Legal News

Deferred Prosecution: Good for Companies? Good for Government?

By Dan Slater

There’s been much made lately over whether corporate monitors — lawyers assigned to supervise companies that strike deferred prosecution agreements with the government — should themselves be more closely monitored. But are DPA’s, which allow companies to acknowledge wrongdoing by not contesting criminal charges but not formally admitting guilt, a good thing to begin with?

A front-pager in today’s NYT takes a look at the rise of DPA’s (there were 35 last year), and asks whether their efficiency is outweighed by the message they send to companies: Go ahead and adopt legally-questionable business practices. If you get caught, you can always just strike a deal, pay a fine, and suffer a corporate monitor. (For more background on the DPA movement, check out this story by former WSJ reporter Laurie P. Cohen from ‘06.)

Paul J. McNulty, a former deputy AG who put new guidelines in place in 2006 for corporate investigations at the DOJ, told the Times, “There’s a fundamental misapprehension with D.P.A.’s to think that they’re a break for the company.” With the imposition of fines and an outside monitor, “the reality is that for the government, it gets pretty much everything without the difficulty of going forward with an indictment,” said McNulty, who moved to Baker & McKenzie last year. “I think companies are beginning to wonder whether they ought to fight more, because they are pretty burdensome.” A recent story by the Journal’s Amir Efrati and Karen Richardson highlighted another government tactic: suggesting personnel changes as part of a settlement with a company.

Charles Intriago, a former federal prosecutor in Miami who specializes in money-laundering issues, says that fines and an outside monitor don’t compare with a criminal conviction. He says the huge penalties, like the $65 million fine for American Express Bank International, which failed to guard against laundering of drug money, in 2007, were “peanuts” compared with the damage posed by a criminal conviction.

LB readers: There’s no doubt that DPA’s are on the rise. According to the NYT, there’ve been 50 in the last 3 years, and 35 last year alone. Are they effective? Or do companies view them simply as get-of-jail-free cards?

Full post as published by Law Blog - WSJ.com on April 09, 2008 (boomark / email).