Friday, April 10, 2009

It's Not Just the Stevens Case - DOJ Needs A Better Compliance Program

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.


April 10, 2009 in Attorney Fees, Defense Counsel, Deferred Prosecution Agreements, Judicial Opinions, Legal Ethics, Prosecutors | Permalink | Comments (8) | TrackBack (0)

Friday, February 20, 2009

UBS - Deferred Prosecution and Ramifications

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

February 20, 2009 in Deferred Prosecution Agreements | Permalink | Comments (0) | TrackBack (0)

Tuesday, February 10, 2009

NeuroMetrix- Deferred Prosecution Agreement

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. 


February 10, 2009 in Deferred Prosecution Agreements | Permalink | Comments (0) | TrackBack (0)

Sunday, January 25, 2009

Update on Deferred and Non-Prosecution Agreements

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


January 25, 2009 in Deferred Prosecution Agreements | Permalink | Comments (0) | TrackBack (0)

Sunday, January 11, 2009

Deferred Prosecution Agreement in Lloyds TSB Bank

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) )

January 11, 2009 in Deferred Prosecution Agreements | Permalink | Comments (0) | TrackBack (0)

Tuesday, December 23, 2008

Fiat FCPA Deferred Prosecution Agreement

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."


December 23, 2008 in Deferred Prosecution Agreements | Permalink | Comments (0) | TrackBack (0)

Wednesday, August 20, 2008

Deferred Prosecution Agreements - New Website

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.


August 20, 2008 in Deferred Prosecution Agreements | Permalink | Comments (1) | TrackBack (0)

Monday, June 16, 2008

Milberg - Non Prosecution Agreement

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)

June 16, 2008 in Deferred Prosecution Agreements | Permalink | Comments (0) | TrackBack (0)

Friday, June 6, 2008

Non-Prosecution Agreement in FCPA Matter

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)


June 6, 2008 in Deferred Prosecution Agreements, FCPA | Permalink | Comments (0) | TrackBack (0)

Tuesday, June 3, 2008

AGA Medical Corp. Gets Deferred Prosecution Agreement on FCPA Matter

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." 


June 3, 2008 in Deferred Prosecution Agreements, FCPA | Permalink | Comments (0) | TrackBack (0)

Wednesday, May 21, 2008

DOJ Modifies Guidelines on Deferred Prosecution Agreements

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, - 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: 

9-16.325 Plea Agreements, Deferred Prosecution Agreements, Non-Prosecution Agreements and "Extraordinary Restitution"

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)

May 21, 2008 in Deferred Prosecution Agreements | Permalink | Comments (0) | TrackBack (0)

Thursday, May 15, 2008

More on Willbros Deferred Prosecution Agreement

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)

May 15, 2008 in Deferred Prosecution Agreements | Permalink | Comments (0) | TrackBack (0)

Wednesday, May 14, 2008

Willbros Gets Deferred Prosecution Agreement

Although there has been talk previously, it is now official that Willbros will receive a deferred prosecution agreement as a resolution of its matters with the DOJ. The DOJ's press release states that this company, a "construction, engineering and other services in the oil and gas industry, and Willbros International Inc. (Willbros International), the wholly owned subsidiary through which it conducts international operations, have agreed to pay a $22 million criminal penalty in connection with corrupt payments to Nigerian and Ecuadoran government officials in violation of the Foreign Corrupt Practices Act (FCPA)."  The government states that "[t]he six-count criminal information charges Willbros with one count of conspiring to make bribe payments to Nigerian and Ecuadoran officials, two counts of violating the FCPA in connection with the authorization of specific corrupt payments to officials in those countries and three counts of violating the FCPA by falsifying books and records relating to corrupt payments and a tax fraud scheme."

Why a deferred prosecution agreement here?  The DOJ explains that

"[i]n recognition of Willbros' thorough review of the improper payments, the companies’ exemplary cooperation, the companies’ implementation of enhanced compliance policies and procedures, and the companies’ engagement of an independent corporate monitor, the Department has agreed to defer prosecution of these companies for three years. If Willbros Group and Willbros International abide by the terms of the agreement, the Department will dismiss the criminal information when the term of the agreement ends."

Willbros now has a foreign corrupt practices act policy, and this policy was issued in October 2007. 


May 14, 2008 in Deferred Prosecution Agreements | Permalink | Comments (0) | TrackBack (0)

Wednesday, April 23, 2008

After Corporate Deferred Prosecution Agreements Come Individual Indictments

Corporations reaching deferred or non-prosecution agreements with the government, often find themselves paying money and offering cooperation in return for an agreement that will allow the company to continue its existence. From this cooperation, which in some cases includes a waiver of attorney-client privilege, comes the indictment of individuals within the company.  From the government, and sometimes the corporations perspective, these folks are the employees that failed to adhere to internal memorandum and internal regulation, and instead decide to break the law.

This week we see the aftermath of the Bristol-Myers agreement as the DOJ in a press release states "that the former senior vice president of Bristol-Myers Squibb Company (BMS) [  ] was indicted for his [alleged]role in lying to the federal government about a patent deal involving the popular blood-thinning drug, Plavix, used by heart attack, stroke and other patients."  "On June 11, 2007, BMS agreed to plead guilty and pay a $1 million criminal fine for misleading the government about the Plavix patent deal."  It is, therefore, not surprising to see an individual as opposed to a company prosecution happening here.


April 23, 2008 in Deferred Prosecution Agreements | Permalink | Comments (0) | TrackBack (0)

Wednesday, April 9, 2008

Response to NYTimes Article on Deferred Prosecution

Guest Blogger - Stephanie Martz, White Collar Crime Project Director - NACDL - writes:

I think that a lot of us are admirers of Eric Lichtblau, who after all won a well-deserved Pulitzer for his coverage of the "TSP," or whatever name the administration is currently giving it.  Therefore, I was saddened when I read -- and re-read, because I couldn't believe my eyes -- his surprisingly unsubstantiated piece on deferred prosecution agreements that appeared on A1 of the April 9 NY Times (here).

For starters, I couldn't find any, well, facts.  To start with, the headline – "Corporate Deals Replace Trials" – is not actually supported in the piece.  Neither Mr. Lichtblau nor anyone he quoted seemed to have tried to figure out whether, based on past conviction rates or even actual "trials" (which are always few and far between in the corporate context), prosecutions have actually been "replaced."  In the second paragraph, he makes the unattributed assertion that Monsanto "would have been prosecuted" in an earlier era.  Really?  Maybe, but not a very supportable assertion.  Monsanto involved a few hundred dollar bills being passed by an employee of  a subsidiary in a foreign country.  In the spirit of supposion, I feel like this case would have resulted in a CIVIL settlement with the SEC, rather than criminal charges.  And nowhere does he acknowledge that deferred prosecution agreements require that charges be filed with a U.S. District Court.  They are then dismissed IF the company complies with the terms of the DPA.

Let's continue:  "In many cases, the details are kept secret."  Really?  They can be hard to find because DOJ hasn't compiled them or made them available anywhere.  But two law review authors in the last 6 months alone have gathered more than 80 of them and analyzed them.  I'm not sure why Mr. Lichtblau didn't interview them, since they are the actual experts in this area. (McConnell/Finder piece and Joe Warin's piece).

Mr. Lichtblau also quotes a former prosecutor, apparently without asking  that person for supporting information, as saying that the DPA fines are "peanuts" compared to fines imposed by a criminal conviction.  Really?  Has Mr. Lichtblau actually looked at these agreements?  I think that Purdue Pharmaceuticals, Reliant Energy, and Vetco would disagree.  Again, the actual facts do not bear this out.  Around 85% of companies that are actually sentenced in federal court pursuant to plea OR trial are small, privately held companies that would be ruined by multi-million dollar fines.  We don't even have a good "set" to compare with the big publicly traded companies that are doing these DPAs.  I might add that if "peanuts" means that companies get to live but pay tons of money to the government under DPAs or die under indictment, I think "peanuts" might be in the public interest.

In short, I suspect that an accurate assessment of DPAs would indicate that they are representative of more, rather than less, government oversight of companies; or at least a shifting focus at DOJ from prosecution to reform, which traditionally has been the bailiwick of the SEC.  Even if that proves to be untrue, any conclusion should be based on facts rather than unfounded speculation. Don't you think?


April 9, 2008 in Deferred Prosecution Agreements | Permalink | Comments (1) | TrackBack (0)

Monday, March 24, 2008

Deferred Prosecution in AB Volvo, et. al

The fact that AB Volvo entered into a deferred prosecution agreement was previously discussed here. Based upon this agreement it seems unlikely that there will be a company statement, at least one that has not first been vetted through the DOJ.  The deferred prosecution agreement in paragraph 14 states:

"14. Statements to the Media:  In connection with this Agreement, AB Volvo, Renault Trucks and VCE shall only issue a press release if they first determine that the text of the release is acceptable to the Department."

And it further looks like some of the terms of the agreement seriously diminish the attorney-client privilege rights. The Department reserved the right to ask for attorney-client privileged material.  And yes, the company can withhold them, but -

iii.   In the event that AB Volvo, Renault Trucks and VCE withhold access to the information, documents, records, facilities and/or employees, the Department may consider this fact in determining whether AB Volvo, Renault Trucks and VCE has fully cooperated with the Department."

And breaches of the agreement, it looks like the Department gets to decide that also, and the company loses some of their statute of limitation rights.   To view a copy of the agreement, see here -

Download newcomb_doc.pdf

If you find this agreement problematic from a contracts perspective, you'll probably be interested in this article by Professor Candace Zierdt (Stetson) and myself here.

(esp) (w/ a Stetson thank you to Librarian Whitney Curtis).

March 24, 2008 in Deferred Prosecution Agreements | Permalink | Comments (0) | TrackBack (0)

Alcoa Investigation

Glenn R. Simpson, of the Wall Street Journal, has an article this morning titled, "U.S. Opens Alcoa Bribery Probe." Alcoa, a global company, clearly has internal rules related to the giving and taking of company gifts. For example, one finds this one on the company website:

"Gifts, favors and entertainment may be given at company expense or accepted by directors, officers or employees from a competitor or an individual or firm doing or seeking to do business with the company only if they meet all of the following criteria:

  1. they are consistent with customary business practices and do not violate applicable law or ethical standards;
  2. they are not excessive in value;
  3. they cannot be construed as a bribe, payoff or improper inducement; and
  4. public disclosure of the facts would not embarrass the company or the director, officer or employee.

Payments or gifts of cash (or of cash equivalents such as stocks or commodities) to or from a competitor or an individual or firm doing or seeking to do business with the company are never permitted and may not be solicited, offered, made or accepted by directors, officers or employees"

Although a big believer in the presumption of innocence, one has to wonder what could happen if this investigation turns up a bribe to a foreign official.  The Foreign Corrupt Practices Act is easily explained in this DOJ Layperson's Guide discussed here.  But one notices in looking at the results of a good number of cases (see here) against companies, that if the DOJ does decide to proceed, there is little likelihood of a trial. When a company is involved, the matter tends to end with a payment of a fine and in some cases a deferred prosecution agreement. In a post-Arthur Andersen world, this is easily explained as the cost of fighting can be a death sentence to a company. If the government does find something here, one has to wonder if this will be the result. But, on the other hand, if there is nothing to this investigation - it is hoped that the press received will not hurt the company.


March 24, 2008 in Deferred Prosecution Agreements, FCPA, Investigations | Permalink | Comments (0) | TrackBack (0)

Friday, March 21, 2008

AB Volvo Gets a Deferred Prosecution Agreement

A DOJ Press Release states that "AB Volvo has agreed to pay a $7 million penalty as part of an agreement with the U.S. Department of Justice regarding charges brought in connection with an ongoing investigation related to the U.N. Oil for Food program." The release describes the breadth of the investigation in stating:

"The Department of Justice today filed an agreement with AB Volvo, as well as criminal informations against AB Volvo subsidiaries, Renault Trucks SAS (Renault Trucks) and Volvo Construction Equipment AB (VCE), in the U.S. District Court for the District of Columbia. The informations charge that Renault Trucks and VCE engaged in separate conspiracies to commit wire fraud and to violate the books and records provisions of the Foreign Corrupt Practices Act.

According to the agreement, AB Volvo has acknowledged responsibility for the actions of its subsidiaries, whose employees, agents and distributors paid kickbacks to the Iraqi government in order to obtain contracts for the sale of trucks and heavy commercial construction equipment. The agreement requires the company to cooperate fully with the Department’s ongoing Oil for Food investigations.

The SEC press release also notes that the "SEC Files Settled Books and Records and Internal Controls Charges Against AB Volvo For Improper Payments to Iraq Under the U.N. Oil for Food Program - Company Agrees to Pay Over $12.6 Million in Civil Penalties, Disgorgement of Profits, and Interest."

The company issued a statement saying that "'[t]he incident is, of course, regrettable, but we do note with some satisfaction that the authorities spoke favorably of the cooperation by Volvo as well as Volvo’s own investigation and measures', says Volvo CEO Leif Johansson. 'It is important that we all now learn from what occurred.'”

SEC Complaint here

Information here

Information (Renault) here


March 21, 2008 in Deferred Prosecution Agreements, FCPA | Permalink | Comments (1) | TrackBack (0)

Friday, March 14, 2008

Deferred Prosecution Agreements & Spitzer

The FCPA Blog appropriately notes we haven't being seeing many deferred prosecution agreements these days (see here).  As the FCPA Blog points out, there have been no reported agreements since Flowserve on February 21.(see here).  It is probably a wise move for the government to lay low on deferred prosecution agreements right now with the microscope focused on how monitors are being appointed on the agreements, and also looking at issues of who should have oversight - prosecutors or the courts.

And then to hear discussion of the possibility of former NY Governor Spitzer obtaining a deferred prosecution agreement sends an interesting message.  One finds this mention noticeably in an article in the Wall Street Journal by Laurie P. Cohen, Glen R. Simpson and Amir Efrati. (see here). In the corporate setting, it is rare that we see an individual obtaining a deferred prosecution agreement.  The last ones of major significance were Former Monster Worldwide CEO Andrew McKelvey (see here) and Frank Quattrone (see here). Now if they decide upon a deferred prosecution agreement with Spitzer, what kind of terms will they include, and will it include a clause used in the Quattrone agreement requiring that he "can only associate with law-abiding persons." 


March 14, 2008 in Deferred Prosecution Agreements, FCPA | Permalink | Comments (1) | TrackBack (0)

Tuesday, March 11, 2008

Monitors in Deferred Prosecution Hearings

The hearing on monitors in Deferred Prosecution Agreements was held yesterday.  To listen and view a video webcast of the hearing go here.  It is 2 hours and 54 minutes, but there is a long break between the two sessions.

In his opening comments, Hon. John Conyors, Jr. called for judicial oversight of these agreements. He stated as his second point that "despite the guidance the Department released just yesterday regarding use of corporate monitors in these agreements, this guidance still fails to ensure uniformity in the agreements themselves. Indeed, some agreements require the implementation of compliance programs, restitution and fines, while others do not."  His fourth point was that "there should be independent judicial oversight of corporate settlement agreements because currently there is no transparency and no requirement that they be made public."  Additionally he stated,

"Judicial oversight would help to ensure greater legitimacy of these agreements by providing a neutral decision-maker to prevent abuses and improper politicization, as well as ensure proper completion of the terms of the agreements. Judicial oversight would also provide some currently lacking public exposure of some aspects of the agreement process itself."

Former AG John Ashcroft's written testimony can be found here. From the DOJ, David Nahmais, (see written testimony here), noted the recent adoption of new DOJ guidelines.  A few interesting items discussed in the hearing:

  • Ashcroft was hit with questions such as - "who besides yourself was considered for the Zimmer Case?"  He admitted that he did not know who else was considered for this position, and he did not know if the appointment of the monitor was bid out for others to be considered.
  • As one might suspect there was discussion of the ethics chair being given to a U.S. Attorney's alma mater.  A comment was made that another law school had been approached first, but that they already had a business ethics chair.   This listener was wondering - should that have precluded them from receiving this new chair, and aren't there other law schools out there - even in this same state or close by in an adjoining state?
  • There was also discussion of the transparency problems when there are non-prosecution agreements. After all, these agreements bypass the court system.
  • There were also comments on whether these agreements should even be allowed.
  • It was brought out that there have been over 80 agreements.


March 11, 2008 in Deferred Prosecution Agreements | Permalink | Comments (0) | TrackBack (0)