July 2, 2009
Beazer Homes Deferred Prosecution Agreement
Beazer Homes USA, Inc. entered into a deferred prosecution agreement with the US Attorney's Office for the Western District of North Carolina. The company issued the following release for investors (see here). The agreement calls for an immediate payment of 10 million dollars in restitution (actually 7.5 million since it already paid 2.5 to North Carolina victims), with additional funds down the road. Additional payments to the FHA include an immediate payment of 4 million.
It is good to see that this agreement does not explicitly include a waiver of attorney client privilege. But there are two provisions in this agreement that cause concern. First is a statement that says that "BEAZER expressly agrees that it shall not, through its present or future attorneys, board of directors, officers, or any other person authorized to speak for the company, make any public statement, in litigation or otherwise, contradicting BEAZER'S acceptance of responsibility set forth above or the factual allegations in the criminal information filed in conjunction with this Agreement, except insofar as BEAZER contests the applicability of the factual allegations in the criminal information and/or this Agreement to a specific private civil litigant or class of litigants...." It later states that "[t]he decision of whether any public statement by any such person contradicting a fact contained in the criminal information will be imputed to BEAZER for the purpose of determining whether BEAZER has breached this Agreement shall be in the sole discretion of the United States." (emphasis added)
A second concern with this agreement also pertains to who has the authority to determine a breach of the agreement. The Agreement states "BEAZER agrees that the decision whether conduct and/or statements of any individual will be imputed to BEAZER for the purpose of determining whether BEAZER has knowingly, intentionally and materially violated any provision of this Agreement shall be in the sole discretion of the United States." (emphasis added) And later the same issue, "It is further agreed that in the event that the United States, in its sole discretion, determines that BEAZER has materially breached or violated any provision of this Agreement...." (emphasis added).
It's good to see DOJ no longer seeking a waiver of attorney-client privilege, but they also need to pay closer attention to contracts and provide a fairer agreement if there is a breach by a party to the agreement. A neutral party, as opposed to one of the parties to the agreement, should be making this call. See Candace Zierdt & Ellen S Podgor, Corporate Deferred Prosecutions Through the Looking Glass of Contract Policing
For discussion of the deferred prosecution agreement, see also Harry R. Weber, Houston Chronicle (AP), Charges filed against Beazer; Settlement reached ; Reuters, Beazer Homes agrees to settle mortgage fraud case; Wallace Witkowski, Marketwatch WSJ, Beazer settles with North Carolina, feds.
Beazer Settlement - Download BEAZER SETTLEMENT
Bill of Information - Download Bill of Info
Deferred Prosecution Agreement - Download Deferred Prosecution
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Actually, I think these provisions are rather common in DPAs. It's a rare instance where the company is permitted to later deny the factual allegations set forth in the DPA or related accusatory instrument.
Posted by: James Keneally | Jul 9, 2009 7:25:23 AM