CORPORATE CRIME REPORTER
Pitofsky:
Deferred Prosecutions “Almost Too Good to Be True”
19 Corporate Crime Reporter
46(7), November 21, 2005
Deferred prosecution agreements for corporations are “almost too good
to be true.”
That’s the take of David Pitofsky, a partner at Goodwin Procter in New
York.
Before joining Goodwin Procter, Pitofsky was an Assistant U.S. Attorney in Brooklyn
and the lead prosecutor in the Computer Associates case.
Pitofsky negotiated a deferred prosecution with the Long Island based company,
while getting convictions against the chief financial officer and the general
counsel.
The chief executive officer and head of sales for Computer Associates are scheduled
for trial next year.
“Until proved otherwise, the deferred prosecution and non prosecution
approach almost is too good to be true,” Pitofsky told Corporate Crime
Reporter. “It allows the government to send its deterrent message
without losing too much leverage, and to obtain from the company both an admission
of guilt and a commitment to reform far, far more completely and quickly than
taking a case to conviction and sentence. And if the government pursues a corporation
to conviction and sentence, there oftentimes is no corporation left to reform
at the end of the day anyway.”
Pitofsky will be moderating a panel discussion
on deferred prosecutions sponsored by the Federal Bar Council in New York City
on December 15, 2005.
Pitofsky said that deferred prosecution and non prosecution agreements will
remain the standard settlement options for federal prosecutors unless one of
two things happen.
“First, if they don't work and don't fix the cultural problems,”
Pitofsky said. “Second, if prosecutors get the sense that companies see
federal prosecution as less of a deterrent because they decide they can live
with a deferred prosecution. I don't think that will happen, but is certainly
something prosecutors are keeping an eye out for. As of now, prosecutors have
immense leverage because conviction can be a corporate death sentence, and they
don't want to lose that leverage.”
What about the double standard – corporate executives commit a crime,
they are convicted – corporations commit a crime, they get their prosecutions
deferred?
“Individuals and corporations are totally different concepts,” Pitofsky
said. “Sending a deterrent message and punishing an individual is a fairly
clean process. Here is the individual. He has to be punished, and an adequate
deterrent message needs to be sent to other individuals who may be considering
the same crime.”
“Sending a deterrent message through the punishment of a corporation is
much more complicated. Convicting the corporation causes negative consequences
to third parties who are extremely distant from the misconduct. Also, there
is another conduit – the prosecution of individuals – which in my
view establishes a much stronger deterrence.”
Pitofsky said that in the Computer Associates case, the deterrent message was
“extremely strong – and I don't see where the absence of the conviction
of the corporation dilutes it.”
“The CFO was convicted and disgraced,” Pitofsky said. “The
general counsel was convicted and disgraced. The CEO and head of sales are scheduled
to go to trial next year.”
“I have a hard time believing that other CFOs, CEOs and general counsels
are sitting in their offices today saying – I guess I'll take the risk
of committing the crime, because even though I may be disgraced and separated
from my family for 15 to 25 years, the company will get off with a deferred
prosecution and only have to pay a fine and agree to reforms,” Pitofsky
said.
Some, like former Corporate Fraud Task Force official William Mateja, have questioned
whether Computer Associates should have been granted a deferred prosecution
agreement. (See Interview with William Mateja, 19 Corporate Crime Reporter
40(12), October 17, 2005, print edition only)
Pitofsky agreed that “a decision to have insisted on a conviction of Computer
Associates would have been entirely defensible.”
“There is not a right or a wrong answer in these cases, which is part
of what makes them so difficult,” Pitofsky said. “The Thompson factors
never all point in the same direction. And while the Thompson factors are helpful
in terms of understanding what the breadth of the analysis should be, they don't,
and they can't, provide any guidance as to what the answer should be. That has
to be left up to the individual U.S. Attorney who has to weigh all of the factors.”
“If the point that Bill was making is that it could have gone the other
way, I agree,” Pitofsky said. “Every one understands that. But if
the point that he was making that the decision was wrong, he may not have had
access to all of the information that we had, that we based the decision on.
Or he may have just a different opinion. The identity of the U.S. Attorney means
something in these cases. Ultimately, the decision falls to an individual person.
In this case it was Roslynn Mauskopf– the U.S. Attorney in Brooklyn. She
felt that a deferred prosecution was the right decision given all the facts
and circumstances in the Computer Associates case. And I agreed with her.”
Pitofsky sees an argument for increased court supervision over the process.
“I think part of the frustration of people who question the government's
use of deferred prosecution agreements is that the process does not include
parties that may take a contrary view,” Pitofsky said. “The government
and the corporation are generally of the same view that deferred prosecutions
are good. Constituencies that see it differently – executives whose interests
are trampled in the process, competitors who think its only fair that the company
be fully punished – have no voice in the process.”
(For a complete transcript of the nine-page question/answer format interview,
see “Interview with David Pitofsky,” 19 Corporate Crime Reporter
46(7), November 28, 2005, print edition only)
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