CORPORATE CRIME REPORTER
Crime
Without Conviction: Report Details 34 Special Deals with Major Corporations
20 Corporate Crime Reporter 1(1), December 28, 2005
Federal and state prosecutors are increasingly offering major corporations –
including Adelphia, Computer Associates, KPMG, Merrill Lynch, Monsanto, Sears,
Shell, WorldCom/MCI – special deals – known as deferred prosecution
or non prosecution agreements.
Under these agreements, prosecutors agree not to criminally prosecute the corporation
to conviction in exchange for cooperation against culpable executives, implementation
of corporate monitors, and fines.
That’s according to a report released
today by Corporate Crime Reporter.
The report – titled Crime Without Conviction: The Rise of Deferred
and Non Prosecution Agreements – details 34 such agreements –
17 deferred prosecution agreements and 17 non-prosecution agreements.
“It used to be that major corporations caught committing serious crimes
would be brought to justice – convicted of a crime and sentenced,”
said Russell Mokhiber, editor of Corporate Crime Reporter. “No
longer.”
Now, under a policy implemented by the Department of Justice since 2003, major
corporations caught committing serious crimes are not convicted of a crime and
sentenced.
In fact, no major corporation caught engaging in accounting or securities fraud
has been convicted since the Arthur Andersen conviction in June 2002.
The report finds that prosecutors have entered into twice as many non-prosecution
and deferred prosecution agreements with major American corporations in the
last four years (23 agreements between 2002 to 2005) than they have in the previous
ten years (11 agreements between 1992 to 2001).
“It used to be that a obstruction of justice would change a decision not
to prosecute into a decision to prosecute,” Mokhiber said. “No longer.
In some cases, as in the KPMG case, where obstruction is alleged, line prosecutors
who want to criminally prosecute the corporation to conviction have reportedly
been overruled by their superiors.”
The report finds that deferred prosecution and non prosecution agreements were
originally intended for minor drug cases and juvenile delinquency cases.
In fact, the U.S. Attorney’s manual is explicit in this regard stating
that a major objective of these agreements is to "save prosecutive and
judicial resources for concentration on major cases."
But now these agreements are being routinely employed to relieve large U.S.
corporations of their criminal liability in major bribery and fraud cases.
The report profiles thirty-four cases where prosecutors –– confronted
with solid evidence of corporate criminal wrongdoing –– have chosen
instead to enter into a non-prosecution agreement or a deferred prosecution
agreement with the corporation.
Seventeen (17) of the thirty-four cases were settled with non prosecution agreements.
That is where the prosecutor agrees not to criminally prosecute the corporation
in exchange for fines, cooperation, monitors, and changes in the corporate structure.
The seventeen companies that settled their cases with non prosecution agreements
are:
American Electric Power (January 2005), Adelphia Communications (May 2005),
Aetna (August 1993), Aurora Foods (January 2001), Bank of New York (November
2005), Coopers & Lybrand (September 1996), Hilfiger (August 2005), John
Hancock Mutual Life (March 1994), Lazard Freres (October 1995), MCI (September
2005), Merrill Lynch (September 2003), Merrill Lynch (October 1995), Micrus
Corporation (March 2005), Salomon Brothers (May 1992), Sequa (June 1993), Shell
Oil (June 2005), Symbol Technologies (June 2004).
The other seventeen (17) cases were settled with deferred prosecution agreements.
Under a deferred prosecution agreement, the prosecutor charges the corporation
with a crime, but agrees to drop the charges if the corporation fulfills its
promises to the prosecutor.
These promises include fines, cooperation –– including the highly
controversial waiver of attorney-client privilege –– and monitors.
The seventeen companies that settled their cases with deferred prosecution agreements
are:
American International Group (November 2004), America On-Line (December 2004),
Amsouth Bancorp (October 2004), Arthur Andersen (April 1996), BDO Seidman (2003),
Banco Popular De Puerto Rico (January 2003), Bristol Myers Squibb (June 2005),Canadian
Imperial Bank of Commerce (December 2003), Computer Associates (September 2004),
InVision Technologies (December 2004), KPMG (August 2005), MCI (March 2004),
Monsanto (January 2005), New York Racing Association (December 2003), PNC Financial
(January 2003), Prudential Securities (October 1994), Sears (April 2001).
“There has been a sea-change in corporate criminal prosecution over the
last couple of years,” Mokhiber said. “Just a few years ago, corporations
would protect the individuals executives from federal prosecutors and plead
the corporation. Today, corporate defense counsel are working with federal prosecutors
to send the executives to jail. In return, federal prosecutors are agreeing
not to convict the corporation. This has undermined corporate criminal liability
and may be doing serious damage to the federal campaign to deter corporate crime.”
The area is ripe for what defense attorneys see as an abuse of prosecutorial
discretion.
In the Bristol Myers Squibb case profiled in the report, the U.S. Attorney in
New Jersey insisted that as a condition of the deferred prosecution agreement,
the company fund a chair in business ethics at Seton Hall Law School –
the law school the U.S. attorney graduated from.
In the MCI case, the Attorney General of Oklahoma demanded that, as a condition
of the deferred prosecution agreement, the company create 1,600 jobs over ten
years.
And in December 2003, the New York Racing Association was required as a condition
of the agreement to bring slot machines into its racing venues.
“Some defense attorney see these demands as a form of prosecutorial abuse
since they are totally unrelated to the underlying alleged criminal activity,”
Mokhiber said. “But another form of prosecutorial abuse is to give up
the store, to forfeit the criminal conviction of the company – and the
sanction that big companies fear most – the fear of adverse publicity
that results from that criminal conviction. And it doesn’t have to be.”
Mokhiber said that federal prosecutors can get the same results with corporate
probation.
“They don’t have to give up the conviction to get where they want
to go,” he said.
“In November 1994, Consolidated Edison was convicted of environmental
crimes and placed on court supervised probation,” Mokhiber said. “A
monitor was appointed. And the monitor reported on the changes within Consolidated
Edison to the judge over the entire probationary period. When the judge was
satisfied that the corporation had rehabilitated itself, he lifted the probation.”
By contrast, the report found, conditions of deferred prosecution and non prosecution
agreements are generally outside the judicial system – judges have little
or no control over them.
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