CORPORATE CRIME REPORTER
Haynes
& Boone’s McConnell on FCPA, Monitors and Non Pros Agreements
25 Corporate Crime Reporter 4, January 22, 2011
Over the past ten years, there has been a dramatic shift in the prosecution
of major corporate crime cases.
Ten years ago, prosecutors pretty much had two choices.
Force a guilty plea.
Or not bring the case.
Today, a third way is dominant.
Settle the cases with deferred and non prosecution agreements.
For years now, Ryan McConnell has been tracking the rise of deferred and non prosecution agreements.
McConnell is a partner at Haynes & Boone in Houston, Texas.
His most recent findings are compiled in an article he co-authored titled “Plan Now or Pay Later – The Role of Compliance in Criminal Cases.”
It will be published in the University of Houston International Law Journal in Spring 2011.
McConnell found 31 deferred and non prosecution agreements in 2010 – up from 23 in 2009.
But it could be that some of the non pros agreements are still flying under the radar.
“There could be more” McConnell told Corporate Crime Reporter in an interview last week. “Most of the time the U.S. Attorney will do a press release. But the press release may or may not be picked up by the media – depending on the size of the case.”
“A $15 million or $20 million case today is just not that significant.”
“We counted 31 agreements in 2010. Are we missing some? Yes, absolutely. I’m sure we are. And I’m sure the other firms that have looked at this are missing some too.”
“The DPAs are easier to find. But the NPAs – unless you hear something – they can be difficult to find.”
And increasingly, corporate defense attorneys are asking for and getting non prosecution agreements.
“With the deferred prosecution agreement, you have to go into court, you have to file a criminal case, and get it dismissed,” McConnell said.
“A non prosecution agreement is just a letter between you and the company. There is a lot less scrutiny. As a practical matter, the two agreements have the same consequences.”
“From a public relations standpoint, the non prosecution agreement works better for a company. But they have the same features. If you sat down and redlined the two agreements, they have the same characteristics.”
“The benefit is there is no court case. It’s harder to find. Non prosecution agreements can be very difficult to turn up.”
“Companies are supposed to file them as material contracts in their 8-K reports, but many companies will enter into a non prosecution agreement and just include the press release. So, it’s tough to get information about the factual background of the case, the factual basis, and the specifics of the agreement.”
“So, there is less transparency with the non prosecution agreement.”
Is it legitimate to ask the prosecutor not to put out a press release about a non prosecution agreement?
“I don’t think so,” McConnell said.
“Most of the agreements say that the Department can disclose the agreement. I don’t think any prosecutor would honor that request. I certainly wouldn’t. And prosecutors that I know wouldn’t.”
“The company is getting a great deal from the prosecutor. They don’t have to go in and plead guilty. I don’t know that a defense lawyer would have the courage to go in and make that request. But I don’t think I would push that envelope too far.”
McConnell found that the Justice Department required ten monitors in 2010 compared to four in 2009.
McConnell is not a big fan of monitors.
“In November 2010, we had the Panalpina oil services agreements,” McConnell said. “No monitors.”
“If you are saying this is a good company. We shouldn’t charge this company. We are going to give them an agreement. Have the company report back on the status of their compliance reforms. Leverage their resources and hold them accountable. Have them come to the government and say – we’ve made the following changes. These will work.”
“So, have the chief compliance officer come back and report to the government.”
“In November 2010, we saw that in the Panalpina agreements. And I think we will see more of that going into 2011.”
So, not having a monitor benefits the company?
“Absolutely,” McConnell said. “And it benefits the Department of Justice.”
“The Department came under a lot of criticism after the Ashcroft $50 million monitorship was announced. Then we had the Morford Memo. And we had continuing effort by the Department to weed out conflicts of interest in the appointments of monitors.”
“These monitors are huge deals for the law firm to get. I went to a company that is under a monitorship. I did a talk on compliance. The monitor was there taking notes.”
“These guys are looking over everything the company is doing.”
Isn’t an independent monitor more of a benefit to the government?
“It depends on the case. If you are that worried about the independence of the internal compliance officer, why in the world are you giving them a deferred or non prosecution agreement?”
“If you think they are not going to be straight with you, make them plead guilty to a felony and have the probation office monitor them.”
“If you don’t trust them, you shouldn’t give them a good deal.”
“I would be interested to see what sort of benefits the Department is seeing in having a monitor over a compliance officer – other than the monitor being paid a lot of money by the company.”
“You could keep entire sections of your law firm busy on these monitorships.”
“‘Oh, I think we need to do some more due diligence in Dubai. Let’s send a partner and three associates out there.’ It’s very lucrative for the law firm.”
Does Haynes & Boone have any monitorships?
“No. Would the firm want to have a monitorship? I’m sure.”
But you think that the government should go for the criminal plea or let the company’s compliance officer be the monitor?
“Correct. That makes the most sense.”
“Line prosecutors, AUSAs, people who go in and try cases – they don’t want mess with companies for two or three years.”
“Law firms are always trying to set up meetings to talk about this or that. The company that is being monitored has no control over the costs. How do you complain about the monitor and all of his lawyers staying at the Ritz Carlton when you as a company put everyone up at the Holiday Inn? You can’t.”
“At Haynes & Boone, we are always very cost conscious. We travel the way the company travels. We are always trying to keep the rates down and show the client they are getting value.”
“But that incentive is not there for the monitor.”
Are there any cost controls on the monitor?
“You can complain to the Department, but you do so at your peril.”
[For the complete q/a format Interview with Ryan McConnell, see 25 Corporate Crime Reporter 4(11), January 24, 2011, print edition.]
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