Federal Judges and Corporate Settlement Agreements
FCPA commentators frequently characterize the Department of Justice as the investigator, prosecutor, judge and jury when it comes to corporate FCPA investigations and settlements. Given the fact that few corporations, if any, are willing to take a criminal FCPA case to trial, companies often have only one chance to argue and vindicate their interests – at the Department of Justice.
The role of federal judges in handling FCPA settlements and other criminal and civil resolutions may be changing. In some cases, the Justice Department does not even involve the courts – when it agrees to a Non-Prosecution Agreement along with a penalty and detailed complaince agreements.
In the last few years, several federal judges, if given the opportunity have been exercising some judicial oversight. Judge Leon in the District of Columbia has taken some hard looks at a settlement involving Daimler and recently, the SEC’s settlement with IBM. In reaction, the SEC is now using administrative proceedings and resolutions to avoid filing a settlement with a federal judge who may want to revisit some of the issues in a proposed settlement.
Judge Gleeson in New York took his sweet time to approve the HSBC settlement after six months of proceedings. Judge Rakoff in the same district is notorious for tackling difficult issues and questioning corporate settlements.
Judge William Young from the District of Massachusetts joined this activist club in a decision rejecting two corporate plea agreements that contained binding sentencing recommendations. In doing so, the court proclaimed that it would rarely, if ever, accept such agreements in the future.
Judge Young urged other district courts to play a more active role in protecting the public interest when deciding whether to accept a corporation’s guilty plea. In the first case, U.S. v. Orthofix, Inc., Judge Young rejected a proposed disposition requiring Orthofix to plead guilty to obstructing a federal audit and pay a $7.7 million fine. In the second case, U.S. v. APTx Vehicle Systems, agreed to enter a plea agreement a pay a $1 million criminal fine and a $2 million civil penalty for failure to deliver on a federal contract.
Judge Young rejected the pleas from both Orthofix and APTx after concluding that the agreements did not sufficiently protect the public interest. Judge Young used the case to argue that federal judges should reject binding plea agreements and should exercise their responsibility to fashion an appropriate sentence.
Most judges routinely accept corporate plea agreements with binding sentences. Few are willing to challenge the government in resolving such cases. Only a few judges are willing to reject such agreements and re-open the issue. Federal judges have egos (or else they would not be where they are) and are increasingly uncomfortable when they are cut out of the judicial process.
Judges complain when their discretion is constrained. They hated the mandatory Federal Sentencing Guidelines before the Booker decision for that very reason. Now they are complaining about corporate settlements which contain binding sentencing terms – if the judge accepts the plea, the judge has to impose the agreed upon sentence.
Time will tell how many judges will join the cause and preserve judicial discretion.