Broadening scope of US prosecutors under scrutiny at Legal Week governance forum. Alex Novarese reports

Even for an event featuring such varied and attention-grabbing topics as the implosion of the euro, illicit videos of pop stars and the underside of press ethics, there was no doubt which issue dominated Legal Week's Corporate Governance and Risk Forum.

Over debates during the one-day event in central London on 18 October, a common theme for the legal and compliance professionals attending was mounting unease regarding the aggressive tactics of global prosecutors and regulators in targeting companies.

In a year that has seen Standard Life, HSBC and Barclays hit the headlines amid high-profile probes in the US and UK, it was perhaps inevitable that a presentation by NatWest Three banker David Bermingham proved the star turn of the day.

Bermingham was one of three UK bankers controversially extradited to the US in 2006 after American prosecutors accused him and two colleagues of stealing $7m (£4.3m) from his employer, Greenwich NatWest, in relation to a deal struck with the chief financial officer of disgraced US energy giant Enron. The trio were in 2008 sentenced to 37 months in jail after a plea deal. 

Delivering a broadside against US prosecution tactics and extra-territorial reach, Bermingham also criticised the conduct of UK agencies like the Financial Services Authority (FSA) and the Serious Fraud Office for allowing US prosecutors to take the lead on allegations against UK nationals.

Bermingham and colleagues Gary Mulgrew and Giles Darby self-reported to the FSA when evidence emerged of serious accounting problems at Enron, but the agency concluded there was no case to pursue against the trio.

Criticising what he argued is a one-sided dynamic between US and UK prosecutors, Bermingham argued that lack of action by domestic agencies makes it hard for targeted UK individuals to defend themselves against US agencies.

He told delegates: "The US operates an enormously aggressive extraterritorial policy. As far as they are concerned, the individual prosecutors are the policeman of the world. They can and regularly do criminalise the acts of people who have never set foot in the United States. The ever-pushing out of the boundaries of what constitutes a violation of US law has been ongoing and appears in some areas to be gathering pace."

Bermingham also strongly criticised US prosecution tactics, in particular the use of deferred prosecution agreements (DPAs) to pressure individuals and corporates to concede liability in investigations. The comments came days before the UK Government this week (23 October) announced plans to usher in DPAs – a form of plea bargaining common in white collar enforcement – as a means of pursuing economic crime cases.

Bermingham said: "The truth is almost inevitably the first casualty in a [DPA]. You have two choices: you can stand by your principles and end up in jail. Or you can do what 98% of people do, which is play the get-out-of-jail-early card."

He also cited cases in which US prosecutors have pressured companies to waive lawyer/client privilege or not pay the legal costs of employees under investigation, citing the Thompson Memorandum, the controversial 2003 memo from the Department of Justice outlining guidelines for federal prosecutors to press individuals and companies for co-operation. He warned: "You all think that attorney/client privilege is sacrosanct – it will be the first thing that is given up."

He also argued that US prosecutors commonly use the threat of corporate indictments – which famously caused the collapse of Enron's accountant Andersen – as a means of forcing co-operation.

New extradition powers

Such comments underline mounting fears among companies regarding the growing trend for regulators and prosecutors to co-operate across borders and long-running tensions over the US's stance in seeking to extradite foreign nationals. Last week Home Secretary Theresa May announced plans to introduce a new 'forum bar', which could allow UK citizens facing extradition to present their defence in the UK. The announcement came as May also blocked the extradition of computer hacker Gary McKinnon to the US on human rights grounds.

Other highlights of the day saw Edwards Wildman Palmer partner Charles Proctor and Moody's Investors Service analyst Colin Ellis address the risks and likely outcomes of the euro crisis.

Ellis described the chances of Greece exiting the euro as 'one in three' but argued that the sheer challenge of containing the fall-out of an exit from the single currency still made it more likely that the eurozone nations would fight to keep countries in.

An interview with high-profile media silk Desmond Browne QC focused on the challenges organisations face in reacting to damaging stories and disclosures due to the speed of online publishing. He warned that companies rarely put in place procedures to deal with such incidents until they have occurred. He also counselled companies to move more quickly to deal with scandals and show "candour" at an earlier stage.

But it was clear that it is the looming shadow of prosecutors and potential cases of corporate wrong-doing that are the issues likely to keep legal and compliance professionals awake at night. A closing debate on preparing for 'unthinkable' crisis moments brought consensus that companies need to react much more quickly.

Iain Linney, a former executive director at WestLB, warned that lawyers often struggle to grasp the immediate market impact of regulatory actions or scandals that can quickly wipe billions off a company's share price. Speaking from the floor, former UBS chairman Peter Kurer agreed that general counsel struggle to perform the 'rapid deployment' function that companies need in a crisis.

But perhaps the most telling comment of the day came in a private conversation with one senior delegate who mentioned how his company had successfully fought off a probe from the US. His response when asked if US prosecutors had been constructive during their investigation was striking: "Constructive? Their attitude was: 'We are the Department of Justice and we can do whatever we f***ing want.'"