The US Model for Deferred and Non-Prosecution Agreements
The Obama Administration has aggressively prosecuted domestic and foreign businesses for criminal violations of a variety of criminal laws, including anti-bribery, antitrust, health care fraud, and securities fraud. Even in this environment, some critics have grumbled that prosecutors have too quickly settled such prosecutions for large fines and future promises of compliance contained in deferred prosecution (DPA) or non-prosecution agreements(NPA).
Underlying the Justice Department’s use of these tools is its desire to encourage voluntary disclosures by corporations. The Justice Department correctly recognizes that enforcement would suffer significantly without some incentive on the part of companies to come clean and bring their operations into compliance.
The distinction between a DPA and an NPA is critical — the DPA invokes the Court’s supervisory jurisdiction and requires the Justice Department to lodge a criminal information to charge the company but defer the prosecution; the NPA remains within the discretion and control of the Justice Department, the Executive Branch, and does not involve any filing with the courts.
The primary benefit of these two tools is to avoid the catastrophic consequences which can result to a public company which is indicted — the Arthur Andersen case in the early 2000s resulted in the collapse of the company, the loss of thousands of jobs and economic harm to communities around the country.
Critics of the DPAs and NPS contend that the Justice Department has not been transparent about its use of such agreements which undermines the appearance of a fair and equitable justice system.
The UK is looking at adopting some type of system to give prosecutors in the UK similar flexibility. There are different approaches which can be used in this area but it is difficult to balance two important but sometimes competing interests – prosecutorial discretion and judicial review. Prosecutors act as the Executive Branch with discretion to enforce the law. Judicial review of such discretion is circumscribed and properly so. Where the balance falls is critical. In the NPA and DPA sphere, judicial review in the US has been minimal. Corporate monitors have been loath to seek enforcement actions with the supervising judge responsible for a DPA.
But what happens when prosecutors are viewed as unfairly exercising their discretion? A good example of what can happen is the passage of the so-called Tunney Act in the 1970s in the antitrust merger arena. In response to political abuse of the merger review and settlement process, Congress enacted comprehensive requirements for judicial review of any settlement, requiring the court to solicit public comments on any proposed settlement and for the court to determine if the settlement was in the “public interest.” Judges have been criticized for injecting their own views and solutions to agreements worked out by the parties submitted for judicial review.
Congress has proposed legislation to restrict the Justice Department’s discretion when it comes to corporate monitors but it is unlikely to pass. Only if there are serious abuses of the process will there be a change in the law.
For UK policymakers, the balance between judicial review and prosecutorial discretion is one which has to be resolved before any new policy can be enacted. The US experience should be helpful to the UK debate.
The more consistent the standards for use of the tools, the terms and provisions of the tools, and the more transparent the process is, the more likely the government is to earn judicial support and avoid public and political criticism.