Federal Deferred, Nonprosecution Deals Fall by 60%

NACDL Update – Feb. 5, 2009

FORTHCOMING STUDY: Deferred and Non-Prosecution Agreements Decline 60%

The National Law Journal reports, according to a forthcoming study conducted by Lawrence D. Finder, Ryan D. McConnell, and Scott L. Mitchell, that the number of deferred prosecution agreements (DPAs) and non-prosecution agreements (NPAs) between the Department of Justice and corporations has declined by 60% in 2008.  This is a sharp drop from a historic high of 40 DPAs and NPAs in 2007 to only 16 DPAs and NPAs in 2008.  The study also reports a significant decline in the inclusion of privilege-waiver provisions in DPA/NPAs.

The study sets out some significant findings including, but not limited to, the following:

·         FCPA violations were the subject 7 of the 16 DPA/NPAs entered into in 2008

·         Immigration work-site enforcement investigations had their DPA/NPA debut in 2008

o   3 of the 16 DPA/NPAs dealt with immigration work-site enforcement investigations

o   All 3 contained some type of corporate compliance reform provision

·          Decline in privilege-waiver provisions:

o   In 2008 – 2 DPA/NPAs contained waiver provisions

o   In 2007 – 3 DPA/NPAs contained waiver provisions

o   From 2003-06 – About half of the 47 DPA/NPAs contained waiver provisions

·         Three-year upward trend in remedial compliance measures:

o   Of the 75 DPA/NPAs over the last three years, more than 75% contain such measures

o   In 2006 – 13 DPA/NPAs contained remedial compliance measures

o   In 2007 – 29 DPA/NPAs contained remedial compliance measures

o   In 2008 – 16 DPA/NPAs – i.e. 100% – contained remedial compliance measures

February 9, 2009
National Law Journal

By Marcia Coyle

WASHINGTON — The number of deferred and nonprosecution agreements between the U.S. Department of Justice and corporations declined by 60% in 2008 — from a historic high of 40 in 2007 to 16 last year, according to a forthcoming study.

Despite the lower numbers, violations of the Foreign Corrupt Practices Act continued to dominate the subject of those corporate pretrial agreements, with seven of the 16 agreements last year resolving FCPA violations.

The study, “Betting the Corporation: Compliance or Defiance?,” was done by Lawrence D. Finder, a partner in the Houston office of Dallas-based Haynes and Boone; Ryan D. McConnell, a Houston assistant U.S. attorney; and Scott L. Mitchell, the chairman of Open Compliance and Ethics Group, a nonprofit think tank. It is scheduled to be published in May in the Corporate Counsel Review of the South Texas College of Law.

Deferred prosecution agreements (DPAs) and nonprosecution agreements (NPAs) are deals between the Department of Justice (DOJ) and a corporate entity to conclude a corporate criminal investigation. The appropriate label depends on whether a charging instrument is filed.

Two years ago, Finder and McConnell, who is representing only his personal views and analysis, published a study of each pretrial agreement by the department since 1992. Their latest study reports that there now have been a total of 112 corporate pretrial agreements from 1993 to 2008.

In 2008, the authors noted, DOJ entered into its first corporate pretrial agreements resolving immigration work-site enforcement investigations — a total of three. And, they reported, every pre-trial agreement contained some type of corporate compliance reform provision — a continuation of a trend seen during the past few years.

Declines in privilege waivers

The study also found that the 2008 and 2007 agreements represented significant declines in provisions requiring waiver of attorney-client or work-product protections compared to the 2003 to 2006 period.

There were two privilege waiver provisions in 2008:

“In the Willbros DPA, which resolved a lengthy FCPA investigation, the agreement provided for a ‘limited waiver of attorney/client privilege with respect to certain subject matters important to DOJ understanding of the internal investigation.’ In the Jackson Country Club DPA, which resolved a immigration work-site enforcement investigation, the Country Club ‘agree[d] not to assert, in relation to any request of the United States, a claim of privilege (such as attorney-client privilege) or immunity from disclosure (such as work product) as to any documents or information request by the United States.’ ”

There were three such privilege waivers in 2007. During the “post-Thompson Memo” period of 2003 to 2006, when the corporate community claimed that waiver of attorney-client privilege was demanded by DOJ as evidence of cooperation, roughly half of the 47 agreements contained privilege waivers.

Haynes and Boone’s Finder said he does not know the reason why the number of DPAs and NPAs declined so significantly in 2008. But he suggested that department resources may have been partly responsible.

“The department has through the FBI and its U.S. attorney offices, as well as components of the Criminal Division, put a lot of emphasis on anti-terrorism and national security,” he said. “Some resources have been transferred to those areas to keep us safe.”

But even those areas, such as immigration and export violations, are beginning to show DPAs, Finder said.
“Investigations take a long time,” he said. “There’s always lag time between the misconduct and the conduct of the investigation and the prosecution.”

A DOJ spokesman said the department does not routinely track the number of DPAs and NPAs and could not comment on why the number declined last year.

The study also noted that new corporate charging policies implemented by DOJ last year now make it “absolutely clear” that waiver of attorney-client and work-product protections is not a prerequisite for a corporation to be viewed as cooperative.

“The waiver language has gone way down,” said Finder. “I think the organized bar was very responsible and responsive to what they perceived as an endangerment of the attorney-client privilege. The department, rather than have Congress legislate in this area, took the responsibility of reviewing its own policies and procedures and implementing remedial measures where necessary.”

Finally, the study reported a three-year trend: business reforms in DPAs and NPAs. During the past three years, there have been 75 DPAs and NPAs, and more than 75% contain remedial compliance measures — 13 in 2006, 29 in 2007 and all 16 agreements in 2008.
Tiffany M. Joslyn, Esq.

Research Counsel, White Collar Crime Project

National Association of Criminal Defense Lawyers (NACDL)

1660 L Street, NW, Suite 1200

Washington, DC 20036

Phone: (202) 872-8600 ext. 260

Fax: (202) 872-8690

David Finn