Friday, October 29, 2021
Deputy AG Lisa Monaco, speaking at the 36th ABA White Collar Crime Institute discussed three areas:
"I have three priorities for my time with you. First, I want to describe three new actions that the department is taking today to strengthen the way we respond to corporate crime. Second, I want to look forward and tell you about some areas we will be studying over the next months, with an eye to making additional changes to help further invigorate the department’s efforts to combat corporate crime. But before both of those, I want to set the scene by discussing trends, as well as the Attorney General’s and my enforcement priorities, when it comes to corporate crime."
Three very telling observations set the stage for the new enforcement policy and the challenges faced:
Corporate crime has an increasing national security dimension — from the new role of sanctions and export control cases to cyber vulnerabilities that open companies up to foreign attacks. Second, data analytics plays a larger and larger role in corporate criminal investigations, whether that be in healthcare fraud or insider trading or market manipulation. Third, criminals are taking advantage of emerging technological and financial industries to develop new schemes that exploit the investing public.
But she notes that these changes have been "changes of degree and not of kind."
DOJ clearly intends to focus on individuals ("Accountability starts with the individuals responsible for criminal conduct."). And they intend to put money there ("We are also going to find ways to surge resources to the department’s prosecutors. As one example, a new squad of FBI agents will be embedded in the Department’s Criminal Fraud Section.")
The three changes will be:
- "companies must provide the department with all non-privileged information about individuals involved in or responsible for the misconduct at issue" & "no longer be sufficient for companies to limit disclosures to those they assess to be “substantially involved” in the misconduct"
- "all prior misconduct needs to be evaluated when it comes to decisions about the proper resolution with a company, whether or not that misconduct is similar to the conduct at issue in a particular investigation." - companies who have veered from a DPA or NPA may have issues here
- Monitors are back in
And finally - there will be a Corporate Crime Advisory Group - so it looks like the implementation of these changes are forthcoming.
With recidivism a focus on the prosecution of corporate crime, we may be seeing a lot more scrutiny of prior DPAs and NPAs.
Sunday, May 3, 2020
Professor Miriam H. Baer of Brooklyn Law School recently posted on SSRN a chapter titled Designing Corporate Leniency Programs, to be published in the forthcoming book Cambridge Handbook on Compliance (D. Sokol & B. van Rooij eds.). The Abstract states:
"Corporate leniency programs promise putative offenders reduced punishment and fewer regulatory interventions in exchange for the corporation’s credible and authentic commitment to remedy wrongdoing and promptly self-report future violations of law to the requisite authorities.
Because these programs have been devised with multiple goals in mind—i.e., deterring wrongdoing and punishing corporate executives, improving corporate cultural norms, and extending the government’s regulatory reach—it is all but impossible to gauge their “success” objectively. We know that corporations invest significant resources in compliance-related activity and that they do so in order to take advantage of the various benefits promised by leniency regimes. We cannot definitively say, however, how valuable this activity has been in reducing either the incidence or severity of harms associated with corporate misconduct.
Notwithstanding these blind spots, recent developments in the Department of Justice’s stance towards corporate offenders provides valuable insight on the structural design of a leniency program. Message framing, precision of benefit, and the scope and centralization of the entity that administers a leniency program play important roles in how well the program is received by its intended targets and how long it survives. If the program’s popularity and longevity says something about its success, then these design factors merit closer attention.
Using the Department of Justice’s Yates Memo and FCPA Pilot Program as demonstrative examples, this book chapter excavates the framing and design factors that influence a leniency program’s performance. Carrots seemingly work better than sticks; and centralization of authority appears to better facilitate relationships between government enforcers and corporate representatives.
But that is not the end of the story. To the outside world, flexible leniency programs can appear clubby, weak and under-effective. The very design elements that generate trust between corporate targets and government enforcers may simultaneously sow credibility problems with the greater public. This conundrum will remain a core issue for policymakers as they continue to implement, shape and tinker with corporate leniency programs."
Tuesday, July 16, 2019
The DOJ Antitrust Division issued a new guidance memo on Compliance Programs in Criminal Antitrust Investigations (see here). Providing transparency to the evaluation process of corporate compliance is a smart move as companies will now know what is expected of them from DOJ, and thus there is a greater likelihood of achieving compliance on the part of companies. This process can also reduce costs in providing a more efficient way of getting companies to readjust their compliance programs and assure that internal measures are in place to avoid company and individual criminality. Providing this 17 page compliance memo to companies should be applauded.
In issuing this new guidance, Assistant Attorney General Makan Delrahim stated that "effective immediately" the Antitrust Division would, "(1) change its approach to crediting compliance at the charging stage; (2) clarify its approach to evaluating the effectiveness of compliance programs at the sentencing stage; and (3) for the first time, make public a guidance document for the evaluation of compliance programs in criminal antitrust investigations." (see here), A major change from past policy is that credit for having a compliance program will now be given at the charging stage.
Eight considerations are provided, but it is noted that "the guidance emphasizes that these elements and questions are not a checklist or formula, and not all of them will be relevant in every case." Delrahim states that "[d]ivision prosecutors should ask three preliminary questions at the outset to help focus their analysis. First question: does the company’s compliance program address and prohibit criminal antitrust violations? Second, did the antitrust compliance program detect and facilitate prompt reporting of the violation? Third, to what extent was a company’s senior management involved in the violation?"
In house corporate counsel and outside attorneys representing companies need to be aware of this new guidance and readjust compliance programs to match the specifics provided by this document.
Saturday, July 13, 2019
- Who in DOJ made the ultimate decision to drop the proposed felony indictment of Jeffrey Epstein and to cap the Non-Prosecution Agreement ("NPA") sentence at two years--later reduced to 18 months? The 6-2-17 affidavit of AUSA Ann Marie Villafaña, the lead prosecutor on the original federal criminal case, largely supports Alex Acosta's account of certain key events in this week's press conference. Keep in mind, however, that her affidavit was filed as part of the Jane Doe 1 and Jane Doe 2 litigation in SDFL, which resulted in Judge Marra's ruling that SDFL violated the Crime Victim's Rights Act ("CVRA") by failing to notify Epstein's victims about the NPA. At the time it was filed, the affidavit was focused on the effort to convince Marra that SDFL had not violated the conferral/right to be heard provisions of CVRA. On pages 8 and 9 of her affidavit, Villafaña attests that: "Prior to the Office making its decision to direct me to engage in negotiations with Epstein's counsel, I discussed the strengths and weaknesses of the case with members of the Office's management and informed them that most of the victims had expressed significant concerns about having their identities disclosed. While I was not part of the final decision-making at the Office that arrived at the two year sentence requirement, I was part of the discussions regarding sex offender registration and the restitution provision. It is my understanding from these and other discussions that these factors, that is, the various strengths and weaknesses of the case...together with the Office's desire to obtain a guaranteed sentence of incarceration for Epstein, the equivalent of uncontested restitution for the victims, and guaranteed sexual offender registration...were among the factors that informed the Office's discretionary decision to negotiate a resolution of the matter and to ultimately enter into the NPA." Translation: Villafaña disagreed with dropping the indictment and was not part of the group that made the ultimate decision to go for an NPA with a two year state prison cap. If she was even present at the meeting where the decision was made, she disagreed with the decision and was thus not "part of the final decision-making process." It is unusual, but not unheard of, for the lead prosecutor to be overruled on a case. It is very unusual to go from a 50-plus page multi-count felony sex trafficking indictment to an NPA with no federal charges, particularly when your lead prosecutor wants to go to trial. Villafaña was and is a respected career AUSA. Apparently DOJ's Office of Professional Responsibility ("OPR") is looking into how the case was handled. OPR will want to see Villafaña's original pros memo in the case, will seek to interview all government participants in the negotiations, and will want to know every DOJ person involved in the ultimate decision to drop the indictment.
- Why was DOJ's standard language making it explicitly clear that the NPA bound only the SDFL not included in the NPA? Such language is employed every day by U.S. Attorneys' Offices throughout the United States and has been for years. It goes like this: "The defendant understands that this agreement is binding only on the U.S. Attorney's Office for the ________ District of _______." Why wasn't that done in Epstein's case? Epstein is now arguing that the SDFL NPA prevents his prosecution in SDNY. He will probably lose, given Second Circuit case law, but why even leave the possibility of challenge open? The NPA does not even include a standard integration clause. This is strange.
- Why was the entire NPA placed under seal? I understand the Government's desire to protect the identity of Epstein's victims, but this could have been done through a redacted version of the NPA, and indeed this has been done in the subsequent litigation.
- Why weren't all of Epstein's known victims notified of the NPA and its terms in a timely fashion? Acosta and Villafaña have explained that they did not want the victims to see the civil damages portion of the NPA before SDFL was certain that Epstein would be pleading to the Florida felony, because they did not want the victims to be cross-examined about having seen those provisions in the event the deal broke down and SDFL took Epstein to trial. Epstein signed the Florida plea papers only a few days before he actually pled guilty and there was not enough time to notify all the victims. I understand the explanation, and assume no bad faith on SDFL's part, but it doesn't cut the mustard. If Judge Marra is correct, CVRA required notification. And either the NPA or Florida plea deal could have been structured to prevent the fiasco of having to locate and confer with victims over a weekend. Marra ruled that SDFL affirmatively hid the NPA from the victims and essentially deceived them into thinking that the office was still investigating Epstein well after the NPA was signed. That scenario should have been avoided.
- Why were Epstein's lawyers allowed to lobby Main Justice after the NPA was signed? I understand going to Main Justice and arguing to overturn an individual office's charging decision. Not every lawyer obtains such access and these efforts to overturn are rarely successful. But they almost always occur BEFORE an indictment has been returned. Why was Epstein's team allowed to lobby for several months AFTER the NPA was signed. The original NPA was signed by attorneys on both sides in September 2007. An addendum was signed by the attorneys in October 2007. Epstein signed in December 2007. The Oosterbaan letter, explaining why federal involvement was legitimate, was not signed until May 15, 2008. This is weird.
I do not believe that the Epstein deal was "dirty" in any way. I have heard from multiple sources that Acosta is a person of high integrity, who was well regarded within the office. I was impressed with Acosta's handling of the press conference. I don't think he should have resigned. I don't know how easy or hard it would have been for SDFL to achieve a victory at trial or how many victims would have been further traumatized by a trial. I do know that SDFL has a long history of aggressively prosecuting these types of cases--child sex trafficking and kiddie porn. And I do believe SDFL should have conferred with the victims before NPA was inked. Acosta had no criminal trial experience when he became U.S. Attorney. Was he was out-negotiated here, or overawed by the team of big name defense lawyers representing Epstein? His First Assistant Jeffrey Sloman, a veteran prosecutor who was deeply involved in the negotiations and signed the NPA, has denied this and has publicly defended both Acosta and the deal.
Still, the questions I and others have posed are legitimate and deserve answers. Perhaps we will get them from the OPR investigation.
Here are some additional documents. The first three were made available by Acosta in connection with his press conference in order to help support his explanation of the NPA. Next is the Jeffrey Sloman op-ed defending Acosta and the deal. The final three documents are the most recent filings in the SDNY case and all deal with the government's effort to detain Epstein pending trial.
July 13, 2019 in Celebrities, Civil Litigation, Current Affairs, Defense Counsel, Deferred Prosecution Agreements, Investigations, Judicial Opinions, News, Prosecutions, Prosecutors | Permalink | Comments (0)
Saturday, September 16, 2017
According to Reuters, Deputy Attorney General Rod Rosenstein said on Thursday that there may be changes to the Yates Memo "in the near future." As discussed at length on this blog (see here, here, here, and here; see also here for an article on the Principles of Prosecution and the Yates Memo), the Yates Memo was released by the DOJ in 2015 in response to criticism that the government had failed to prosecute individuals, particularly on Wall Street, related to the financial crisis of the late 2000s. The Yates Memo responded by focussing federal prosecutors on targeting individuals and requiring that corporations provide significant information on employee conduct to receive credit for cooperating with the government. The Yates Memo states, "[t]o be eligible for any cooperation credit, corporations must provide to the Department all relevant facts about the individuals involved in corporate misconduct."
According to reports, Rosenstein said, "It is under review, and I anticipate that there may be some changes to the policy on corporate prosecutions." It is unclear how far the review extends or whether possible changes extend beyond the Yates Memo and include revisions to the larger Principles of Federal Prosecution of Business Organizations contained in the U.S.A.M. Whatever changes are made, it is unlikely that the focus on individuals will diminish. Attorney General Sessions has publicly commented on his commitment to holding individuals accountable for corporate misconduct. We will have to wait, therefore, to see whether significant changes or mere reiterations of current policy priorities are on the horizon.
Wednesday, June 7, 2017
Attorney General Jeff Sessions issued a press release today here putting an end to settlements that had payments to third parties as a condition of settlement. The press release says that " [w]ith this directive, we are ending this practice and ensuring that settlement funds are only used to compensate victims, redress harm, and punish and deter unlawful conduct.”
Will this mean that Chris Christie's agreement as US Attorney with Bristol-Myers Squibb and the University of Medicine and Dentistry of New Jersey, the former of which included an endowment of an ethics chair to Seton Hall Law School, will no longer be allowed in future agreements(see here, here, and here - see para. 20)?
And will all the groups receiving funds from the BP Plea Agreement find that innovative resolutions will no longer be allowed in the future agreements? For example the BP plea agreement included $350 million to the National Academy of Sciences for the purposes of Oil Spill prevention and response in the Gulf of Mexico. (see here) The Court stated there -
"The National Academy of Sciences is required to use the funds to advance scientific and technical understanding to improve the safety of offshore oil drilling, production and transportation in the Gulf of Mexico."
"Of course, the Court realizes that the fines and other penalties provided by the plea agreement can do nothing to restore the lives of the 11 men who were killed. But in the payment to the National Academy of Sciences, the agreement at least directs money towards preventing similar tragedies in the future. That the bulk of the payments to be made under the plea agreement are directed toward restoring the Gulf Coast and preventing future disasters, contributes to the reasonableness of the plea agreement."
AG Sessions says that "[u]nder the last Administration, the Department repeatedly required settling parties to pay settlement funds to third party community organizations that were not directly involved in the litigation or harmed by the defendant’s conduct. Pursuant to the Attorney General’s memorandum, this practice will immediately stop."
It remains to be seen what will get included and what will be omitted in future non-prosecution, deferred prosecution, and plea agreements. The actual memo is here.
Friday, December 30, 2016
Each year this blog has honored individuals and organizations for their work in the white collar crime arena by bestowing "The Collar" on those who deserve praise, scorn, acknowledgment, blessing, curse, or whatever else might be appropriate. With the appropriate fanfare, and without further ado, The Collars for 2016:
The Collar for the Best Left Hand Turn – To the Supreme Court following Justice Scalia’s death in affirming both insider trading and bank fraud convictions.
The Collar for Failing to Deliver the Goods – To the government for prosecuting Fed Ex and then needing to dismiss the case following opening statements.
The Collar for Needing New Glasses – To James Comey so that he can read Agency policy to not do anything election related within 60 days of an election.
The Collar for Sports MVP – To the world of tennis, which stole some of the focus from FIFA this year with the BBC's allegations of significant match-fixing.
The Collar for Slow and Steady – To Britain's Serious Fraud Office, which, after announcing the implementation of DPAs in October 2012, entered into its first DPA in November 2015 and its second in July 2016.
The Collar for Quick and Steady – To the DOJ, which, according to Professor Brandon Garrett’s website, has entered into well over 100 DPAs and NPAs since October 2012.
The Collar for Best Reading of this Blog– To the Supreme Court in reversing Virginia Governor Bob McDonnell’s conviction, this blog’s 2015 case of most needing review.
The Collar for the Longest Attempt to Justify a Decision – To the 11th Circuit for its 124-page decision in United States v. Clay that attempts to justify how “deliberate indifference” meets the Global Tech standard.
The Collar for Worst Schmoozing at an Airport – To former President Bill Clinton for causing AG Loretta Lynch to accept the FBI’s decision-making after Bill Clinton came abroad her airplane.
The Collar for the Most Underreported Settlement – To Trump University’s agreement to pay $25 million settlement in the Trump University case.
The Collar for Mandating Corporate Backstabbing – To Deputy AG Sally Yates, who keeps insisting her memo that promoted a corporate divide from its constituents – widely referred to as the “Yates Memo” -- should be called the Individual Accountability Policy.
The Collar for the Pre-mature Weiner Release – To James Comey for his overly excited announcement about the former Congressman’s emails.
The Collar for Community Service to Russia – To all those who failed to investigate and release reports on computer hacking that caused the release of information during the election.
The Collar for the Quickest Backpeddling – To Rudy Giuliani for “clarifying” his statement that he knew about a confidential FBI investigation related to Hillary Clinton’s emails.
The Collar for Best Game of Hide and Seek – To Donald J. Trump for explaining that he could not release his already-filed tax returns because he was under an IRS audit.
The Collar for Best Self-Serving Confession – To the Russian Sports Federation for admitting there was systematic doping of Olympic athletes (but Putin didn't know about it).
The Collar for Quickest Recantation (aka the "Mea Culpa Collar") – To DOJ Chief Leslie Caldwell for criticizing overly aggressive AUSAs at a Federalist Society function and apologizing to DOJ attorneys a few days later.
The Collar for Best Judicial Watchdog – To Judge George Levi Russell III of the United States District Court for the District of Maryland for his post-trial decision reversing the conviction of Reddy Annappareddy and dismissing the indictment with prejudice based on prosecutorial misconduct.
The Collar for Never Giving In – To Josh Greenberg and Mark Schamel who tirelessly and brilliantly represented Reddy Annappareddy post-trial and secured his freedom.
The Collar for Best Money Laundering – To the New York City and Los Angeles real estate developers who sell eight-figure condo apartments to anonymous LLP's owned by foreign officials and their families.
The Collar for the Best Child – To Don Siegelman’s daughter, who continues to fight to “Free Don.”
The Collar for the Best Parent – Retired years ago and renamed the Bill Olis Best Parent Award –not awarded again this year since no one comes even close to Bill Olis, may he rest in peace.
(wisenberg), (goldman), (esp)
December 30, 2016 in About This Blog, Current Affairs, Deferred Prosecution Agreements, Government Reports, Investigations, Judicial Opinions, Money Laundering, News, Prosecutions, Prosecutors | Permalink | Comments (0)
Wednesday, July 20, 2016
Earlier this month, the UK Serious Fraud Office announced the approval by Lord Justice Leveson of the country's second deferred prosecution agreement. Readers may recall that the implementation of a DPA process is relatively new in the UK (see prior post here). According to the SFO press release in the matter, the company, which remains nameless due to ongoing, related legal proceedings, was subject to an indictment charging "conspiracy to corrupt, contrary to section 1 of the Criminal Law Act 1977, conspiracy to bribe, contrary to section 1 of the same Act, and failure to prevent bribery, contrary to section 7 of the Bribery Act 2010, all in connection with contracts to supply its products to customers in a number of foreign jurisdictions."
Pursuant to the terms of the DPA, the indictment was suspended and the company agreed to pay a total of 6,553,085 British Pounds. The company also agreed to continue to cooperate with the ongoing SFO investigation and conduct a review of all third party transactions and its existing compliance measures.
The SFO press release went on to state:
In passing the judgment, Lord Justice Leveson said:
“[This conclusion] provides an example of the value of self-report and co-operation along with the introduction of appropriate compliance mechanisms, all of which can only improve corporate attitudes to bribery and corruption.”
SFO Director David Green CB QC said:
“This case raised the issue about how the interests of justice are served in circumstances where the company accused of criminality has limited financial means with which to fulfill the terms of a DPA but demonstrates exemplary co-operation.
“The decision as to whether to force a company into insolvency must be balanced with the level and nature of co-operation and this case provides a clear example to corporates. The judgment sets out the considerations in detail and endorses the approach we took. As with the first DPA with Standard Bank, the judgment provides clear and helpful guidance.”
The suspended charges relate to the period of June 2004 to June 2012, in which a number of the company’s employees and agents was involved in the systematic offer and/or payment of bribes to secure contracts in foreign jurisdictions. The SFO undertook an independent investigation over a period of two years, concluding that of the 74 contracts examined 28 were found to have been procured as a result of bribes.
The SME’s parent company implemented a global compliance programme in late 2011. In August 2012, this compliance programme resulted in concerns being raised within the SME about the way in which a number of contracts had been secured. The SME took immediate action, retaining a law firm that undertook an independent internal investigation. The law firm delivered a report to the SFO on 31 January 2013, after which the SFO conducted its own investigation.
The SFO would like to thank HM Treasury, HM Revenue & Customs and the Department for Business, Innovation & Skills for their assistance in this investigation.
The final redacted judgement in the matter is available here.
This week, WilmerHale released a piece entitled "The UK's second DPA: a hopeful judgment." In the piece, author Lloyd Firth argues that several revelations from the DPA are encouraging as we consider the role the new DPA system will have in the UK. For those interested in the evolving DPA process in the UK, I recommend you give both the final redacted judgment and the WilmerHale piece a read.
Friday, July 15, 2016
In 2014, prosecutors proceeded with a case against fed ex. Unlike many companies in a post-Arthur Andersen world, they would not be bullied into folding and taking a non-prosecution or deferred prosecution agreement. Instead, they took the risk - and it is always a risk - of going to trial. What makes this case particularly puzzling is that the company had cooperated with the government. They hired a top-notch white collar attorney Cristina Arguedas and the government folded shortly after the trial began. Now, according to Dan Levine and David Ingram in their Reuter's story, U.S. Prosecutors Launch Review of Failed Fed Ex Drug Case, the DOJ is reviewing this matter. Some thoughts -
1. It is good to see DOJ re-examining this case. What happened here should not have happened, and learning from this case is important.
2. The review should not be limited to the fed ex case. There needs to be an examination, especially for the smaller companies that cannot afford to go to trial, of the government cooperation tactics.
3. If cooperation is going to work, then credit needs to rightfully be given.
4. The government's pitting employees (the corporate constituents) against the employers (company) needs to also be examined. This practice defeats the ability of corporations and individuals working together to root out corporate misconduct.
5. Criminal defense attorneys need to recognize that one can successfully take a corporation to trial against the government. The risk is enormous, but innocence needs to matter.
Tuesday, June 21, 2016
Elkan Abramowitz, one of the best and most-respected white collar crime defense practitioners in the nation, last week received the Robert Louis Cohen Award for Professional Excellence from the New York Criminal Bar Association. At the dinner at which he received the award, Mr. Abramowitz spoke thoughtfully about the pernicious effect of prosecutions of corporations, particularly on the rights corporate employees.
The recent focus on perceived corporate wrongdoing, he said, "has seriously impeded the rights of individual employees caught up in the web of ... corporate investigations." He pointed out that the "simple threat"of a corporate investigation has forced corporations "to conduct internal investigations upon any suspicion of wrongdoing" and, because corporations rarely, if ever, can risk going to trial, they will end up disclosing alleged criminality to the prosecutors to work out the best deal they can. The results as to the corporations themselves are non-prosecution or deferred prosecution agreements "which typically give the prosecutors much more power over the corporation than [they] would have if the corporation were actually convicted of a crime in court." The results as to corporate employees are at the insistence of prosecutors as a condition for a deal with the corporation that "the heads of individual employees be handed to them on a silver platter."
Mr. Abramowitz made a distinction between investigations by prosecutors who "hopefully most of the time" investigate without bias toward a particular result and corporations which in an internal investigation "are incentivized to find out and expose criminality." Thus, corporate employees are explicitly made to understand that if they refuse to testify they will be terminated and often told that their legal fees will not be paid if they chose to defend themselves." And, since these individuals accordingly sometimes choose not to hire counsel and to talk to internal investigators, the information presented to prosecutors by corporations often provides "more ammunition" than an investigation conducted by the FBI, police or another federal agency.
The results are, Mr. Abramowitz said, cases against individuals "that might never have been brought without the corporation's coercion." Thus, he believes, "Whatever social utility is believed to be served by this system,..this outsourcing of a purely governmental function is extremely dangerous and [causes] great injustices to individuals working in companies under investigation."
Mr. Abramowitz's observations of the systemic changes, most obviously the role of corporations and their special prosecutors (who, interestingly, he did not mention specifically) as quasi-prosecutors, are right on the mark. And, he is quite correct that the prosecution of individuals coerced into giving up their rights to silence and to counsel in response to their employer's demands "flies in the face of the restraining values of our society as expressed in the Bill of Rights." However, I suspect that most prosecutors and many others (including those liberals and others who like Bernie Sanders are still complaining that no individuals from the big institutions involved in the 2008 financial crisis were jailed) would not say that on balance the addition of corporations to those ferreting out financial crime is a negative one. After all, that addition presumably has or will result in more indictments, convictions, and jail sentences of individuals who have committed financial crimes. While I too bemoan the incursion into fundamental individual rights as a result of corporate prosecutions, I suspect Mr. Abramowitz and I are in the minority.
Monday, January 4, 2016
Guest Blogger - Dmitriy Kamensky, Fulbright Faculty Development Fellow, Stetson University College of Law; Professor of Law, Berdyansk State University, Ukraine.
On Dec. 30, just as corporate and the rest of America was getting ready to celebrate the New Year, one of the top-tier Swiss banks, Julius Baer Group, announced (see here) that it had reached an agreement in principle with the U.S. Attorney’s Office for the Southern District of New York, related to a long and extensive investigation into aiding American customers to evade millions of tax dollars. The bank said it set aside $ 547 million to settle the matter with the Justice Department and expects to enter a final settlement in the first quarter of 2016.
This final development of the Julius Baer case is the latest of about a dozen Swiss financial institutions that came under DOJ scrutiny for allegedly providing American customers (and taxpayers) with numbered accounts that were protected by Swiss bank-secrecy laws, thus effectively helping U.S. taxpayers underreport their taxes.
In February of 2009, UBS AG, the largest Swiss bank worth over $ 1 trillion in assets, entered into a Deferred Prosecution Agreement (DPA) with the Department of Justice for $780 million (see here). The bank has acknowledged that between 2000 and 2007 it has participated in a cross-border scheme with the purpose of defrauding the United States and the Internal Revenue Service. The scheme was designed to aid American customers in evading federal taxes, by dodging their money to numbered UBS accounts. Under growing pressure from the U.S. authorities, the bank and later the Swiss government agreed to cooperate, by granting access to American accounts and later relaxing bank secrecy laws altogether.
Then in 2014 another larger Swiss lender, Credit Suisse Group AG, moved to settle a similar criminal probe by pleading guilty to conspiracy to aid its American clients in filing false income tax returns with the IRS. The bank agreed to pay $ 2.6 billion in criminal fine, restitution and other penalties (see here).
With the case of Julius Baer outlining the final part of multiyear aggressive probes by DOJ into the Swiss banking industry and tax dodging operations, it becomes clear that bankers across the globe are being given a serious (and quite expensive) warning: do not mess with American tax laws; federal prosecutors and tax agents have long arms.
Tuesday, December 8, 2015
Not surprisingly, New York County District Attorney Cyrus Vance's office has announced it will after a hung jury retry, albeit in slimmed-down form with fewer defendants and counts, the criminal case involving the defunct firm of Dewey & LeBoeuf's alleged misrepresentations in seeking financing during its desperate dying days. Prosecutors rarely admit defeat in big cases after a single hung jury. Double jeopardy does not apply.
The major defendant, against whom (as often happens with the highest-ranking officer) there is the least evidence, Steven H. Davis, its former chair, has been pared from the case and apparently will receive a deferred prosecution. "Deferred prosecutions" are rarely, if ever previously, given to individuals by New York state prosecutors, at least by that name. Although the terms have not been announced, this disposition, I suspect will essentially be just a dismissal dressed up so that the prosecutor can save some face and not admit a total loss.
The prosecutor, as is a custom in New York County, announced publicly on the record his plea offers to the three defendants remaining. I find this custom repugnant and sometimes in return I announce the defendant's terms for a final disposition - such as, a dismissal, an apology by the prosecutor and a testimonial dinner in the defendant's honor.
The plea offers here were a felony plea with a one-to-three year jail term to Joel Sanders, a felony plea with 500 hours of community service to Stephen DiCarmine, both of whom spent six months at the trial that ended in a hung jury, and a misdemeanor plea with 200 hours of community service, to Zachary Warren, who was severed and has not yet gone to trial. I would not be surprised if these cases were settled before trial, not necessarily at the offered price.
Monday, November 30, 2015
According to Reuters, a judge approved Britain's first Deferred Prosecution Agreement today. The below is from the Serious Fraud Office's (SFO) press release.
The Serious Fraud Office's first application for a Deferred Prosecution Agreement was today approved by Lord Justice Leveson at Southwark Crown Court, sitting at the Royal Courts of Justice.
The counterparty to the DPA, Standard Bank Plc (now known as ICBC Standard Bank Plc) ("Standard Bank"), was the subject of an indictment alleging failure to prevent bribery contrary to section 7 of the Bribery Act 2010. This indictment, pursuant to DPA proceedings, was immediately suspended. This was also the first use of section 7 of the Bribery Act 2010 by any prosecutor.
As a result of the DPA, Standard Bank will pay financial orders of US$25.2 million and will be required to pay the Government of Tanzania a further US$7 million in compensation. The bank has also agreed to pay the SFO's reasonable costs of £330,000 in relation to the investigation and subsequent resolution of the DPA.
In addition to the financial penalty that has been imposed, Standard Bank has agreed to continue to cooperate fully with the SFO and to be subject to an independent review of its existing anti-bribery and corruption controls, policies and procedures regarding compliance with the Bribery Act 2010 and other applicable anti-corruption laws. It is required to implement recommendations of the independent reviewer (Price Waterhouse Coopers LLP).
DPAs are a new settlement vehicle in the U.K., as discussed in my article International White Collar Crime and Deferred Prosecution Agreements. One should expect that now the first DPA has been approved, U.K. enforcement bodies will begin aggressively using DPAs in the coming years. As the Director of the SFO, David Green, said of the Standard Bank DPA, "This landmark DPA will serve as a template for future agreements."
The press release and links to the Standard Bank DPA are available on the SFO website.
Tuesday, November 24, 2015
Sally Yates' new DOJ Memo has been a hot topic. (see here, here, here). Check out Sara Kropf's terrific entry here reporting and questioning the Yates Memo influence in a recent indictment of a corporate employee.
But one wonders if this DOJ claim that they have changed their policy is anything new. Has DOJ forgotten Enron and Jeff Skilling, who remains incarcerated?
My take continues to be that all the Yates really does is make it official that companies have to throw individuals under the bus (see here). And knocking NPAs and DPAs is not the answer. Yes, the terms within these documents are often offensive. (see here) But getting compliance from companies and changing corporate culture is an important goal and one needs to remain focused on how best to achieve this goal. Working with companies, as opposed to against companies, is the best way to foster compliance. Likewise, pitting individuals within a company against the entity and the entity's counsel is not the answer.
Friday, September 18, 2015
Just days ago, DOJ came down with a new corporate directive (discussed here) describing a shift in investigation policy. The new focus would be on the prosecution of individuals within the entity. It states:
"2. Both criminal and civil corporate investigations should focus on individuals from the inception of the investigation.
Both criminal and civil attorneys should focus on individual wrongdoing from the very beginning of any investigation of corporate misconduct. By focusing on building cases against individual wrongdoers from the inception of an investigation, we accomplish multiple goals. . . . "
So much for this new policy, as the GM Deferred Prosecution Agreement comes before any individual prosecutions. (see Corporate Crime Reporter here). It has the company paying $900 million, accepting responsibility, agreeing to cooperate, and providing information to the government.
Both the old DOJ approach and this new one, that seems to exist only on paper and not in practice, have problems. Both have the company serving as "agents" of the government. Both have the company doing the investigative work for the DOJ. Both have the company "throwing employees under the bus." And both show a disrespect for individual attorney-client relations.
Corporate and individual criminal actions are a problem that needs to be corrected. But as previously said, pitting the entity against its constituents will not correct misconduct. And telling the public that you intend to take a different approach and just days after you do the opposite fosters a lack of trust. It also demonstrates the importance of Congressional action as opposed to reliance on DOJ internal guidelines.
Wednesday, September 9, 2015
The new DOJ Policy (see here for the NYTimes story that includes DOJ Policy) makes the current practice of corporations "throwing employees under the bus," official. It states, "[t]o be eligible of any cooperation credit, corporations must provide to the Department all relevant facts about the individuals involved in corporate misconduct." Corporations have received deferred and non-prosecution agreements (DPAs and NPAs) that often provide for the corporation cooperating with the government in the investigation of alleged criminally culpable individuals. Now it is clear that to obtain "any" cooperation credit it will be necessary to provide the evidence against these individuals.
Three concerns here:
1) what is meant by providing "all relevant facts"? Does this mean only information that is relevant to the government's case against the individuals? Will the government also be asking for Brady material that might be exculpatory for the individuals? Does this mean that the corporation now is officially a member of the government team?
2) what does this mean for the corporate culture? The concept of the individuals in the company working together, asking for legal advice from corporate counsel, and working to resolve problems in an open environment may now be officially over. This policy pits the corporation against the individual. Is this a wise approach to correcting business misconduct?
3) does this make it more important that there be fairness in internal investigations? See here for a discussion of the importance of fairness in internal investigations.
Interestingly, the new policy calls for starting with the individual and also calls for sharing information between civil and criminal attorneys. It also requires "a clear plan to resolve related individual cases before the statute of limitations expires and declinations as to individuals in such cases must be memorialized." This is a clear message that individual prosecutions are now a priority.
The message to white collar criminal defense attorneys - corporate prosecutions may no longer be the focus. Get ready for more prosecutions against individuals.
Friday, April 24, 2015
The Deferred Prosecution Agreement (DPA) is available online on the DOJ website here. Like so many DPAs, this one has terms that place the sole discretion on certain matters with the DOJ. For example,
"Deutsche Bank agrees that in the event that the Department determines, in its sole discretion, that Deutsche Bank has knowingly violated any provision of this Agreement, an extension or extensions of the term of the Agreement may be imposed by the Department, in its sole discretion, for up to a total additional time period of one year, without prejudice to the Department's right to proceed as provided in Paragraphs 13-16 below."
As with many DPAs, it calls for continued compliance, a monitor, and disclosure of information (not covered by the attorney-client privilege, etc.). The agreement allows Deutsche Bank to propose three names of monitors to the government - although the government gets to choose. Bottom line is that if the company complies with the DPA (which is within the sole discretion of the government to decide) the criminal Information gets dismissed. Another problematic provision within the DPA is that:
"Deutsche Bank expressly agrees that it shall not, through present or future attorneys, officers, directors, employees, agents or any other person authorized to speak for Deutsche Bank or its subsidiaries or affiliates, make any public statement, in litigation or otherwise, contradicting the acceptance of responsibility by Deutsche Bank set forth above or the facts described in the attached Statement of Facts."
Is it really necessary to place so much discretion with the government in the DPA? Shouldn't a court get to decide if there is a violation of a DPA? Should First Amendment rights be allowed to be discarded in a DPA? We will probably never know the answer to these questions because companies in a post-Arthur Andersen world can't take a risk of fighting the government. Most just sign the DPA, try their best to comply, and hope they can move on. For a discussion of terms within DPAs, see my co-authored article here.
DOJ Press Release here today -
"DB Group Services (UK) Limited, a wholly owned subsidiary of Deutsche Bank AG (Deutsche Bank), has agreed to plead guilty to wire fraud for its role in manipulating the London Interbank Offered Rate (LIBOR), a leading benchmark interest rate used in financial products and transactions around the world. In addition, Deutsche Bank entered into a deferred prosecution agreement to resolve wire fraud and antitrust charges in connection with its role in both manipulating U.S. Dollar LIBOR and engaging in a price-fixing conspiracy to rig Yen LIBOR. Together, Deutsche Bank and its subsidiary will pay $775 million in criminal penalties to the Justice Department."
"The agreement requires the bank to continue cooperating with the Justice Department in its ongoing investigation, to pay a $625 million penalty beyond the fine imposed upon DB Group Services (UK) Limited and to retain a corporate monitor for the three-year term of the agreement."
"Together with approximately $1.744 billion in regulatory penalties and disgorgement—$800 million as a result of a Commodity Futures Trading Commission (CFTC) action, $600 million as a result of a New York Department of Financial Services (DFS) action, and $344 million as a result of a U.K. Financial Conduct Authority (FCA) action—the Justice Department’s criminal penalties bring the total amount of penalties to approximately $2.519 billion."
Monday, February 2, 2015
Judge Rakoff has authored an interesting article in the New York Review of Books examining Professor Brandon L. Garrett’s book entitled “Too Big to Jail: How Prosecutors Compromise with Corporations.” Professor Garrett’s book looks closely at the use of deferred prosecution agreements by the government and includes a wealth of information and data. While Professor Garrett concludes that deferred prosecution agreements have been “ineffective,” he also proposes a number of steps that might make them more efficient in the future. Along with conducting a nice discussion of Professor Garrett’s book, Judge Rakoff offers his own perspective on these agreements in his review. For those interested in deferred prosecution agreements, both Judge Rakoff’s article and Professor Garrett’s book are must reads.
Friday, October 31, 2014
Earlier this month, I had the pleasure of once again attending the ABA Criminal Justice Section’s annual International White Collar Crime Institute in London. This year’s event included a host of excellent speakers from around the world addressing some of the most pressing issues in the field. I thought I would take just a few moments to share some of the insights and themes from the conference.
First, there was much discussion about deferred prosecution agreements in the UK. Though a very common means of resolving a criminal investigation in the US, DPAs only became possible in the UK earlier this year. Thus far, no DPAs have been announced in the UK. That might be about to change, however, as several speakers informed the audience that there are rumors in London that the first such DPA may be entered into towards the end of this year. We’ll be keeping an eye out for this significant development.
Second, many speakers pointed out important differences that exist globally when discussing white collar crime and enforcement. For example, in the UK, the SFO prefers that corporations not interview employees during an internal investigation. Once the US DOJ becomes involved, however, the DOJ tends to insist on interviews, thus creating a conflict of approaches. As another examples, the trend of requiring monitors as part of settlements is beginning to lose favor in the US. By comparison, the UK is currently moving towards monitorships. As a final example, the role of whistleblowers remains drastically different around the globe. In the US, whistleblowers and whistleblower incentive programs like the FCA and Dodd-Frank are generally considered important tools for discovering misconduct. In France, by comparison, whistleblowing is discouraged. In fact, according to our speakers, in France it would be illegal for an employer to require employees to engage in any form of whistleblowing. These are just a handful of examples of the significant differences that exist around the world and that create complex issues for resolution in cross-border criminal investigations and prosecutions.
Finally, I’ll briefly mention the panel I moderated. The panel examined collateral consequences of conviction around the world. Collateral consequences are an issue that is garnering much attention in the United States today. This is partly because of the ABA’s collateral consequences website, which is an excellent tool for researching the collateral consequences that might be applicable in a particular case. The website also gives some incredible insights into the breadth and scope of these collateral consequences. In Illinois, for examples, there are 2,266 statues, rules, and regulations imposing various collateral consequences. These include things like losing the right to vote, the right to drive, and the right to hold public office. One might lose a public pension, a business license, or even parental rights. One might lose access to public housing and food stamps. The list is voluminous. One of the most unusual collateral consequences in Illinois makes it a felony for a felon to “knowingly own, possess, have custody, or reside in residence with… an unspayed or unneutered dog or puppy older than 12 weeks of age…." Our conversation in London revealed that the trend of expanding collateral consequences is not limited to the United States. In the UK, prosecutors are now more likely to put forward collateral consequences during a prosecution and the courts are becoming more likely to impose them on individual defendants.
While there are many other fascinating issues that were covered during the conference, including discussion of virtual currencies, anti-bribery initiatives, whistleblowing generally, financial regulations, anti-trust prosecutions, and cyber security, I’ll stop here. But I hope this gives some insight into the complexities of international white collar crime in a global environment where significant differences abound.