U.S. Corporate DPA Program: International Embarrassment?

In a forthcoming paper in Arizona State Law Journal, I argue two main points regarding Deferred Prosecution Agreements (DPAs) negotiated between federal prosecutors and corporations accused of misconduct: First, since the recent appellate court ruling in United States v. Fokker Services B.V.[1] (which narrowly circumscribes a court’s role in reviewing and approving DPAs), cases have begun to arise in which district courts express strong misgivings about having to approve DPAs they would otherwise reject as overly-lenient. Second, numerous countries around the world—including Australia, Canada, France, Ireland, Singapore, and the United Kingdom—appear to be rejecting U.S.-style corporate DPAs as they work to build DPA programs ensuring comparatively greater levels of transparency, judicial oversight, and public interest accountability.

Consider the following recent cases in which district courts approved DPAs despite serious concerns regarding the fairness and reasonableness of those agreements:

  • Fokker DPA: In this case, the defendant was charged with violating the International Emergency Economic Powers Act. The district court rejected the DPA agreement and said it was “grossly disproportionate to the gravity” of the offending behavior,[2] concluding: “[I]t would undermine the public’s confidence in the administration of justice and promote disrespect for the law for it to see a defendant prosecuted so anemically for engaging in such egregious conduct for such a sustained period of time….”[3] The appellate court ruled that the district court had transgressed its authority in reviewing the terms of the agreement and remanded the case back to the district court,[4] which thereupon immediately approved the DPA.
  • S. Bancorp DPA: In this case, the defendant was charged with violating the Bank Secrecy Act. The court said it was “likely…that a consequence of the [DPA] is that individuals who committed the felonies on behalf of the bank…[will] walk away….”[5] The court said that “both the interests of deterrence and the interests of just punishment are better served in all or most cases by prosecution of the individuals responsible” and that “[i]f you really want to deter, the way to do it is to make the individuals pay the price for the crimes.”[6] In the end, the district court yielded to the precedent set forth by the Fokker appellate court and approved the DPA, stating: “I have absolutely no choice in this matter, no discretion whatsoever….I’m obliged to swallow the pill, whether I like it or not.”[7]
  • TLI DPA: In this case, transportation company Transport Logistics International (“TLI”) was charged with conspiracy to violate the Foreign Corrupt Practices Act.[8] The court reviewing the DPA noted that the company failed to self-report the violations and that the agreement required a penalty of less than 10 percent of the amount recommended by the U.S. Sentencing Guidelines, concluding: “[T]here is a risk that a DPA under these circumstances will provide insufficient deterrence to companies which otherwise would permit fraud, or fail to prevent fraud, by its senior officials in the future.”[9] Despite this apprehension, the court concluded it nevertheless “must” approve the DPA based on the standard set forth in the Fokker appellate ruling.[10]

The courts in the above matters appear to have been hamstrung by the Fokker appellate court ruling, which severely circumscribes a court’s role in the DPA approval process. Specifically, the D.C. Circuit held that a district court’s role is limited to “assur[ing] that the DPA in fact is geared to enabling the defendant to demonstrate compliance with the law and is not instead a pretext intended merely to evade the Speedy Trial Act’s time constraints.”[11] Therefore, said Fokker, a court that reviews a DPA must “confine[ ] its inquiry to examining whether the DPA served the purpose of allowing [the defendant] to demonstrate its good conduct.”[12] The practical impact of the ruling is clear: A court cannot reject a DPA due to disagreement with its substantive terms—e.g., a court cannot reject a DPA merely because it believes the agreement is too lenient. In effect, DPAs must be approved without meaningful judicial review. Compare this with plea bargains, where a court can reject an agreement if it “believes that the bargain is too lenient, or otherwise not in the public interest.”[13] Why is this vital review process—a process mandated for settlement agreements, consent decrees, and plea bargains—not also required for DPAs?

Countries worldwide are now implementing their own versions of corporate DPAs, and many of those countries are mandating meaningful judicial review: In Australia, an “approving officer” who is a former judicial officer of a federal, State, or Territory court will approve a DPA only if he or she believes its terms are “in the interests of justice” and are “fair, reasonable and proportionate.”[14] In Canada, a DPA (called a ‘Remediation Agreement’) will be approved only if a court finds the agreement to be “in the public interest” as well as “fair, reasonable, and proportionate to the gravity of the offence.”[15] In France, the law includes the public interest judicial agreement (convention judiciaire d’intérêt public), a tool closely resembling DPAs.[16] The agreements must be presented at a public hearing, reviewed and approved by a court, and published on the French Anticorruption Agency’s website.[17]

Likewise, in Ireland, a national law reform commission issued a report criticizing the lack of judicial oversight for U.S. DPAs and concluded, “The UK’s statutory system, in which judicial oversight is an integral part of the [DPA] process…would appear a preferable model.”[18] The Law Society of Ireland (the regulatory body for Ireland’s solicitors) said that it, too, favored the U.K. model over the U.S. model, adding, “Judicial and executive oversight is crucial.”[19] In Singapore, a DPA will be approved only if a court finds the agreement to be “in the interests of justice” and its terms to be “fair, reasonable and proportionate.”[20] And in the United Kingdom, DPAs must be approved through a preliminary and then a final hearing process—and in both processes the prosecutor must apply to the Crown Court for a declaration that the agreement “is likely to be in the interests of justice” and that the proposed terms of the agreement “are fair, reasonable and proportionate.”[21]

Given this situation, we might do well to heed the call of Judge Rosemary S. Pooler of the United States Court of Appeals for the Second Circuit, who suggests it is “…time for Congress to consider implementing legislation providing for [meaningful court oversight of DPAs].”[22] My paper goes into great detail regarding how such oversight might look given various interests and concerns at play. Failing to address DPA rule-of-law and separation-of-power shortcomings either through court decisions or through congressional action will continue to undermine respect for U.S. law—both at home and abroad.

ENDNOTES

[1] United States v. Fokker Services B.V., 79 F. Supp. 3d 160 (D.D.C. 2015), vacated, 818 F.3d 733 (D.C. Cir. 2016).

[2] 79 F. Supp. 3d 160, 167 (D.D.C. 2015).

[3] Id.

[4] 818 F.3d 733, 742 (D.C. Cir. 2016).

[5] Arraignment 8, United States v. U.S. Bancorp, No. 18-cr-150 (S.D.N.Y. Feb. 22, 2018), ECF No. 9.

[6] Id. at 9.

[7] Id. at 10.

[8] Transport Logistics International Inc. Agrees to Pay $2 Million Penalty to Resolve Foreign Bribery Case, U.S. Department of Justice Press Release, March 13, 2018.

[9] United States v. Transport Logistics International, Inc., Order Approving Deferred Prosecution Agreement, United States District Court of the District of Maryland, April 2, 2018.

[10] United States v. Transport Logistics Int’l, Inc., No. 18-CR-00011, at *3 (D. Md. Apr. 2, 2018).

[11] 818 F.3d at 744.

[12] Id. at 747.

[13] See United States v. Miller, 722 F.2d 562, 563 (9th Cir. 1983) (interpreting Fed. R. Crim P. 11).

[14] Crimes Legislation Amendment Bill 2017 (Cth) sch 2 pt 3, §§ 17G cl 2, 17D cl 4(a, b) (Austl.).

[15] See Budget Implementation Act, 2018, No. 1, S.C. 2018, c 12, §§ 715.37(6)(b, c) (Can.).

[16] See Loi 2016-1691 du 9 décembre 2016 relative à la transparence, à la lutte contre la corruption et à la modernisation de la vie économique [Law 2016-1691 of December 9, 2016 relating to the Transparency, the Fight Against the Corruption and the Modernization of the Economic Life], Journal Officiel de la République Française [J.O.] [Official Gazette of France], Dec. 10, 2016.

[17] Id. art. 22.

[18] Law Reform Comm’n, Issues Paper: Regulatory Enforcement and Corporate Offences (2016) (Ir.), at 38.

[19] Law Society Submission: Response to Law Reform Commission’s Issues Paper on: Regulatory Enforcement and Corporate Offences 7 (2016) (Ir.).

[20] Criminal Justice Reform Act (Bill No. 14/2018) § 35 (Sing.) (amending Chapter 68 of the Criminal Procedure Code).

[21] Crime and Courts Act 2013, c. 22, §§ 7(1), 8(1), sch. 17.

[22] United States v. HSBC Bank USA, 863 F.3d 125, 143 (2d Cir. 2017).

This post comes to us from Peter Reilly, an associate professor at Texas A&M University School of Law. It is based on his forthcoming paper in Arizona State Law Journal, “Sweetheart Deals, Deferred Prosecution, and Making a Mockery of the Criminal Justice System: U.S. Corporate DPAs Rejected on Many Fronts,” available here.