I seriously doubt that many folks really know what a deferred prosecution agreement (DPA) is. That’s understandable since many have never even heard the term. But I am equally confident that chief executive officers and in-house corporate counsel are very much familiar with these agreements and exactly how they work. The U.S. Department of Justice obviously likes them since their prosecutors use them quite often. A deferred prosecution agreement is:
A voluntary alternative to adjudication in which a prosecutor agrees to grant amnesty in exchange for the defendant agreeing to fulfill certain requirements. A case of corporate fraud, for instance, might be settled by means of a deferred-prosecution agreement in which the Defendant agrees to pay fines, implement corporate reforms, and fully cooperate with the investigation. Fulfillment of the specified requirements will then result in dismissal of the charges.
Since 1999, the United States Department of Justice has set forth guidelines concerning the prosecution of business organizations and corporations. The United States Attorneys’ Manual (USAM) of the Department allows consideration of non-prosecution or deferred prosecution of corporate criminal offenses because of collateral consequences and discusses plea agreements, deferred prosecution agreements, and non-prosecution agreements in general.
As I understand it, under the U.S. Sentencing Guidelines, a deferred prosecution in the past will not count toward a Defendant’s criminal history if there was no finding of guilt by a court and the Defendant did not plead guilty or otherwise admit guilt in open court. This is in contrast to a deferred disposition, which typically does involve such a finding or admission.
This question is being asked by many who are familiar with the process, “Do deferred and non-prosecution agreements deter criminal wrongdoing?” Many knowledgeable people say no. But, in the past, the Justice Department has answered that query with a resounding yes. In December 2012, the Department claimed:
One of the best sources of anecdotal evidence demonstrating that deferred and non-prosecution agreements have a deterrent effect comes from the companies themselves. The companies against which DPAs and NPAs have been brought have often undergone dramatic changes. For instance, prior to or following the entry of DPAs or NPAs, many companies have terminated personnel, including senior managers, established new codes of conduct and compliance policies and procedures, pledged not to use third-party agents, withdrawn from bids tainted by corruption, provided new and substantial resources to compliance and audit functions within their organizations, and instituted new training regimes.
These companies, through their remediation efforts under DPAs and NPAs, have often fundamentally changed how they conduct business. In addition, just like with individuals on parole or probation, the monitor provisions or self-reporting requirements of DPAs and NPAs are designed to deter future misconduct and, at the same time, ensure that companies meet their obligations. In meetings with board members, chief executive officers, chief financial officers, general counsel, and chief compliance officers, DOJ and SEC have heard directly from these senior leaders about the impact DPAs and NPAs have had on their companies for the better.
There are numerous examples where corporations were caught and were guilty of breaking a criminal law, and those corporations would enter into a DPA, would not admit guilt, pay a fine and agree to certain conditions designed to prohibit future problems. Many of these very same corporations subsequently violate the conditions, violate criminal laws, and are caught again. Professor Mike Koehler, a law professor, gives two examples to counter the Justice Department’s argument. The first involves the following:
In 2008, the Department of Justice announced that Aibel Group Ltd. pled guilty to violating the anti-bribery provisions of the Foreign Corrupt Practices Act (FCPA). Aibel Group admitted that it was not in compliance with a deferred prosecution agreement it had entered into with the Justice Department in February 2007 regarding the same underlying conduct. This is the third time since July 2004 that entities affiliated with Aibel Group have pleaded guilty to violating the FCPA.
Example two is the case of Ingersoll-Rand. Fresh off its exit of a deferred prosecution in 2011, the company soon disclosed that it found other potential violations of the FCPA. In a 2011 filing, the company stated as follows:
We have reported to the DOJ and SEC certain matters which raise potential issues under the FCPA and other applicable anti-corruption laws, including matters which were reported during the past year. We have conducted, and continue to conduct, investigations and have had preliminary discussions with respect to these matters with the SEC and DOJ, which are ongoing.
So the question remains, do deferred and non-prosecution agreements actually deter criminal activity in Corporate America? Have those arguments really slowed such activity down? What do you think?
Source: Corporate Crime Reporter
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