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?


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While it difficult to compare eras, or get inside the heads of prosecutors past or present, there is enough anecdotal evidence of Bush-ite nonfeasance to make the NYT piece viable journalism.

On a related issue, the richly deserved prosecution of Authur Andersen seems to have given permenant immunity to the remaining Big 4 firms, no one wants a Big 3 siutation. Otherwise KPMG would be a goner.

Posted by: save_the_rustbelt | Apr 10, 2008 10:19:21 AM

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