University of Virginia Law Professor Brandon Garrett knows a lot about the way the Justice Department settles corporate crime cases.
In 2014 he wrote a book about it titled Too Big to Jail: How Prosecutors Compromise with Corporations (Harvard University Press, 2014).
And he has created perhaps the most comprehensive on-line database of corporate crime settlements — deferred and non prosecutions and plea agreements. Garrett says the database is being upgraded and the new improved database will be publically available sometime in the summer.
Garrett was not at all pleased with the DC Circuit’s Fokker decision earlier this month ruling that federal judges had no discretion to “second guess” decisions to cut deals with corporations.
Judge Richard Leon rejected a deferred prosecution agreement with Fokker Services.
“We have not seen judges fail to rubber stamp deferred prosecution agreements with companies very often,” Garrett told Corporate Crime Reporter in an interview last week. “The fact that a deferred prosecution agreement was rejected is unusual.”
“Judge Leon said the deal was too lenient. He called it an anemic prosecution given the egregious conduct over a long period of time. He said the company was only being asked to pay a fine in the amount of the illegal revenue obtained. That’s not really deterrence. There is no added punishment there. He said employees involved with the crime were allowed to remain with the company. There was no independent monitor that would assure that the company would comply. He said the court and the prosecutors were only being told based on the company’s say so whether any compliance problems were being fixed.”
“He said if you have a rogue company, such a company should pay a meaningful fine with actual punishment and it should be put on probation for more than 18 months and there should be a monitor. And he noted that employees and individuals were not being held accountable.”
“You would think that prosecutors would welcome this. Obviously, the judge scuttled their deal. But actually, it strengthens their hand. Prosecutors can return to the company and say — we have to impose tougher terms now. Instead, prosecutors responded with outrage, appealed the judge’s decision to the DC Circuit, arguing that the judge had overstepped his authority.”
“The Speedy Trial Act says that judges have discretion to decide to do something unusual. In this case, that was to excuse a case from the regular Speedy Trial Act provisions. The prosecutors said — no, the judge shouldn’t have that kind of discretion. They should basically approve any deal that we enter. There is discretion involved, but the discretion is the prosecutor’s discretion, not the judge’s discretion.”
“I was involved in a case in DC occurring around the same time — Saena Tech. Judge Emmitt Sullivan reached out and asked if I would serve as amicus to brief the court on whether a judge had discretion to approve or supervise such a deferred prosecution agreement. And I argued that without agreeing or disagreeing with what Judge Leon did, that a judge in general should have the authority to approve a deferred prosecution agreement. The Speedy Trial Act is clear that a judge is supposed to supervise diversion since the case is on their docket. The Speedy Trial Act language is clear that not only is there the purpose that judges supervise these cases but that judges are granting something exceptional and it is within the judge’s discretion to deny such an unusual agreement.”
“I argue that while judges should be deferential as parties reach an agreement, and it is a good thing to encourage parties to settle cases, judges should also ask whether such agreements are in the public interest. And I offered some factors for judges to consider, including some of the very factors that Judge Leon considered, including whether the fine was adequate or whether individuals were being held accountable.”
“I have taken the position that it is appropriate and it should be required that judges exercise discretion in deciding whether to approve deferred prosecution agreements or not.”
“The DC Circuit’s opinion was quite disappointing. They could have reached the same result and reversed Judge Leon and say that Judge Leon’s exceeded his discretion. And if they had done that, they could have described what discretion Judge Leon had and what makes for an arbitrary denial of a deferred prosecution and what makes for a good denial in the public interest.”
“Instead, they said as a blanket matter, using highly overbroad language, that judges must not do anything to interfere with an agreement between prosecutors and defendants, except maybe if there is something unethical or illegal going on.”
“That makes little sense. That’s not the standard for plea bargains where defendants are convicted. Judges can decide not to approve a plea bargain if the interest of justice are implicated. It’s certainly contrary to the language of the statute which says that judges have the option, but are not required to grant exceptional relief.”
“The decision also doesn’t make much sense because the Speedy Trial Act is designed to protect a defendant’s rights. It’s not a tool for prosecutorial discretion. It’s designed to protect an important due process right of criminal defendants. It’s called the Speedy Trial Act because it protects speedy trial rights. Instead, the DC Circuit said that this statute should be interpreted to preserve the maximum prosecutorial discretion, to preserve executive power.”
“That’s kind of a remarkable idea. I’ve haven’t heard of such a concept in criminal law — that statutes should be interpreted to maximize prosecution power? That’s the opposite of the principle that we normally apply for criminal statutes — which is — the rule of lenity — the idea that you interpret statutes, if they are vague to be lenient, given the stakes in criminal cases.”
“What they were relying on was the idea that judges are not supposed to review a prosecutor’s decision to drop a case entirely, to dismiss. That’s an exercise of mercy by prosecutors. You don’t want judges interfering in that decision. But the decision to go forward with a deferred prosecution agreement, fine a company, supervise a company, and place a case on the judge’s docket — is nothing like the decision to decline to prosecute and voluntarily dismiss a case.”
“I think the DC Circuit got it wrong every which way in its opinion. I’m not sure that the parties would ever have a reason to appeal that decision, since both parties would welcome it. And that’s unfortunate because the DC Circuit got it wrong. It may be that other circuits over time will disagree with them. Another result may be that Congress returns to the subject and amends the Speedy Trial Act to create a statute that has specific conditions for a deferred prosecution agreement with a corporation. I have recommended to folks on Capitol Hill to look into legislation like that and I hope that the Speedy Trial Act is amended to create corporation specific rules for deferred prosecutions.”
Judge Sullivan, Leon, John Gleeson and Jed Rakoff are among a handful of federal judges pushing to make more transparent the corporate crime settlement practice.
“One thing we have learned because of Judge Gleeson in the HSBC case is that company still has some real compliance problems,” Garrett said. “I was heartened to see Judge Gleeson order that the monitor’s report in that case be made public. It was a 1,000 page report. We don’t know what it says because the bank is appealing and the prosecutors agree that the report should be kept secret. I just don’t understand that. These monitors are doing incredibly important work. They are doing a public service. They don’t work for the company and they don’t work for prosecutors. They are serving the public interest. That’s why they are independent.”
What is the Justice Department’s argument for moving to keep the report secret?
“The Department argues that the bank didn’t realize that the report could be made public when they agreed to the monitor or that some of the information may not be suitable for the public. I’m not sure any of those reasons are convincing. The judge said that if there is information that is private or that is about particular employees, you could redact information from the report. I don’t understand why prosecutors wouldn’t want the public to know how things are going in some of their most important criminal cases. They should want the public to know if a company is making important improvements. And if they are not, the public should know that as well. The prosecutor should be aggressively policing a company like that — extending the agreement, demanding that the company better comply with what the monitor is identifying. It raises the concern that prosecutors aren’t really trying to get companies to follow these agreements. They just want them to be over and to collect the fine.”
Are there any standards or guidelines governing when a company will get a monitor or not?
“There are somewhat vague standards. The Department of Justice memo says monitors should not always be used, but if a company has particularly serious compliance problems that a monitor could help with, then a monitor should be considered. The guidance is totally unhelpful.”
“What we see is that the vast majority of the time, no monitors are appointed at all. I find that troubling. As prosecutors say, they only go after companies when there are systemic problems. If it is just an isolated problem, they should just be prosecuting the individuals. If a company has systemic problems and there is no monitor, you are really just trusting the company to fix things on its own. And you are trusting the company’s word that they have fixed the problem. Monitors are not perfect. There are good reasons to worry that too many of these monitors charge too much money, too many of them are former prosecutors. But those are all reasons to involve judges more in approving the monitor and making sure there is independent accountability, that the monitor is approved by a judge, that the monitor reports to the court and that there is a consequence in court if the monitor goes too far or if the monitor identifies problems that the company ignores.”
Are you hinting at omnibus corporate crime legislation that would include guidelines on monitors and authority for judges over deferred and non prosecution agreements?
“I would certainly support legislation like that. I’m not sure how likely it is. A limited intervention might be amending the Speedy Trial Act to include criteria for approving deferred prosecution agreements with corporations.”
“There could be different rules for corporate probation, including rules for corporate monitoring. There is a lot that Congress could do to shape up this area.”
“In the past, we have had amorphous Department of Justice guidelines and vague sentencing guidelines. That gives prosecutors a lot of discretion, which they have used.”
What is the status of the HSBC monitor report?
“It’s before the Second Circuit. That will be down the road.”
Who is arguing to make it public?
“Citizens — represented by First Amendment lawyers. They are arguing that there is a First Amendment public right of access to important government information. It’s been a struggle over the years to get information about some of these corporate agreements.”
In your database, are there monitor reports?
“I’ve come across very few of them. They are generally kept secret. There are a handful of situations where the company itself has voluntarily posted a monitor report. But it’s rare.”
[For the complete transcript of theq/a format Interview with Brandon Garrett, see 30 Corporate Crime Reporter 16(10), April 18, 2016, print edition only.]