Non-prosecution and deferred prosecution agreements have been a staple of DOJ FCPA enforcement for years. 2010 saw 15 such resolution vehicles (4 NPAs) and (11 DPAs) (see here  for the prior post) and these resolution vehicles are significantly different than a corporate entity being criminally charged or pleading guilty.
Last month, the SEC used a DPA for the first time in resolving the Tenaris FCPA enforcement action. See here  for the prior post.
This post collects what others are saying about the SEC’s first DPA, including whether resolution via such a vehicle is all that different from traditional SEC resolution procedures.
In this  publication, Shearman & Sterling noted as follows. “Prior to this settlement, the SEC had employed only two enforcement options: civil complaints seeking injunctive relief or administrative cease-and-desist orders. In both cases, even though the company could settle without admitting or denying the SEC’s allegations, the relevant adjudicator (either a judge or the Commission) necessarily made a formal finding that the company had indeed violated the law and that the injunction or order was necessary to prevent it from doing so again.” Shearman notes that “in the criminal context, DPAs and non-prosecution agreements, their slightly less formal cousins which do not involve filed charges, were first used in FCPA cases beginning in 2004” and further notes the benefits of a DPA compared to criminal charges. However, the Shearman publication states as follows. “It is not clear whether the benefits afforded by a civil DPA in a SEC enforcement action confer similar benefits. With due respect to the SEC, a civil enforcement adjudication is a much less fearsome matter than a criminal conviction. Further, although the issuance of an injunction or an order undoubtedly represents some finding of wrongdoing, since they are settled without the defendant company admitting or denying the relevant facts, they do not bar the company from contesting such facts in non-SEC proceedings. Further, they do not have the automatic collateral consequences of a criminal conviction. Thus, one must question what benefits a SEC DPA really affords.” As to the Tenaris DPA, Shearman states as follows. “Although the company was not required to pay a civil fine, the SEC has similarly forgone fines in some previous traditional settlements in the past, requiring the defendant company only to disgorge its illicit gains. Moreover, by tolling the statute of limitations, the company potentially extends its exposure and subjects itself to potential civil enforcement for a greater period of time than if it had settled the SEC matter in the traditional way. Finally, it is not clear that the company received any financial benefit from entering into a DPA as opposed to the usual consent judgment or administrative settlement. […] [T]he SEC appears to have exacted the full amount of disgorgement and interest in this matter.” The Shearman publication also contains an interesting discussion about the “concealed penalty” in the Tenaris DPA and states as follows. “The Tenaris DPA also reflects a disturbing development relating to the financial penalty, which may not be restricted to DPAs. Specifically, the SEC’s DPA with Tenaris provides that the company must “refrain from seeking or accepting a US federal or state tax credit or deduction for any monies paid pursuant to this Agreement.” Since the only monies paid related to disgorgement and prejudgment interest, this effectively precludes the company from recouping any taxes it might have paid on the profits it now has to disgorge, resulting in a hidden additional penalty.” Finally, Shearman touches upon an issue it has frequently raised in such FCPA alerts and that is the expansive jurisdictional theories frequently used by U.S. enforcement authorities to prosecute non-U.S. companies for FCPA offenses. As to Tenaris, the Shearman publication states as follows. “The Tenaris matter demonstrates the U.S. government’s continued aggressive approach to expanding the reach of the FCPA, no matter how attenuated or de minimis a non-U.S. company’s contact with the U.S. may be.”
In this  publication, Gibson Dunn observes as follows. “One question raised by this case is where the SEC draws the line between use of a DPA and an NPA. Based on comments by the Commission staff in announcing the DPA, Tenaris was a DPA candidate because of its immediate disclosure and exceptional cooperation. However, it appears not to have been an NPA candidate because of the alleged underlying violation.” Gibson Dunn asks – “the key question now is how a defendant benefits from receiving an NPA or DPA from the SEC over a traditional settled enforcement action” and states as follows. “Turning to a DPA, the defendant agrees to what appear to be remedies very similar to those historically obtained by the SEC in a settled enforcement action, but potential defendants need to consider the risks and benefits of a DPA more carefully. Optically, for a company that does not go on to violate the agreement, a DPA can be favorably described as the SEC’s decision not to take an enforcement action against the defendant. This distinction is meaningful for a defendant’s public image and reputation. […] A second potential advantage of a DPA is avoidance of the collateral consequences. Some collateral consequences, such as disclosure obligations or disqualifications from participation in the securities industry, arise from the entry of an injunction, which a DPA avoids.” Gibson Dunn further states as follows. “On the other hand, the DPA’s model is untested. One reason parties settle SEC proceedings is to avoid the collateral estoppel effect of adverse findings of fact and conclusions of law in contested litigation which an adversary may use in a claim for damages or other relief. Generally, courts have concluded that they will not impose collateral estoppel based on factual recitations contained in settled SEC enforcement actions and that settled SEC complaints or administrative orders are not evidence. Because DPAs are new, there is less precedent on how courts will view similar factual recitations.” Finally, Gibson Dunn observes that “companies considering a DPA may wish to consider confirming that their insurance carriers will not construe a DPA as an admission that could adversely affect coverage for a company and/or its directors and officers.”
In this  alert, Dewey & LeBoeuf stated as follows. “The Tenaris DPA is significant insofar as it shows the SEC’s willingness to cut a break to those companies that demonstrate “high levels of corporate accountability and cooperation” with SEC enforcement investigations. Tenaris was credited for “immediate self-reporting, thorough internal investigation, full cooperation with SEC staff, enhanced anti-corruption procedures, and enhanced training.” These great lengths allowed it to obtain a more lenient sanction than it may have otherwise received. As companies under investigation by the SEC tend to go to such lengths in order to settle rather than litigate SEC cases, it is likely that we will see more DPAs from the SEC in the future. This is especially true with respect to SEC cases involving allegations of FCPA violations, which are routinely settled rather than litigated.”
In this  alert, Debevoise & Plimpton states as follows. “… [T]he nature and circumstances of the settlement call into question how beneficial the settlement overall, and particularly the SEC’s novel form of resolution, actually was for Tenaris. The company, even by the government’s account, did everything right after discovering potentially improper conduct: It immediately and voluntarily disclosed the conduct at issue, retained outside counsel to conduct a worldwide investigation, cooperated extensively and in “real time” with the SEC and DOJ, and implemented substantial remedial measures and compliance enhancements. Yet Tenaris still had to pay millions in disgorgement and fines, adopt wide-ranging compliance requirements (including certification by all directors and members of management regarding compliance with a revised code of conduct) on top of the extensive reforms and enhancements the company had already implemented, commit to notify the DOJ during the two-year term of the NPA of any conduct by any Tenaris employee that violates U.S. federal or state criminal law or any non-U.S. fraud or anticorruption law (or even any investigation of such conduct) that comes to the attention of the company’s senior management, and, perhaps most significantly, agree not to dispute detailed accounts of the company’s conduct that include express statements that the conduct was “illegal” and “improper.” For example, although the DPA includes a pro forma recitation that Tenaris was not “admitting or denying” the SEC’s allegations, Tenaris agreed not to dispute a statement of facts that describes the payments as “illegal payments to OAO officials” and identifies those OAO employees as “‘foreign officials’ within the meaning of [the FCPA].” The SEC’s resolution of the Tenaris investigation by means of a DPA reflects the adoption by the SEC of aggressive techniques and practices employed by the DOJ in criminal matters – a trend that may continue as the SEC increases the vigor of its FCPA enforcement efforts.”
In this  alert, Foley & Lardner noted as follows. “The agreement also does not contain an injunction or an order of a court, which reduces the risk of collateral actions (securities class actions, shareholder breach of fiduciary duty actions). Undoubtedly, Tenaris’s full disclosure and cooperation played a major role in SEC’s deciding to use a deferred prosecution agreement for the first time.”
In this  alert, Bryan Cave noted as follows. “It is telling that the SEC’s first use of a DPA occurred in an investigation involving alleged violations of the Foreign Corrupt Practices Act (“FCPA”). Such investigations, which typically require reviews of detailed financial records, e-mails and other documents in numerous jurisdictions, often in languages other than English, present substantial challenges to the SEC and other authorities. In these situations, what the SEC describes as “extraordinary cooperation” on the part of a corporation has particular value.”
In this  alert, Dechert stated as follows. “It is noteworthy that the SEC chose to offer a DPA to Tenaris but an NPA to Carter’s. The SEC has offered no public explanation why it used different cooperation tools, and in fact the instructions in the SEC manual for the use of the two types of agreements are similar. The SEC press releases for both use similar language to describe the cooperation from the respective companies. One explanation for this different treatment may lie in the seriousness with which the SEC views FCPA violations. While NPAs are typically reserved for those viewed by the charging agency as witnesses with little or no criminal exposure, DPAs are often accompanied by a formal charging document, are filed with a court, and generally include a rigorous set of corrective measures that the cooperating company must undertake in order for the prosecution to remain deferred. Thus, the DPA is likely to remain a favored agreement in the FCPA context, where there will invariably be additional measures for the corporate defendant to undertake in the area of compliance and/or monitoring. Moreover, there are potentially additional adverse consequences if the DPA is violated, so it is a more rigorous enforcement tool.”
In this  alert, Cahill Gordon & Reindel note as follows. “Significantly, the DPA does not require Tenaris to make an admission of wrongdoing, or admit to a statement of facts detailing the misconduct, as is common in agreements of this type in the criminal context. Such admissions can be used against a company by criminal authorities or by private plaintiffs, neither of whom are bound by the DPA.”