17 Corporate Crime Reporter 29(1), July 21, 2003


A Justice Department memo issued earlier this year by Deputy Attorney General Larry Thompson has opened the door to deferred prosecution agreements for corporations.

The memo, titled "Principles of Federal Prosecutions of Business Organizations," is a revision of a similar memo issued by Thompson's predecessor, Eric Holder. The Holder memo was originally issued in June 1999.

The Thompson memo is very much similar to the Holder memo, with a few key differences. One of them has opened the door to deferred prosecution agreements.

Pre-trial diversion, as the agreements are also known, has traditionally been saved for minor cases, not major corporate crime cases.

The U.S. Attorney's Manual says that a major objective of pretrial diversion is to "save prosecutive and judicial resources for concentration on major cases."

But the Thompson memo explicitly allows federal prosecutors to begin settling corporate crime cases with pre-trial diversion.

"Granting corporation immunity or amnesty or pretrial diversion may be considered in the course of the government's investigation," the memo now states. "In such circumstances, prosecutors should refer to the principles governing non-prosecution agreements generally. These principles permit a non prosecution agreement in exchange for cooperation when a corporation's 'timely cooperation appears to be necessary to the public interest and other means of obtaining the desired cooperation are unavailable or would not be effective.'"

The Thompson memo was issued almost simultaneously with one of the first major pre-trial diversion cases earlier this year.

In that case, Banco Popular de Puerto Rico agreed to forfeit $21.6 million to the United States as part of a deferred prosecution agreement on charges of failing to report suspicious financial activity.

"This is a favorable change for companies," said Alan Vinegrad, a partner at Covington & Burling in New York. "The memo now explicitly says that pre-trial diversion, which had been reserved for small, individual, minor crimes, is now available for corporations."

Vinegrad said that while there have been a handful of publicized pre-trial diversion cases by corporations, it is conceivable that the Justice Department can cut these kind of deals with companies without filing a public document -- and therefore without any publicity to the case.

Vinegrad said that one such case has been handled by his office.

"Sometimes the agreement does not require -- depending on how they get done -- the filing of any public documents in court," Vinegrad said.

"There wouldn't be that relatively easy means of finding out what happened." (See Interview, page 11.)

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