Thursday, January 14, 2010
The SEC has instituted a new initiative to provide for greater cooperation in hopes of encouraging individuals to assist in bringing to light improper activities. (see SEC Press Release) And cooperators may obtain a benefit of immunity in return for their cooperation (see Marketplace here). The framework for this cooperation can be found here. Some concerns -
- What if you are the last person in the chain and there is no one left to offer cooperation against - is it fair for cooperation to be a race to the SEC office? Will individuals with more resources be the ones to receive the most benefits, while poorer folks are left to suffer the consequences of others cooperating?
- It is clear that the SEC gives itself enormous discretion in deciding the value of the individual's cooperation. The four factors listed as the outline for determining "whether, how much, and in what manner to credit cooperation by individuals" sound wonderful, but the outline is clearly subject to many different interpretations. For example, will everyone be in agreement as to "[w]hether the individual's cooperation resulted in substantial assistance to the Investigation?" Also, the SEC will be determining if the person acted with scienter. Will those who could suffer consequences of an SEC action agree with the determination that is made?
- And what if the individual disagrees with the level of cooperation determined by the SEC, is there any place to obtain review? The rules explicitly state that it does not "create or recognize any legally enforceable rights for any person."
- Does this really go beyond the powers that the SEC presently has now? If cooperation is offered, couldn't they now decide not proceed against someone? Is this new initiative offered for a symbolic purpose?
- If there is a real incentive offered will it result in the possibility of misinformation being relayed to the SEC by those who desire to obtain immunity. How will the SEC handle cooperators who lie to save themselves from the consequences that they can face for their illegal activities?
- Until such time as a neutral third party enters this picture to evaluate the cooperation, it certainly seems like this "new" approach is vague and perhaps just more of the same.
- The real question is not whether the SEC will receive information on improprieties, but rather will they do something about it when the information is received. Would this situation have brought the Madoff case to light sooner, or was Madoff brought to their attention but they failed to follow up.
For more commentary on other aspects of the SEC announcement, like the use of deferred prosecution agreements, see Mike Koehler, FCPA Blog, Game-Changing" Day at the SEC
Sunday, January 3, 2010
DOJ Press Release, UTstarcom Inc. Agrees to Pay $1.5 Million Penalty for Acts of Foreign Bribery in China states:
"UTStarcom Inc. (UTSI) has entered into an agreement with the Department of Justice, agreeing to pay a $1.5 million fine for violations of the Foreign Corrupt Practices Act (FCPA) by providing travel and other things of value to foreign officials, specifically employees at state-owned telecommunications firms in the People’s Republic of China."
"In a related matter, UTSI reached a settlement today with the U.S. Securities and Exchange Commission under which it agreed to pay an additional $1.5 million penalty and satisfy additional obligations for a period of four years."
See also David Barboza, NYTimes, Telecom Company to Pay $3 Million in China Bribe Case
Wednesday, September 2, 2009
Associate AG Perrelli states at the Pfizer Settlement Press Conference:
"today’s settlement reflects the Department of Justice working hard to protect American taxpayer dollars. This case is a great example of the Department’s commitment to fiscal accountability, combating fraud, and returning much-needed dollars back to the U.S. Treasury and state treasuries."
It is good to know that in these days of fiscal downturn, money is being obtained from a company that engaged in conduct disapproved by DOJ. (see here for background) But wouldn't it have been better if the wrongdoing had not occurred in the first place. I have to wonder what the government is doing pro-actively as opposed to re-actively to assure corporate compliance. Perhaps more dollars need to to be spent on "Educating Compliance" My forthcoming article, "Educating Compliance" to be published in Georgetown's American Criminal Law Review can be found here.
Saturday, August 15, 2009
UBS entered into a deferred prosecution agreement with the government (see here). The agreement included that UBS would provide the U.S. government "with the identities of, and account information for, certain United States customers of UBS’s cross-border business." Things initially moved slowly as an agreement needed to be reached regarding the release of information in light of privacy laws (see here). But with these two steps apparently settled according to press reports, it is not surprising to see an individual reaching a plea agreement with the government for failure to disclose UBS Swiss bank accounts to the IRS. A DOJ Press Release reports that this individual "admitted that he failed to pay at least $200,000 in federal income taxes and that he now owes the government interest and penalties."
One has to wonder if the government action of proceeding against individuals with Swiss accounts that were not properly reported to the IRS, will assist the US economy. Eileen C. Mayer, Chief of IRS-Criminal Investigation, called this prosecution "the tip of the iceberg."
Thursday, July 2, 2009
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
Tuesday, May 12, 2009
A DOJ Press Releasereports on a deferred prosecution agreement entered into by "Novo Nordisk A/S (Novo), a Danish corporation based in Bagsvaerd, Denmark." The agreement calls for the company to pay a penalty of "$9 million penalty for illegal kickbacks paid to the former Iraqi government." This case is part of the DOJ's investigation "into the UN Oil-for-Food program." The DOJ filed "one count of conspiracy to commit wire fraud and to violate the books and records provisions of the Foreign Corrupt Practices Act (FCPA)." The DOJ Press Release states:
"According to the agreement and the information filed today, between 2001 and 2003, Novo paid approximately $1.4 million to the former Iraqi government by inflating the price of contracts by 10 percent before submitting the contracts to the United Nations for approval and concealed from the United Nations the fact that the price contained a kickback to the former Iraqi government. Novo also admitted it inaccurately recorded the kickback payments as "commissions" in its books and records."
Monday, May 11, 2009
Back in October 2007, WellCare Health Plans, Inc. in Tampa was the subject of a search by government agents. (see here and here) Last week, the company entered into a deferred prosecution agreement. (see Bloomberg here). A DOJ Press Release outlines the obligations of WellCare under this agreement. It includes "consent to the civil forfeiture of $40,000,000," "pay an additional $40,000,000 in restitution to the Florida Medicaid and healthy Kids programs," "retain and pay an independent Monitor," and as usual for deferred prosecution agreements, cooperation in investigations, in this case investigations of "Wellcare executives and employees responsible for the alleged fraudulent conduct at issue."
But like so many of the recent deferred prosecution agreements, the DOJ plays a powerful position in the company's future. In this case the U.S. Attorney's Office gets to select the "independent Monitor." And if the "Monitor resigns or is unable to serve the balance of his or her term, a successor Monitor shall be selected by the USAO. . ." Additionally, a breach of the agreement rests in the sole discretion of the prosecution, although they do give the company time to respond to claims of a breach. And "[r]egardless of whether the USAO pursues criminal charges against WellCare upon any breach of the DPA, any monies paid to the USAO at any time by WellCare will not be returned to WellCare and WellCare will make no claim upon such monies." So much for contract law. (see here)
Deferred Prosecution Agreement here.
Sunday, April 19, 2009
The threat of indictment to a corporation is huge, and one need only look at what happened to Arthur Andersen LL.P to reach this conclusion. In the aftermath of Andersen, many corporations have entered into deferred and non-prosecution agreements with the government, paying huge fines but avoiding prosecution. With their "backs against the wall" the companies agree to many controversial terms, including in some cases the waiver of the attorney-client privilege. The net result to the government is not only money, but also evidence that can be used to proceed against individuals within the company.
But how does this scenario play out in the long run. The case of U.S. v. The Williams Companies provides an interesting glance at what can happen when the attorney-client privilege is violated by the company. Williams, an opinion issued this past week by the DC Court of Appeals has the individual asking for discovery in the criminal case, and wanting the government to produce the discovery they received from the company. The problem is that the company does not want the evidence to be produced to the defendant. So the court is left to rule on "a third-party appeal of a discovery order in a criminal case compelling the government to produce 'all materials disclosed' by the third party pursuant to its cooperation with federal investigators during a criminal investigation of the third party and others." The court remands the case to the district court to assess "which documents were material to the defense."
The moral of the story is - you may think that your back is against the wall to enter into a deferred prosecution agreement, but before you agree to waive the attorney-client privilege, be aware of the long-term ramifications of this decision.
(esp) (blogging from Chicago)
Friday, April 10, 2009
A "not guilty" verdict was returned on a drug case in Miami, but what happened during the investigation and prosecution of this case has now resulted in an award of $601,795.88 under the Hyde Amendment. The Hyde Amendment allows for attorney fees when a "prevailing criminal defendant" can demonstrate "that the position the government took in prosecuting him was vexatious, frivolous, or in bad faith." (see Order, infra, citing U.S. v. Gilbert).
Hon. Alan S. Gold, in the Southern District of Florida, issued an Order awarding these attorney fees and enjoined the US Attorneys who practice in that court from "engaging in future witness tampering investigation of defense lawyers and team members in any ongoing prosecution before [this judge] without first bringing such matters to [the judge's] attention in an ex parte proceeding." The judge also issued a public reprimand against the US Attorneys office and specifically 2 AUSAs. And it does not end there, as the judge also makes it clear that a disciplinary body needs to review this matter. (Court's Order - Download 08-20112 (Shaygan) Prosecutorial Misconduct FINAL )
The judge presents a thoughtful Order that gives credit to the USA's office for taking "immediate efforts to investigate" this matter when it came to light. After all, the taping of defense counsel and a defense investigator, by government informants, does present serious concerns. The failure to disclose this material is more problematic. The judge tells of Brady, Giglio, and Jencks issues in this case.
Hon. Alan S. Gold could not have said it better when he stated,
"It is the responsibility of the United States Attorney and his senior staff to create a culture where 'win-at-any-cost' prosecution is not permitted, Indeed, such a culture must be mandated from the highest levels of the United States Department of Justice and the United States Attorney General. It is equally important that the courts of the United States must let it be known that, when substantial abuses occur, sanctions will be imposed to make the risk of non-compliance too costly."
DOJ, the enforcer against corporate misconduct and the one who requests the appointment of monitors in deferred prosecution agreements, may seem to be having its own issues. One has to give the department credit for recognizing their lack of compliance in the Stevens case and agreeing to dismiss it. Likewise one has to give the government credit in this recent Miami case, in that the DOJ stated that they "made serious mistakes in a collateral investigation that was an offshoot of this case and stands ready to pay the additional attorneys' fees and costs incurred by the defendant as a result." Clearly the new AG Holder is taking a strong position against prosecutorial misconduct and sending that clear message to those in his office, something that is wonderful to see happening. But if this were a corporation that had committed misconduct, would these acknowledgments and payment be sufficient? The deferred prosecution agreement would require monitoring, and there would be a need to assure that there was now compliance. Mind you, I am not suggesting that a monitor in another deferred prosecution agreement case, John Ashcroft, be appointed here. But the concern is that both of the cases mentioned here had attorneys who could present these claims. My concern rests with the many cases that might have similar claims of misconduct but no attorney to bring the issues to light.
Friday, February 20, 2009
Deferred prosecution agreements can have ramifications to many. A DOJ press release states that "UBS AG, Switzerland’s largest bank, has entered into a deferred prosecution agreement on charges of conspiring to defraud the United States by impeding the Internal Revenue Service (IRS), the Justice Department..." The press release further states:
"As part of the deferred prosecution agreement and in an unprecedented move, UBS, based on an order by the Swiss Financial Markets Supervisory Authority (FINMA), has agreed to immediately provide the United States government with the identities of, and account information for, certain United States customers of UBS’s cross-border business. Under the deferred prosecution agreement, UBS has also agreed to expeditiously exit the business of providing banking services to United States clients with undeclared accounts. As part of the deferred prosecution agreement, UBS has further agreed to pay $780 million in fines, penalties, interest and restitution..."
Deferred prosecution agreements can provide information to the government to proceed against individuals. It has been controversial when the agreement waived attorney client privilege, allowing the government in some cases to secure evidence against individual employees in a corporation. But this deferred prosecution could have ramifications to customers. The issue being whether their tax liabilities were properly paid.
A more recent DOJ Press Release tells more. See DOJ Press Release, United States Asks Court to Enforce Summons for UBS Swiss Bank Account Records. Here the release states that " [t]he government filed a lawsuit ... in Miami against Swiss bank UBS AG." "The lawsuit asks the court to order the international bank to disclose to the Internal Revenue Service (IRS) the identities of the bank’s U.S. customers with secret Swiss accounts. According to the lawsuit, as many as 52,000 U.S. customers hid their UBS accounts from the government in violation of the tax laws."
It sounds like some white collar and tax attorneys will be busy in the next few months.
(esp)(blogging from Louisville, Kentucky)
Addendum - Lynnley Browning, NYTimes, UBS Pressed for 52,000 Names in 2nd Inquiry
Tuesday, February 10, 2009
Check out Marketwatch, NeuroMetrix Resolves Investigation into Past Sales and Marketing Practices for the latest deferred prosecution agreement.
A press release issued by NeuroMetrix tells that "it has reached a resolution with the United States Department of Justice ("DOJ") and the Office of Inspector General ("OIG") of the United States Department of Health and Human Services regarding the previously-disclosed investigation into certain of the Company's past sales and marketing practices relating to its NC-stat System." It looks like a 3.7 million dollar price tag as "the Company has agreed to a $1.2 million payment and the DOJ has agreed not to prosecute NeuroMetrix in return for compliance with the terms of the three-year Agreement." Additionally there is a "civil Settlement Agreement with the DOJ and OIG" for 2.5 million.
Sunday, January 25, 2009
Ryan D. McConnell, Larry D. Finder, and Scott L. Mitchell provide new data regarding corporate deferred and non-prosecution agreements. It is interesting to see a decline of sixty percent in 2008 from the number of agreements in 2007. It was not surprising to see that Foreign Corrupt Practice Act agreements were seven of the sixteen agreements in 2008. This study is a wonderful compilation of who received agreements, the type of agreement, and for what activities. The article also speaks to compliance programs with a listing, by crime, of features of a DPA/NPA Compliance Program. This piece should be a must-read for in-house counsel and all attorneys working with companies on compliance programs.
The article, to be published in Corporate Counsel Review, is available on SSRN here
Sunday, January 11, 2009
Federal prosecutors are not the only ones using deferred prosecution agreements in white collar cases. In a press release, "Manhattan District Attorney Robert M. Morgenthau announced . . . a Deferred Prosecution Agreement with the British bank, Lloyds TSB Bank plc ('LLOYDS') in settlement of a 'stripping' scheme in which the Bank caused the falsification of the records of New York financial institutions and enabled its Iranian and Sudanese banking clients to access the U.S. banking system in violation of federal sanctions prohibiting such conduct. As a result, LLOYDS will pay fines and forfeiture totaling $350,000,000." The release stated that:
"Mr. Morgenthau said that today’s settlement was the result of a joint investigation undertaken by the District Attorney’s Office and the Asset Forfeiture and Money Laundering Section of the United States Department of Justice ('DOJ'). As a result of the settlement and Deferred Prosecution Agreement with both the District Attorney’s Office and DOJ, LLOYDS has agreed to adhere to best practices for international banking transparency, to cooperate with ongoing law enforcement investigations, to conduct an internal review of past transactions, and to pay the fines and forfeiture."
(esp) (blogging from San Diego) (w/ a hat tip to Karen Freifeld, Bloomberg, Lloyds TSB to Pay $350 Million to Settle Probe (Update1) )
Tuesday, December 23, 2008
Noted here was the recent Fiat deferred prosecution agreement. The FCPA Blog has the agreement, as well as comments here. Yes, this is an end-of-the-year (or as some might say, a pre-new administration) agreement in the U.N. Oil for Food investigation. The DOJ Press Release states that "Fiat S.p.A (Fiat), an Italian corporation based in Turin, Italy, has agreed to a $ 7 million penalty for illegal kickbacks paid to officials of the former Iraqi government by three of its subsidiaries." There is also a $3.6 million in civil penalties and an additional amount in disgorgement of profits.
By having a deferred prosecution agreement, the government is able to keep check of any future violations of the company. If the company complies with the agreement than the government dismisses the information against the entities charged.
This all sounds good and clearly it is a win-win situation for all parties - the government, the companies, and the general public that wishes to know that kickbacks will not occur in the future.
But there are several aspects of the agreement that raise questions here:
- The deferred prosecution agreement is yet another instance of the company selling out individuals within the company. Now clearly if these individuals are going against company policy, and acting illegally - it is deserved. But having the larger entity being able to negotiate these agreements while individuals take the fall, raises issues as to whether power is being used against the less powerful.
- The agreement states that the department "in its sole discretion" gets to determine a breach. From a contract standpoint is it proper to have a breach of the contract determined solely by one of the parties to the contract? See Zierdt & Podgor, Corporate Deferred Prosecutions Through the Looking Glass of Contract Policing, 96 Kentucky L.J., available here.
- And again (see here) we are seeing a provision that only allows the company to issue a "press release if they first determine that the text of the release is acceptable to the Department."
Wednesday, August 20, 2008
Professor Brandon L. Garrett and Jon Ashley of University of Virginia School of Law, have created a wonderful website of deferred prosecution agreements. It is here. These agreements have not always been easy to find, and having this new database will certainly assist in this process. The database also allows one the ability to sort by company, jurisdiction, and date.
Monday, June 16, 2008
A DOJ Press Release reports that the Milberg law firm will receive a non-prosecution agreement at a cost to them of $ 75 million. "The Justice Department has agreed not to pursue criminal charges against the law firm, which has agreed to employ a compliance monitor and enact “Best Practices Program” for two years." See Press Release Here - Download milberg_firm_settlement.083.pdf
Milberg's Press Release reads as follows -
"Milberg LLP announced today that federal prosecutors have agreed to dismiss all charges against the firm as part of a comprehensive settlement relating to the misconduct of certain former senior partners. The non-prosecution agreement provides that the government will promptly move to dismiss the indictment of the firm, and eliminates any plea or trial.
"Sanford Dumain, a member of the firm's Executive Committee, stated: 'We are pleased that the government specifically recognizes that none of the lawyers now at the firm was involved in any of the misconduct, and that in fact our former partners who were prosecuted were deliberately concealing their illegal activities from us. This favorable outcome now allows us to put a painful chapter behind us so that we can resume building one of the best known plaintiffs firms in the country.'
"'This settlement enables us to move forward with our continuing representation of investors and consumers in class actions and other important lawsuits, and allows us to capitalize on the tremendous talents of the lawyers at the firm,' he continued.
"The firm will make payments to the government totaling $75 million over the next five years as part of the settlement. Regarding the amount, Dumain stated: 'The firm risked having to pay forfeitures and penalties of many hundreds of millions of dollars if the criminal case against the firm had gone forward. We wanted to avoid that enormous risk, which we faced solely because of the misconduct of certain of our partners who are no longer with the firm.'
"The firm plans to make the settlement payments out of firm resources and income, and is evaluating pursuing claims against responsible parties. The firm also agreed to expand its 'best practices' compliance program, which it instituted prior to indictment.
"Dumain reiterated the firm's apology, based on the former partners' misconduct, to 'all judges, lawyers, clients and class members who deserve full and complete adherence to all legal and ethical norms. We pledge to faithfully comply with those standards as we rebuild our practice.'
"Management of the firm was taken over last year entirely by partners who were neither engaged in nor aware of the misconduct charged by the government, thereby clearing the way for the firm to expand its retention by top-tier clients and its appointment as lead or co-lead counsel in prominent cases. Recent new matters include securities cases in the fields of subprime mortgage and auction-rate obligations, and other ERISA, consumer, and antitrust cases. The firm has over 65 lawyers and 130 staff employees in New York, Los Angeles and Tampa.
"Recognizing the start of a new era for the firm, Dumain added: 'Even during our darkest times, our talented team of lawyers continued to achieve significant results for our clients. Now, with the non-prosecution agreement, we are prepared to re-affirm our position as the nation's leading class action law firm.'"
Addendum - Agreement - Download Agreement.pdf (w/ a hat tip to Peter Henning)
Friday, June 6, 2008
Who gets prosecuted, who gets a deferred prosecution agreement, and better yet - who gets a non-prosecution agreement? Prosecutorial discretion plays an enormous role in answering this question. And in many ways this is good when prosecutors are factoring in human aspects such as trying to avoid harm to innocent third parties. But many in the world would like the guidance of how to better their case to receive the least damaging result to their company when conduct within the company crosses the line.
Continuing to provide transparency to the process appears to be the best way to discern the nuances that allow for the differing results. But this can be difficult.
DOJ just announced in a press release the agreement by Faro Technologies Inc. to a non-prosecution agreement. "Faro Technologies Inc. (Faro), a public company that specializes in computerized measurement devices and software, agreed to pay a $1.1 million criminal penalty in connection with corrupt payments to Chinese government officials in violation of the Foreign Corrupt Practices Act (FCPA)." The non-prosecution agreement has a two year term and includes an agreement for an independent corporate monitor.
On its website, the company describes the resolution of this matter and also notes that "[w]ith approximately 17,000 installations and 7,600 customers globally, FARO Technologies, Inc. designs, develops, and markets portable, computerized measurement devices and software used to create digital models -- or to perform evaluations against an existing model -- for anything requiring highly detailed 3-D measurements, including part and assembly inspection, factory planning and asset documentation, as well as specialized applications ranging from surveying, recreating accident sites and crime scenes to digitally preserving historical sites." (see here)
As with so many white collar matters, there is also a parellel proceeding here. "[T]he Securities and Exchange Commission (SEC) today instituted a settled enforcement action against Faro. Faro consented to the entry of a cease and desist order and agreed to pay approximately $1.85 million in disgorgement and prejudgment interest . . ." (see also SEC here)
Tuesday, June 3, 2008
A DOJ Press Release reports that "AGA Medical Corporation (AGA), a privately-held medical device manufacturer, has agreed to pay a $2 million criminal penalty in connection with corrupt payments to Chinese government officials in violation of the Foreign Corrupt Practices Act (FCPA)." The 2 count Information filed by the government "charges AGA with one count of conspiring to make bribe payments to Chinese officials and one count of violating the FCPA in connection with the authorization of specific corrupt payments to officials in China."
Wednesday, May 21, 2008
It doesn't look like the DOJ will be suggesting to a company that a law professor receive an endowed chair as part of a deferred prosecution agreement. The change comes as a result of a recent DOJ Memo issued. (See Reisinger, Corporate Counsel, Law.com - New DOJ Policy: Just Call it the Christopher Christie Amendment). But it doesn't preclude a company from going ahead and giving the chair to the law school professor and then using that as a basis for arguing leniency at sentencing. The new guideline issued by DOJ is as follows:
Plea agreements, deferred prosecution agreements and non-prosecution agreements should not include terms requiring the defendant to pay funds to a charitable, educational, community, or other organization or individual that is not a victim of the criminal activity or is not providing services to redress the harm caused by the defendant's criminal conduct.
Such payments have sometimes been referred to as "extraordinary restitution." This is a misnomer, however, as restitution is intended to restore the victim's losses caused by the criminal conduct, not to provide funds to an unrelated third party.
Apart from the limited circumstances described below, this practice is restricted because it can create actual or perceived conflicts of interest and/or other ethical issues.
This section does not, of course, restrict a defendant's own decision, outside the context of a plea agreement, deferred prosecution agreement or a non-prosecution agreement, to unilaterally pay monies to a charitable, educational, community, or other organization or individual, and then to request leniency from the judge at sentencing based upon such action.
This section also does not restrict "community restitution" payments made pursuant to 18 U.S.C. § 3663(c). That section provides guidance for such payments where the defendant is convicted under 21 U.S.C. § 841, § 848(a), § 849, § 856, § 861 or § 863. Among other factors, that section requires the absence of identifiable victims, as well as a nexus between the payment and the offense.
Neither does this section restrict the use of community service as a condition of probation for environmental prosecutions. United States Attorneys' Offices contemplating such community service as a condition of probation in a case involving environmental crimes shall consult with the Environmental Crimes Section of the Environmental and Natural Resources Division, which has issued guidance to ensure that the community service requirements are narrowly tailored to the facts of the case. The guidance also requires that any funds paid by a defendant as part of the community service portion of a sentence be directed to an entity in which the prosecutors have no interest that could give rise to a conflict and that is legally authorized to receive funds.
There is also the continual concern that DOJ guidelines are not enforceable at law. They are merely internal guidelines. And in some cases, these guidelines are not adhered to. (See my 2004 article in the Cornell Jrl of Law and Public Policy, Department of Justice Guidelines: Balancing 'Discretionary Justice,' ).
(esp)(w/ a hat tip to Dick Cassin)
Thursday, May 15, 2008
Looking at the deferred prosecution agreement signed in the Willbros matter, two things are interesting. First is the treatment of attorney-client privileged materials and the second is the document related to the appointment of an internal monitor.
With respect to attorney client privileged material, the deferred prosecution agreement allows the government to obtain the items and penalizes the company for non-compliance. The company can give notice to the DOJ if they wish to withhold access to "information, documents, records, facilities and/or employees based upon an assertion of a valid claim of attorney-client privilege or application of the attorney work-product doctrine." But "[i]n the event that WGI and WII withhold access to the information, documents, records, facilities and/or employees of WGI and WII, the Department may consider this fact in determining whether WGI and WII have fully cooperated with the Department." Is this a determination that DOJ should have control over, and should they be allowed to obtain this attorney-client privilege material as part of a deferred prosecution agreement? And is it proper to allow one party to a contract the ability to determine if there is compliance with a term within the contract?
The Deferred Prosecution Agreement - Download willbros_deferred_agreement.pdf
The monitor gets selected by Willbros. It is subject to approval by the DOJ. This may avoid situations of a DOJ appointment of a friend or former political boss. But is this going to the other extreme by allowing the company the right to chose the person who will provide oversight? Wouldn't a better approach be to have an impartial member of the judiciary making these decisions?
The Monitor Attachment - Download attachment_d_independent_corporate_monitor.pdf
(esp) (w/ thanks to Librarian Whitney Curtis)