Non-prosecution agreements (NPAs) and deferred prosecution agreements (DPAs) are the predominate way in which the DOJ resolves Foreign Corrupt Practices Act enforcement actions against business organizations. Indeed, as highlighted in this prior post, since 2010 86% of corporate DOJ enforcement actions have involved either an NPA or DPA.
NPAs and DPAs of course are used in other areas as well – which makes this recent opinion by U.S. District Court Judge Richard Leon (D.D.C.) of interest. The action, U.S. v. Fokker Services, involved criminal charges against Fokker to unlawfully export U.S. origin goods and Services to Iran, Sudan, and Burma. In resolving the case, the DOJ and Fokker agreed to an 18 month DPA in which the company agreed to forfeit $10.5 million and to pay an additional $10.5 million in a parallel civil settlement.
No so fast, Judge Leon said in rejecting the DPA. The analysis section of Judge Leon’s opinion states, in pertinent part, as follows (internal citations omitted).
“Both of the parties argue, not surprisingly, that the Court’s role is extremely limited in these circumstances. They essentially request the Court to serve as a rubber stamp […]. Unfortunately for the parties, the Court’s role is not quite so restricted.
“One of the purposes of the Court’s supervisory powers, of course, is to protect the integrity of the judicial process.”
[T]he government has charged Fokker Services with criminal activity. And it does not propose to dismiss the case at this point; rather, under the proposed resolution, this criminal case would remain on this Court’s docket for the duration of the agreement’s term.
The parties are, in essence, requesting the Court to lend its judicial imprimatur to their DPA. In effect, the Court itself would ‘become an instrument of law enforcement. The parties also seek to retain the possibility of using the full range of the Court’s power in the future should Fokker Services fail to comply with the agreed upon terms. To put it bluntly, the Court is thus being asked to serve as the leverage over the head of the company.
When, as here, the mechanism chosen by the parties to resolve charged criminal activity requires Court approval, it is the Court’s duty to consider carefully whether that approval should be given.
I do not undertake this review lightly. I am well aware, and agree completely, that our supervisory powers are to exercised ‘sparingly, and I fully recognize that this is not a typical case for the use of such powers. The defendant has signed onto the DPA and is not seeking redress for an impropriety it has identified. But the Court must consider the public as well as the defendant. After all, the integrity of judicial proceedings would be compromised by giving the Court’s stamp of approval to either overly-lenient prosecutorial action, or overly-zealous prosecutorial conduct.”
After reviewing various specifics of the Fokker action and resolution (including by noting that “under the DPA no individuals are being prosecuted for their conduct at issue here”), Judge Leon stated:
“While I do not discount Fokker Services’ cooperation and voluntary disclosure or, for that matter, its precarious financial situation, after looking at the DPA in its totality, I cannot help but conclude that the DPA presented here is grossly disproportionate to the gravity of Fokker Services’ conduct … In my judgment, it 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 and for the benefit of one of our country’s worst enemies. […] As such, the Court concludes that this agreement does not constitute an appropriate exercise of prosecutorial discretion and I cannot approve it in its current form.”
As referenced in Judge Leon’s opinion, his analysis was very similar to that of Judge John Gleeson (E.D.N.Y) who faced as similar issue in U.S. v. HSBC Bank (see here for the July 2013 post in which Judge Gleeson ultimately approved the DPA in that case).
However, Judge Leon’s opinion contains the following concerning statement similar to Judge Gleeson’s prior ruling.
“The Government, of course, has the clear authority not to prosecute a case. Indeed, this Court would have no role here if the Government has chosen not to charge Fokker Services with any criminal conduct – even if such a decision was the result of a non-prosecution agreement.”
Such an observation elevates form over substance and gives the DOJ a green light – indeed a further incentive – to use NPAs to resolve alleged instances of corporate criminal liability and thereby bypass the judicial system altogether and insulate its enforcement theories from judicial scrutiny.
At the very least, Judge Leon’s recent order, along with Judge Gleeson’s 2013 order, has started an important legal and policy conversation as to the judiciary’s role in the alternate reality that the DOJ has created and championed through its use of alternative resolution vehicles.
Use of alternative resolution vehicles to resolve alleged corporate criminal liability in the FCPA context presents two distinct, yet equally problematic, legal and public policy issues.
The first is that such vehicles, because they do not result in any actual charges filed against a company – and thus do not require the company to plead guilty to any charges – allow egregious instances of corporate conduct to be resolved too lightly without adequate sanctions and without achieving maximum deterrence.
The second is that such vehicles, because of the same factors discussed above, nudge companies to agree to the vehicles for reasons of risk-aversion and efficiency and not necessarily because the conduct at issue actually violates the FCPA.
While the two instances of judicial scrutiny of DPAs have focused on the first dynamic rather than the second, Judge Leon did nevertheless state:
“[I]he integrity of judicial proceedings would be compromised by giving the Court’s stamp of approval to either overly-lenient prosecutorial action, or overly-zealous prosecutorial conduct.”