The U.S. Department of Justice (“DOJ”) and the U.S. Securities and Exchange Commission (“SEC”) continue to deploy DPAs and NPAs aggressively. This past year left no doubt that such resolutions are a vital part of the federal corporate law enforcement arsenal, affording the U.S. government an avenue both to punish and reform corporations accused of wrongdoing. In early December, for example, U.S. Assistant Attorney General for DOJ’s Criminal Division, Leslie Caldwell, highlighted the importance of negotiated resolutions that allowed DOJ to “impose reforms, impose compliance controls, and impose all sorts of behavioral change.” She concluded: “In the United States system at least [settlement] is a more powerful tool than actually going to trial.” DOJ and the SEC have used negotiated resolutions, including DPAs and NPAs, to require companies to implement an effective compliance program. In 2014 we witnessed a number of notable developments in negotiated resolutions that demonstrate that the traditional hallmarks of DPAs and NPAs, including post-settlement compliance and reporting obligations, are here to stay.
Posts Tagged ‘Joseph Warin’
As the debate continues over whether and how to punish companies for unlawful conduct, U.S. federal prosecutors continue to rely significantly on Non-Prosecution Agreements (“NPAs”) and Deferred Prosecution Agreements (“DPAs”) (collectively, “agreements”). Such agreements have emerged as a flexible alternative to prosecutorial declination, on the one hand, and trials or guilty pleas, on the other. Companies and prosecutors alike rely on NPAs and DPAs to resolve allegations of corporate misconduct while mitigating the collateral consequences that guilty pleas or verdicts can inflict on companies, employees, communities, or the economy. NPAs and DPAs allow prosecutors, without obtaining a criminal conviction, to ensure that corporate wrongdoers receive punishment, including often eye-popping financial penalties, deep reforms to corporate culture through compliance requirements, and independent monitoring or self-reporting arrangements. Although the trend has been robust for more than a decade, Attorney General Eric Holder’s statements in connection with recent prosecutions of financial institutions underscore the dynamic environment in which NPAs and DPAs have evolved.
Deferred Prosecution Agreements (“DPAs”) and Non-Prosecution Agreements (“NPAs”) (collectively, “agreements”) continue to be a consistent vehicle for prosecutors and companies alike in resolving allegations of corporate wrongdoing. In the two decades since their emergence as an alternative to the extremes of indictment and outright declination, DPAs and NPAs have risen in prominence, frequency, and scope. Such agreements are now a mainstay of the U.S. corporate enforcement regime, with the U.S. Department of Justice (“DOJ”) leading the way, and the U.S. Securities and Exchange Commission (“SEC”) recently expanding its use of this tool. These types of agreements have achieved official acceptance as a middle ground between exclusively civil enforcement (or even no enforcement action at all) and a criminal conviction and sentence. With the United Kingdom’s recent enactment of its own DPA legislation, the trend toward use of these alternative means for resolving allegations of corporate wrongdoing is poised to continue.
In the past two weeks, Judges Richard J. Sullivan and Shira A. Scheindlin of the United States District Court for the Southern District of New York separately issued important rulings in civil Foreign Corrupt Practices Act (“FCPA”) cases against foreign executives of non-U.S.-based companies whose stock is traded on a U.S. stock exchange. Their rulings reached opposite results on the issue of the court’s exercise of personal jurisdiction over foreign executives who are alleged to have violated the FCPA. One or both of these rulings could provide the Second Circuit with a rare opportunity to clarify the FCPA’s jurisdictional reach in the context of purely foreign bribery schemes.
SEC v. Straub, __ F. Supp. 2d __, No. 11 Civ. 9645 (RJS) (Feb. 8, 2013) (Sullivan, J.)
In December 2011, the Securities and Exchange Commission (“SEC”) brought a civil enforcement action against three senior executives of a Hungarian telecommunications company, Magyar Telekom, who allegedly bribed government and political party officials in Macedonia and Montenegro in 2005 and 2006 to win business and shut out competition in the telecommunications industry. The SEC alleges that these executives used sham “consultancy” and “marketing” contracts to pay approximately €4.875 million to Macedonian officials and €7.35 million to Montenegrin officials. The three executives then allegedly caused the bribes to be falsely recorded in Magyar’s books and records, which were consolidated into the books and records of its parent company, Deutsche Telekom AG. Both Magyar and Deutsche Telekom were publicly traded through American Depository Receipts (“ADRs”) on the New York Stock Exchange (“NYSE”). The defendants allegedly made false certifications to Magyar’s auditors, who in turn provided unqualified audit opinions that accompanied the filing of Magyar’s annual reports with the SEC. There was no allegation that any of the negotiations or meetings regarding this scheme occurred within the United States, that the payment of bribes occurred through banks located in the United States, or that the foreign defendants otherwise ever traveled to the United States in furtherance of the bribery scheme.
“Over the last decade, DPAs [Deferred Prosecution Agreements] have become a mainstay of white collar criminal law enforcement,” Lanny Breuer, the head of the U.S. Department of Justice’s Criminal Division, declared on September 13, 2012. Corporate Deferred Prosecution Agreements (“DPAs”) and Non-Prosecution Agreements (“NPAs”) (collectively, “agreements”) have, in Mr. Breuer’s words, ameliorated the “stark choice” that prosecutors faced: either to employ “the blunt instrument of criminal indictment” that he likened to using “a sledgehammer to crack a nut” or to “walk away” and decline prosecution outright. Mr. Breuer declared that DPAs and NPAs “have had a truly transformative effect on . . . corporate culture across the globe” resulting in “unequivocally far greater accountability for corporate wrongdoing–and a sea change in corporate compliance efforts.” Mr. Breuer’s comments are timely, coming in a year during which such agreements yielded a record level of monetary penalties and related payments totaling nearly $9.0 billion and are increasingly used to resolve front-page criminal matters.
This client alert, the ninth in our series of biannual updates on DPAs and NPAs, (1) summarizes the DPAs and NPAs from 2012, (2) considers detailed remarks from leading enforcement officials with the U.S. Department of Justice (“DOJ”) and the U.S. Securities and Exchange Commission (the “SEC”) regarding settlement agreements, (3) examines compliance measures presented in recent non-FCPA agreements as examples of DOJ-endorsed good practices in various industries, and (4) looks across the Atlantic to evaluate the United Kingdom’s prospective use of DPAs.
Deferred Prosecution Agreements (“DPAs”) and Non-Prosecution Agreements (“NPAs”) (collectively, “agreements”) in recent years have become a primary tool of the U.S. Department of Justice (“DOJ”) for resolving allegations of corporate criminal wrongdoing. Since 2000, DOJ entities have entered into 230 reported agreements with corporate entities, extracting a total of $31.6 billion in fines, penalties, forfeitures, and related civil settlements. The U.S. Securities and Exchange Commission (“SEC”), which announced the adoption of DPAs and NPAs as part of its Cooperation Initiative in January 2010, has since entered into three NPAs without monetary penalties and one DPA, which included disgorgement. With these agreements, companies obtain finality and closure and agree not to commit further legal violations and to undertake specific cooperation and compliance obligations in exchange for DOJ or the SEC agreeing to forgo enforcement action. In the DOJ context, the two agreement types differ in one material respect: for DPAs, DOJ files a criminal information in federal court, while NPAs generally are not filed in court.
During the last 12 years, DOJ and the SEC have employed DPAs and NPAs in some of the most high-profile cases and continue to turn to them in cases where they believe criminal conduct may have occurred but for a variety of reasons, including a company’s extensive cooperation, internal management shakeups, or the grave risk of collateral consequences to the corporate entity, a conviction through a guilty plea would not be equitable. In the final analysis, DOJ’s increasing reliance on DPAs and NPAs demonstrates its recognition that they are precision instruments to resolve allegations of corporate wrongdoing. The SEC, which recently embraced DPAs and NPAs, and the United Kingdom, which appears to be in the process of doing so, recognize that these agreements can be fine-tuned to help reward cooperation and mitigate collateral consequences.