved money–laundering of tax evasion proceeds rather than corruption, this French DPA is being watched with attention as a guidance for future settlements.

It was brought together by i) the French National Financial Prosecutor “NFP,” who contributed to the Sapin II law and the DPA, with a clear understanding that business requires a dedicated and efficient tool against white–collar crimes, and ii) the negotiations with the defendant’s lawyers, after the Sapin II Law enactment.

The DPA statement of facts state that HSBC group and particularly its Swiss affiliate HSBC Private Bank (Suisse) SA “PBRS,” sent its salespeople to France to prospect new French clients or offer new products to existing clients. Most, also French tax residents, did not declare their Swiss accounts, contrary to French legal requirements. PBRS thus assisted them in illegally concealing these assets from the French tax administration. A judicial investigation was then opened; PBRS was indicted for unlawful financial and banking solicitation and aggravated money–laundering of tax evasion proceeds.

As PBRS admitted to the facts and accepted their legal characterization, which was necessary because an investigation was opened, the NFP proposed a DPA that the Tribunal approved.

Because the Justice Ministry has not yet issued any guidelines, the HSBC/PBRS DPA is valuable in understanding how authorities determined the fine paid by PBRS. It describes i) PBRS’ activity in France, ii) the number of its employees, iii) the value of the undeclared assets managed for its French clients, iv) its profits, and v) its profits derived from assets managed for French clients. From this, the authorities calculated a €86,400,000 fine for disgorgement of profits.

The compliance program of HSBC group at the time, is described by the DPA as less developed than today. It also notes that its subsidiaries, including PBRS, were allowed to conduct their business quite independently. HSBC group has since overhauled its compliance program, increased its control over its subsidiaries, withdrawn from certain markets and implemented strict financial crime, regulatory and compliance standards. At PBRS’ level, most managers were replaced, a transparency policy was implemented, some services were no longer offered and numerous clients were dropped.

Until the Sapin II Law enactment, PBRS was uncooperative, as the law did not permit settlements in such criminal matters. However, afterwards, the NFP recognized PBRS’ cooperation with authorities.

Given the seriousness of the matter, the DPA imposed an additional €71,575,422 fine, bringing PBRS’s total to the maximum available at law.

PBRS also had to indemnify the victims per the Sapin II Law, including the French Government, which was awarded damages for its €142,024,578 tax loss.

Altogether, PBRS paid €300,000,000, which HSBC Holdings guaranteed.

The advantage of DPA procedures over regular procedures is that defendants are not prohibited from participating in public procurement processes.

Incidentally, this is the major difference with World Bank procedures. It debars companies engaged in corruption or collusion from participating in any World Bank financed public procurement market. This was the case for the French company Oberthur Technologies SA., debarred for 2.5 years. It was also debarred from procurements issued by other development banks as part of the cross–debarment procedure.

 

(1) Frédéric Ruppert, Avocat à la Cour, Attorney at Law, California State Bar, Frederic’s practice is mostly focused on M&A and Private Equity and also extends to other corporate and business matters and Corporate Governance. https://www.linkedin.com/in/frederic-ruppert-2218767/ Email:  ruppert@frlaw-avocats.com

(2) Maria Lancri, Avocat à la Cour, has had a career in both private practice and in-house. She is currently of Counsel at GGV, a Franco-German law firm and specializes in Compliance matters and Data Protection and also advises companies in France on how to set up their Compliance programs: http://gg-v.fr/equipes/maria-lancri/ Email: lancri@gg-v.net

Canadian DPA? Cross-country consultations begin

Government of Canada Launches Consultations

More than two years ago, in the context of its procurement modernization initiative designed to ensure that it was doing business with ethical suppliers, the Government of Canada introduced a government-wide “Integrity Regime”. The Government is now seeking to review whether its objectives have been achieved. On September 25, 2017, it launched a consultation to seek stakeholders’ views on its “Integrity Regime” and took the opportunity to seek the public’s opinion on a potential deferred prosecution agreement (DPA) regime as well. The Government has published a Discussion paper entitled “Expanding Canada’s Toolkit to Address Corporate Wrongdoing: the Deferred Prosecution Agreement Stream Discussion Guide in relation to the consultation process. Stakeholders may provide their responses and comments until November 17, 2017.

DPA Regime

A DPA regime is like a diversion program that provides an alternative to criminal proceedings. Instead of going to trial, the prosecutor can make an offer to the accused to hold off on criminal charges, while the person enters into a program designed to rehabilitate them. If the accused does not comply with the terms of the agreement, the prosecution is resumed. In Canada, diversion programs are currently made available to individuals only. A DPA regime is a diversion program made available to corporations. It is often – but not always – available only for specific offences related to economic crimes.

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Deferred Prosecution Agreements Regime: A Canadian Proposal

Diversion programs for those accused of criminal offences are not new in Canada.  In Québec, for example, first-time individual accused or accused suffering from a psychiatric or medical condition may participate in a diversion program, which results in the criminal charges being dropped.  Corporations may also benefit from diversion programs, such as the Competition Bureau’s Immunity and Leniency Programs.

Transparency International Canada (“TI Canada”), a non-governmental anti-corruption organization, released a report in July, 2017 “urging” the Canadian government to adopt a Deferred Prosecution Agreement (“DPA”) mechanism, modeled closely to the current regime in the U.K.  A DPA is an agreement between the prosecutor and the accused suspending outstanding charges and requiring the accused to fulfill a certain number of commitments.  Once the accused has completed its contractual undertakings, the prosecutor will drop the charges.

TI Canada’s Recommended DPA Mechanism

The proposed scheme, according to TI Canada, addresses all the pitfalls of the current DPA regime in the U.S., but retains all of the advantages, including encouraging greater enforcement and self-reporting, saving costs and resources for both parties, and promoting certainty and transparency for all stakeholders involved.

TI Canada recommends that the proposed DPA scheme only be available to corporate accused who are charged with economic crimes.  The DPA scheme would be legislatively enacted and judicially monitored to fulfill the underlying three objectives of financial reparations, sincere compliance reform, and accountability of individual wrongdoers.

Below is a summary of the proposed regime.

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