Third Tesco Director Cleared: Does the DPA Process Need to Be Reassessed?

The third former Tesco director to be accused of fraud in connection with the company’s multi-million pound accounting black hole has been cleared at Southwark Crown Court.

This means no one has been found guilty. Yet Tesco itself admitted wrongdoing in order to secure a deferred prosecution agreement (DPA) and avoid being convicted.

Aziz Rahman, Senior Partner and Founder of award-winning business crime solicitors Rahman Ravelli, argues that the case highlights the need for reassessment of the DPA process. He also warns against a culture where corporates see such agreements as the cost of doing business while their senior figures face prosecution.

As the last of the three Tesco executives to be acquitted over the supermarket giant’s accounting scandal, Carl Rogberg has come to the end of a four-year ordeal. An ordeal in which no individual has been found guilty.

And yet the just-published details of the DPA that Tesco reached with the Serious Fraud Office (SFO) states that the investigation “revealed clear evidence of what amounts to a serious breach of criminal law’’ that “implicates senior management.’’

So if the DPA says that and yet the senior management have been acquitted what has gone wrong? The simplest and most obvious answer is that the DPA process is in clear and urgent need of recalibrating. In this case, we are finally getting to see the terms of a DPA which is nearly two years old and which clearly blames senior management – yet we only see it when all those being blamed have been cleared.

This points to the DPA process being flawed. Does it make it attractive for a corporate to admit wrongdoing and avoid the reputational damage of a prosecution, while leaving its senior figures to face the stress and strain of being prosecuted as individuals? That is what appears to have happened with Tesco.

Under the Crime and Courts Act 2013, which introduced DPA’s, a DPA should only be reached in the interests of justice. Has that been the case with Tesco? Many would say no.

When done correctly, DPA’s can be a way of companies putting right the wrongs of the past and moving forward. But there is the worrying prospect that larger companies may come to see DPA’s as nothing more than the cost of doing business. While they happily admit wrongdoing – regardless of whether there was any – to secure a DPA the individuals are left to fend for themselves.

It may be the case that the whole UK legal system is on a learning curve with DPA’s. They are, after all, a relatively new concept here. But the process certainly appears to need, at the very least, some significant fine tuning if we are not to see many more Tesco-style contradictory situations, where a company admits wrongdoing yet is not prosecuted and none of the individuals blamed for it are convicted.

And maybe companies should hold their nerve instead of folding at the first hint of a DPA. Allegations can – and often are – successfully challenged and companies can emerge from an investigation with neither a DPA nor a conviction to their name. But they have to show resolve and not look to the DPA as an easy but flawed option.

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