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Once Upon A Corporate Crime

Once Upon A Corporate Crime

Why Unlocking A Company’s Story Is The Key To A Successful Defence

Few people would add the skill of storytelling to a barrister or solicitor’s CV.  But to build a credible, persuasive defence in corporate crime investigations and prosecutions, barristers and solicitors must create a yarn that knocks down the prosecution’s tale of why the defendant should be found guilty/receive a particular sentence, and add in additional substance that puts doubt in the jury’s mind.

In this paper, I argue that in white-collar crime investigations and prosecutions, understanding the defendant organisation’s industry, structure, commercial ambitions, and past history and then constructing a story to present to the jury is the key to a successful defence.  Too many lawyers see the law as black and white, missing the intricate shades of grey that creep into the facts of every case.

To achieve this, we need to understand what triggers company directors or organisations themselves to seek legal advice and when this action should be taken.  Following on, we will examine the methods used by a specialist criminal defence team (by which I mean a barrister and solicitor).  Finally, we will look at why a story, pieced together via full knowledge of the organisation and the alleged offence can persuade a regulator, jury, or judge to a) enter into an agreement, such as a Deferred Prosecution Agreement (DFA), or b) hand down a lesser sentence.

When to seek help

Regulations and compliance requirements are increasing on both sides of the Atlantic.  And this trend began decades before the 2008 financial crisis.  The Economist reported in 2018 that between 1970 and 2008 the number of prescriptive words like “shall” or “must” in the code of federal regulations grew from 403,000 to nearly 963,000, or about 15,000 edicts a year.

There are no signs of authorities losing enthusiasm.  In 2019, the number of independent investigations ordered by the Financial Conduct Authority (FCA) and Bank of England into financial institutions rose .  And the Serious Fraud Office (SFO), which has been scathingly criticised for its lack of ability to bring cases to trial, is determined to improve the organisation’s success record.

Director Lisa Osofsky, told the Financial Times in August last year:

“We have always been painstaking — we’ve got top-notch investigators who have spent their life in law enforcement — but we’ve also got somewhere to go in terms of focus . . . We’ve got to be able to focus enough so that our cases come into court within the kind of time to have the witnesses and defendants still living, and the evidence still alive.”

The Covid-19 pandemic is likely to increase white-collar crime, as businesses take risks out of desperation to survive.  Regulators and enforcement bodies are aware of this.  Although investigatory and enforcement action may be hampered by social distancing, agencies in the UK, Europe, and the USA will be primed to go after wrongdoers and any unwitting associates once the crisis abates.

Unfortunately, most directors/companies seek specialist legal advice far too late.  Corporate counsel, experts in their role of advising the Board on matters involving risk management, property, and contracts etc, are often reluctant to instruct external help because they mistakenly believe actions such as a regulatory request for information will not lead to a formal investigation.  It is true that often, it won’t.  But many investigations have been launched on the back of innocent looking regulatory requests because the business handled the appeal for information incorrectly.

The speed in which information is demanded takes many businesses by surprise.  Seven to ten days is not an uncommon timeframe for a regulatory request to be met.  Providing too much data or failing to separate legally privileged information can inadvertently lead to a formal investigation.  However, lean answers, stripped of detail, can also arise suspicion.

The obvious trigger for contacting your external legal team is the dawn raid.  These can be carried out by HMRC, the Competitions and Markets Authority (CMA), National Crime Agency (NCA), FCA, and SFO among others.  The danger with dawn raids is they happen so fast that confusion can lead to lawyers being called in after irrecoverable damage is done.

The correct procedure if regulatory officials turn up at your premises unannounced is for a senior executive to take them into a meeting room that is clear of files, offer them tea or coffee, and call your legal team immediately.  Officials will normally wait around 45 minutes for your lawyers to arrive.

Assembling your legal team and obtaining their advice and representation too late can result in grave consequences.  In R and others [2015] EWCA Crim 1941; [2016] 1 Cr. App. R. 20, the Court of Appeal issued a practice note in which Sir Brian Leveson PQBD stated (at para.34) (our emphasis) :

“…To fulfil its duty under s.3 , the prosecution must adopt a considered and appropriately resourced approach to giving initial disclosure. Such an approach must extend to and include the overall disclosure strategy, selection of software tools, identifying and isolating material that is subject to legal professional privilege (LPP) and proposing search terms to be applied. The prosecution must explain what it is doing and what it will not be doing at this stage, ideally in the form of a “Disclosure Management Document”. This document, as recommended by the Review and the Protocol, is intended to clarify the prosecution’s approach to disclosure (for example, which search terms have been used and why) and to identify and narrow the issues in dispute. By explaining what the prosecution is, and is not, doing, early engagement from the defence would be prompted.”

The CMA now serves this document early on in the investigation.  It is imperative that the defence team sees this to ensure they can identify and collect the data they need.  If relevant data is not identified early enough, investigators can prevent your defence team from obtaining it.   Furthermore, investigators can discover information which may be highly relevant to the defence’s story and use it for their own means.

Getting to know you

“You never really understand a person until you consider things from his point of view … Until you climb inside of his skin and walk around in it.” – Atticus Finch – To Kill a Mockingbird

If your advisors and representatives are myopic in their approach to your case, only looking at how the law applies to the factual situation rather than the commercial sphere in which your organisation operates, frankly, you’re in trouble.

To counteract the prosecution’s defence, your legal team needs to dig deep into your organisation to ensure it understands the following:

  • the market you operate in
  • the history and commercial objectives of your organisation
  • your supply chain and customers
  • the culture and accepted practices of your industry
  • how the business is organised and managed

The latter is vitally important to understand because the Courts are not blind to commercial realities, especially given a director’s role is to delegate; therefore, they cannot be held responsible for everything that occurs within the day to day running of the business.

This point was highlighted in Huckerby v Elliot [1970] 1 All ER 189 (DC), a case concerning a prosecution under the Finance Act 1966 for failure to hold a required gaming licence.  A director was charged with an offence contrary to section 305(3) of the Act in that the offence was attributable to her neglect.

Lord Chief Justice Parker stated:

"...I know of no authority for the proposition that it is the duty of a director to, as it were, supervise his co-directors or to acquaint himself with all the details of the running of the company.  Indeed, it has been said by Romer J in Re City Equitable Fire Insurance Co Ltd [1925] Ch 497 at 428-430 that amongst other things it is perfectly proper for a director to leave matters to another director or to an official of the company and that he is under no obligation to test the accuracy of anything that he is told by such a person, or even to make certain that he is complying with the law."

Building trust

Barristers and/or solicitors with familiarity in corporate investigations and prosecutions understand from past experience that building trust with their client early on in an investigation significantly increases the chance of a successful case outcome.

The intense workload and pressure on company directors is a barrier that often needs overcoming to ensure the knowledge of the company and its culture, plus all the evidence required to build a robust defence is identified, collated and presented in a legally defensible manner (a process referred to as disclosure).  A legal team that understands commercial realities will ensure that the people at the top of an organisation understand that most of the tasks required can be delegated down.  For instance, the task of eDisclosure (identifying, collating, analysing, and presenting evidentiary data) can be jointly undertaken by people in the IT and legal team, alongside an external provider of eDisclosure services if appropriate.

Another way of building trust is to be honest upfront about what success is likely to look like after examining the facts of the incident that led to the investigation and/or prosecution.  For example, in health and safety prosecutions, the applicable Sentencing Guidelines allow judges to reduce the sentence if an organisation makes an early guilty plea.  It may be that if health and safety regulations have been breached, pleading guilty is the best tactical move.  Your legal team’s job is then to find other mitigating factors that can reduce the sentence imposed; for example, immediately rectifying the breach, installing policies and procedures to ensure the breach never occurs again, and demonstrating an excellent health and safety record to date.  But to build a story which encapsulates this evidence and presents it in a way that convinces a judge to reduce the sentence, your lawyers must put in the groundwork to understand every aspect of your business.

The power of a story

Storytelling is an intrinsic human characteristic  Long before anything was written down, stories were communicated in cave paintings and oral traditions.  History’s oldest known written story the “Epic of Gilgamesh,” which dates from 2100BC, would have been told orally (at least in parts) long before it was committed to stone tablet.

Stories create a sense of connection, shared culture and values, and familiarity and trust.  Stories are also sticky – they provide a way for people to remember a set of facts.  This is why a talented barrister uses the story format – there is no better mechanism for presenting a defence.

Suddenly finding yourself subject to a regulatory investigation and/or prosecution is stressful at best, terrifying at worst.  Your business, future as a director, and professional and personal reputation can be shattered by such an event.  You need to instruct a legal team that understands this, as well as the impact an investigation/litigation can have on your businesses cashflow, human capital, procurement prospects, and appeal to investors.

The key to a persuasive argument is to build a compelling narrative around the evidence.  But to accomplish this, your legal team must gain the trust of their client to ensure they can access the information they need to construct a convincing narrative.  This is achieved by:

  • engaging an experienced legal team who have a track record of successfully defending allegations of white-collar crime,
  • taking the time to understand the business and the market sector it operates in, and
  • letting directors know that most of the information requests received from the legal team can be delegated down.

Ultimately, it comes down to one simple principle - successful legal teams comprise of those who are businesspeople first, lawyers second.

That is the advantage you need to achieve a successful result, allowing you to get back to focusing on what you do best – managing your talent and growing your business.

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