New rules on fines risk making it easier to do dirty business

The Serious Fraud Office is to allow plea bargaining, which will raise cash but leave justice short-changed

deputy business editor

It's not easy growing old in prison. Limited wheelchair access, lack of exercise or healthy food, and poor healthcare make penal life for pensioners pretty miserable. Last week, the grey generation of jailbirds – the fastest growing sector of the prison population – was swelled by a batch of what could be a growing number of white-collar criminals. At least, if fraud prosecutors get their way.

Dennis Kerrison, 69, from Surrey, Paul Jennings, 57, from Cheshire and Miltiades Papachristos, 51, a Greek citizen, were all jailed for their role in the notorious Innospec bribery case. Their crimes were deeply unpleasant: they conspired to bribe state officials in Indonesia and Iraq to buy Innospec's chemicals. In the case of Indonesia, this included the lead additive in petrol banned in the UK and elsewhere for causing severe brain damage, particularly in children. Thanks to these men's complicity in the bribery, the Indonesian people were exposed to leaded petrol long after the government there had wanted to eliminate it.

But despite the seriousness of their actions, the lengths of the sentences – four years in the case of Kerrison – came as a shock to the City. Particularly in the case of Jennings, who was sentenced to two years despite having pleaded guilty in 2012.

For the Serious Fraud Office (SFO), the jail terms are a triumph. The City's police had already obtained successful prosecutions of the company, resulting in multi-million pound corporate fines. They could have stopped there. But, to the surprise of many in the financial world used to decades of relative impunity for individuals, the SFO prosecuted the bosses of the company too – right to the bitter end.

It was to the democratic good that the company's actions, and those of its directors, were dissected by barristers in public. White-collar crime, particularly bribery in emerging or war-torn economies, is far more serious than the publicity it usually receives reflects – and it is instructive how little coverage the Innospec scandal has received. As the judge said last week: "None of these defendants would consider themselves in the same category as common criminals who commit crimes of dishonesty or violence … but the real harm lies in the effect on public life, the effect on community and, in particular with this corruption, its effect on the environment."

But the scrutiny of business people's wrongdoing is, I fear, to be severely lessened under new powers for the SFO allowing companies to effectively plea bargain their crimes away in return for a hefty fine and no trial. These so-called deferred prosecution agreements are based on the US model which has garnered billions of dollars in fines, but potentially seen serious crimes committed by very well-paid executives swept into filing cabinets that will remain locked for ever more in prosecutors' offices.

For, while deferred prosecution deals make it easier to raise fines from companies, they foster a perception that corporate corruption is not as serious as, say, ATM fraud by gangs. Imagine the uproar in the popular press if a gang of east European credit-card cloners paid off the courts with a £50,000 fine and a promise not to do it again.

It's easy to see why the SFO might want to go down the plea-bargain route. This underfunded organisation has blundered repeatedly in attempts to take on the richest people, and organisations, in the land. But to let off the criminal companies with fines – which will inevitably be a fraction of their weekly profits – adds to the temptation of employees and directors to see potential settlements with the SFO as part of the everyday cost of doing dirty business.

In fairness, SFO director David Green is aware of such criticism. That is why he has been telling City law firms – who will be negotiating on behalf of the corporate criminals – that he will be seeking to step up prosecution of individuals as well as striking deferred prosecution deals.

But how easy will it be to encourage companies to cop a plea while also offering up their employees? Some lawyers argue: not very. For starters, the prosecutions of individuals will involve damaging revelations about company behaviour. That evidence could trigger civil claims from shareholders and others. And for seconds, the directors negotiating with the SFO on potential deferred prosecution agreements may themselves be involved in the criminal behaviour that could lead to the dock.

Add to that, the SFO's record on bungling cases – from the Guinness scandal to this year's collapse of the Robert Tchenguiz investigation – and you get some hefty incentives to companies to declare: "See you in court."

Hamish McRae is away

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