Holding companies & DPAs

The deferred prosecution agreement (DPA) secured by the Serious Fraud Office (SFO) against an unnamed company highlights the role of holding companies, a senior fraud lawyer has said.

Lord Justice Leveson approved the DPA last week. The company involved is subject to allegations of conspiracy to corrupt, conspiracy to bribe and failure to prevent bribery in connection with contracts with customers in foreign jurisdictions.

The company will pay more than £6.5m in financial orders, has agreed to cooperate fully with the SFO and must provide regular reports on its third party intermediary transactions and anti-bribery and corruptions controls. Its US holding company will pay nearly £2m of the penalty.

Peter Binning, partner at Corker Binning, says: “The case highlights the question of how far a holding company can be held responsible for paying the criminal penalties that a prosecutor wants to impose for the acts of its subsidiary.

“Here the court has approved a pragmatic solution to the problem and the DPA, as finally approved by the court, has set out why an innocent holding company should pay up in these circumstances.

Why? The answer seems to lie partly in the adverse perception of even innocent receipt of the proceeds of crime, and partly in the interests of the parent in maintaining the ability to trade in the market in which XYZ operates. This is also due to the exceptional nature of this case where there was a great deal of motivation on the part of the SFO to secure an acceptable DPA despite the overall penalty and financial disgorgement being low in comparison to the scale of the offending. No costs were awarded to the SFO due to XYZ being so impecunious and no compensation was ordered.”