Nearly a quarter of all merger and acquisition deals in Britain show signs of irregular share trading activity just before they are announced. It looks as if the UK is suffering from an alarming level of insider activity. This is not victimless crime: it robs shareholders of profits and can cause otherwise sound deals to collapse, destroying value and possibly putting jobs at risk.

If London is to retain its reputation as the leading global financial centre, the Financial Services Authority must crack down on this illegal activity. This is easier said than done, as all too often it has proved too difficult to catch the culprits and, even when identified, too complicated to obtain a successful prosecution.

To combat the problem, the Attorney-General is considering importing a mechanism from the US that has proved useful in securing a better conviction rate – plea bargaining. But the idea has prompted a mixed response, with those hostile to it claiming that it promotes back-room deals between hard-charging prosecutors who get illiterate defendants to admit to crimes that they did not commit.

In America, plea bargaining is not restricted to financial crimes and more than 95 per cent of federal criminal cases are resolved through guilty pleas. This benefits society in three ways – by being efficient, transparent and fair. Few would doubt the system’s efficiency – a guilty plea speeds up the judicial process and cuts costs – but that on its own is not a sound enough argument in favour. It is also imperative that the system is fair.

Important safeguards include legal representation at every stage, even before a plea is registered, and guidance on sentencing to help to ensure that defendants make an informed and voluntary decision.

Federal judges determine whether there is a factual basis for a guilty plea and they do this in open court where the defendant is placed under oath and asked to describe what he did to make him plead guilty. Judges also ensure that the defendant is aware that a guilty plea will mean that he forfeits his right to a trial and that he knows the full range of penalties he faces upon conviction. If judges do not like what they hear, they can reject the plea. Indeed, at no time is the court required to accept a guilty plea simply because the parties want to resolve the case short of trial.

In addition, before the plea is agreed, a defendant discusses with his attorney the charges and the evidence against him. The parties negotiate written plea agreements so that the terms are clear and in black and white. Under the protection of written contracts (known as proffer letters) defendants offer cooperation. Provided that the defendant is truthful, these discussions are inadmissible should the case go to trial. The caveat ensures that a defendant benefits only from cooperation that is truthful and complete and anyone who changes his story risks indictment for perjury or impeachment at trial.

Going to trial costs money and time, especially where complicated cases are concerned. In Britain, estimates range from £2 million to £3 million for each trial undertaken by the Serious Fraud Office (SFO). If the process can be resolved expeditiously, the families and careers of those defendants who will contest charges can be spared lining up for their day in court.

Plea bargaining can also go a long way towards eliminating last-minute changes of plea to guilty, again wasting scarce resources. The National Audit Office has put the annual cost of cracked trials at £29 million. As for speeding up the process, as time passes the likelihood that witnesses will remember the events, let alone stay in locations where they can be found, diminished dramatically. Thus, justice delayed can be justice denied.

Such waste is causing frustration within the UK’s legal system and a fairly recent survey by the Sentencing Advisory Panel found that 76 per cent of the respondents endorsed reduced sentences for guilty pleas specifically to save time and money.

But plea bargaining is not just about the defendant and saving the State money. In the US it also offers benefits to the victims of the crime. First, victims provide their perspectives throughout the investigation and during the plea negotiations, keeping them at the heart of the process. In addition, they are spared the often daunting prospect of testifying.

Society can also benefit because a system that encourages the cooperation of defendants helps to build insight into, and understanding of, how a crime occurs. This permits society to guard against such acts in the future. The trial of Lord Black of Crossharbour is a perfect example of this as David Radler’s testimony – given in exchange for a guilty plea and a reduced sentence – has been pivotal to the prosecution in building its case against Conrad Black. Radley has bargained his sentence down from life, or 60 years behind bars, to 29 months’ jail and a $250,000 fine.

But plea bargaining, even with these safeguards, can work only if defendants believe that they will be found guilty. Why would they agree to a guilty plea if they think that at trial the prosecution will fail to secure a conviction? And should they be convicted, the sentence needs to be sufficiently high. The defendant who faces SFO charges knowing that he will face an average sentence of three years, which may amount to little more than one and a half years in jail, may be willing to roll the dice. At the very least, purporting to want a trial will buy the defendant time, as complex trials typically involve extensive discovery and pretrial motions.

The US system is not foolproof, but its record for securing convictions, which act as a deterrent to others as well as a punishment to the guilty, is far better than the system that exists in the UK. Surely it is time to consider taking the best bits and adapting them for the British judicial system?

The author is senior consultant in the corporate investigations division of Control Risks Group; and a former deputy general counsel of the FBI and former federal prosecutor

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