The Shadow Regulatory State at the Crossroads: Federal Deferred Prosecution Agreements Face an Uncertain Future

Amended report: This is a revised version of the originally released report. The discussion of corporate monitorship has been amended due to a change in counting methodology that more accurately reflects an apple-to-apples comparison across time.

This report analyzes the current state of play in federal use of deferred prosecution agreements (DPAs) and non-prosecution agreements (NPAs). Case studies examine three 2016 agreements involving hundreds of millions of dollars in company payouts to the federal government—involving the Dutch company VimpelCom’s business dealings in Uzbekistan, the U.S. company JPMorgan Chase’s hiring of interns related to the leaders of state-owned Chinese businesses, and the Japanese company Olympus’s efforts to sell equipment to U.S. and Latin American hospitals. The report looks also at the U.K.’s second DPA law and France’s new DPA law.

• In 2016, the DOJ entered into 35 DPAs and NPAs—the most since 2012, excluding the many Swiss banks reaching common NPAs last year through a program resolving overseas tax claims. The Securities and Exchange Commission entered into two more. Total payments under these agreements were $4.6 billion.
• In addition to requiring large payouts, nine federal DPAs and NPAs in 2016 placed a "corporate monitor" in the company (at company expense) who reported back to the government. DPAs and NPAs often involve wholesale changes to business practice. No statute authorizes such sweeping government authority over internal company operations, nor would the government be able to insist on changes to business practice if it successfully convicted the company in court.
• In 2016, a plurality of the agreements involved alleged violations of the Foreign Corrupt Practices Act (FCPA), which, in practice, empowers the government to police corporate activity abroad with little nuance about expected norms in non-U.S. environments.
• There are alternatives to current U.S. practice. Deferred prosecution agreements in Britain and France are subject to significant judicial oversight and review and must follow clearly defined statutory boundaries. Although U.S. law limits judicial incursion on prosecutorial discretion in charging decisions, Congress could limit the DOJ’s ability to coerce defendant companies to take actions that are not defined expressly as statutory penalties—creating an avenue for potential judicial oversight. The DOJ could take internal steps limiting the scope of remedies used in DPAs and NPAs. DOJ rules could, and should, also require collaboration with other executive branch agencies—including Treasury, Commerce, and State—when such remedies may create domestic or foreign collateral consequences.

READ FULL REPORT

______________________

James R. Copland is a senior fellow and director of legal policy at the Manhattan Institute. 
Rafael A. Mangual is the project manager for legal policy.