Do deferred and non prosecution agreements deterred criminal wrongdoing?
Mike Koehler wants to know.
Koehler is a professor at the University of Southern Illinois School of Law.
In the past, the Justice Department has answered with a resounding “yes.”
But Koehler says the real answer is — nobody knows.
In December 2012, the Justice Department weighed in by arguing that “one of the best sources of anecdotal evidence demonstrating that deferred and non prosecution agreements have a deterrent effect comes from the companies themselves.”
“The companies against which DPAs and NPAs have been brought have often undergone dramatic changes,” the Justice Department argued. “For instance, prior to or following the entry of DPAs or NPAs, many companies have terminated personnel, including senior managers, established new codes of conduct and compliance policies and procedures, pledged not to use third-party agents, withdrawn from bids tainted by corruption, provided new and substantial resources to compliance and audit functions within their organizations, and instituted new training regimes.”
“These companies, through their remediation efforts under DPAs and NPAs, have often fundamentally changed how they conduct business. In addition, just like with individuals on parole or probation, the monitor provisions or self-reporting requirements of DPAs and NPAs are designed to deter future misconduct and, at the same time, ensure that companies meet their obligations.”
“In meetings with board members, chief executive officers, chief financial officers, general counsel, and chief compliance officers, DOJ and SEC have heard directly from these senior leaders about the impact DPAs and NPAs have had on their companies for the better.”
But Koehler puts forth two examples to counter the Justice Department’s argument.
In 2008, the Department of Justice announced that Aibel Group Ltd. pled guilty to violating the anti-bribery provisions of the Foreign Corrupt Practices Act (FCPA).
“Aibel Group admitted that it was not in compliance with a deferred prosecution agreement it had entered into with the Justice Department in February 2007 regarding the same underlying conduct,” the Department said. “This is the third time since July 2004 that entities affiliated with Aibel Group have pleaded guilty to violating the FCPA.”
Example two is the case of Ingersoll-Rand.
Fresh off its exit of a deferred prosecution in 2011, the company soon disclosed that it found other potential violations of the FCPA.
In a 2011 filing, the company stated as follows: “We have reported to the DOJ and SEC certain matters which raise potential issues under the FCPA and other applicable anti-corruption laws, including matters which were reported during the past year. We have conducted, and continue to conduct, investigations and have had preliminary discussions with respect to these matters with the SEC and DOJ, which are ongoing.”
“So the question remains, do deferred and non prosecution agreements deter?” Koehler asks.
“It turns out that not even the Department of Justice knows the answer,” he answers.