Clifford Chance Partner Edward O’Callaghan on the Fokker Services Deferred Prosecution

In June 2014, the Justice Department criminally charged Dutch aerospace firm Fokker Services with violating federal export controls by engaging in illegal transactions involving the export of aircraft parts, technologies, and services to customers in Iran, Sudan, and Burma.

Edward O'Callaghan Clifford Chance

Edward O’Callaghan
Clifford Chance

Fokker settled the case with a deferred prosecution agreement.

But in February 2015, Judge Leon threw out the agreement, ruling that “it would undermine the public’s confidence in the administration of justice and promote disrespect for the law for it to see a defendant prosecuted so anemically for engaging in such egregious conduct for such a sustained period of time and for the benefit of one of our country’s worst enemies.”

“Surely one would expect, at a minimum, a fine that exceeded the amount of the revenue generated, a probationary period of longer than 18 months, and a monitor trusted by the Court to verify for it and for the government both that this rogue company truly is on the path to complete compliance,” Judge Leon wrote.

Fokker Services and the Department of Justice both appealed to the DC Circuit, arguing that Judge Leon overstepped his authority.

Earlier this year, the DC Circuit agreed saying that Judge Leon  “significantly overstepped” his judicial authority in tossing the deferred prosecution agreement.

Fokker Services was represented in the case by Edward O’Callaghan, a partner at Clifford Chance in New York.

What gives a judge authority to review a deferred prosecution agreement?

“The authority emanates from the Speedy Trial Act,” O’Callaghan told Corporate Crime Reporter in an interview last week. “Once charges are filed against a defendant, the defendant has a right to a speedy trial. The clock starts running. Often in federal cases, there are a number of justifications within the code to toll the speedy trial clock. And one of those specifically is for deferred prosecution agreements.”

“The government and the defendant, once those charges are filed and put before a judge, the parties need to go before the judge to ask that the judge toll the running of the speedy trial clock. Otherwise, the government would be obligated to prosecute within 70 days. The language in the law is ambiguous as to how much authority a judge gets over the tolling of the speedy trial clock. We argued in our case, and the Department argued, that the authority that the judge has is simply to approve the fact of the deferred prosecution not to look at the specific terms of the agreement.”

“The authority is simply to determine that the parties aren’t somehow trying to subvert the speedy trial clock for some unjustified reason. There is specific language in the statute that does grant a district court authority to approve tolling the speedy trial clock.”

You stood side by side with Justice Department lawyers making the same argument — that the judge can’t question the details of the agreement.

“I felt fairly comfortable with that. Once you have the agreement with the Department, it is certainly in the company’s best interest to align with the Department to make sure the terms of the agreement are not disturbed by a court or otherwise. By negotiating a deferred prosecution agreement, the company is seeking to obtain that finality. In this case, the deferred prosecution agreement was filed. It went before Judge Leon. And the hope was that Judge Leon would look at it and agree that deferring the prosecution was appropriate and was not something that was intended to subvert the 70 day period and grant the request to toll the speedy trial clock for the 18 month term.”

In February of last year, Judge Leon rejected the deferred prosecution. It was the first time that a federal judge had rejected a deferred prosecution agreement in a corporate crime case.

Judge Leon ruled that “it would undermine the public’s confidence in the administration of justice and promote disrespect for the law for it to see a defendant prosecuted so anemically for engaging in such egregious conduct for such a sustained period of time and for the benefit of one of our country’s worst enemies.”

Did this decision come as a surprise to you?

“We were surprised by the decision. We had filed the deferred prosecution agreement in June 2014. And we had a number of court conferences before Judge Leon. Those were public. He had expressed his concerns with what he determined to be lenient agreement terms. We understood that the agreement was being scrutinized heavily by the judge. But we did not think that he was going to outright reject it. As you said, that had never been done before. And we didn’t think the court had the authority to do that, which the DC Circuit ultimately agreed with us on.”

“We didn’t think Judge Leon was going to flat out reject it. We anticipated perhaps a court order for more briefing. Or perhaps some further argument on the merits of it. But his flat out rejection of it was unprecedented. It was hard to predict that was going to happen. It had never happened before.”

What was your argument to the DC Circuit?

“The argument was that Judge Leon had severely overstepped his authority in rejecting the parties’ application for tolling of the speedy trial clock to allow Fokker Services to demonstrate its good conduct in the deferral period. The Department of Justice had a number of constitutional principle arguments — separation of powers.”

“They argued that they maintained discretion to not only charge cases where it saw fit, but also to dispose of cases as it saw fit and enter into resolutions. The Department argued — and we agreed — that in rejecting the agreement, Judge Leon had gone beyond the authority provided to him under the Speedy Trial Act. The argument was he didn’t have the authority to judge the terms of the agreement as being too lenient. And ultimately his rejection of the agreement overstepped his judicial authority.”

The DC Circuit Court overturned Judge Leon — on what basis?

“The DC Circuit accepted the arguments of the Department of Justice and Fokker Services that a district court judge has a limited role in approving a deferred prosecution agreement. They ruled that Judge Leon significantly overstepped his authority. The authority does not allow district court judges to step in the shoes of the Attorney General to make a determination as to whether or not the resolution is appropriate.”

Who would have standing to appeal the DC Circuit’s ruling to the Supreme Court?

“If there had been a different ruling, the Department of Justice and Fokker Services would have had to consider whether a petition for cert to the Supreme Court would have been appropriate. Being parties to the action, they would have had the predicate to file that petition for cert.”

“Would the amicus in the case have standing to appeal? I’m not quite sure whether there is precedent for that.”

Or would Judge Leon have standing to appeal?

“Or amicus on behalf of the judge? It would be interesting. We couldn’t find precedent for that scenario where a petition was actually filed.”

“The deferred prosecution agreement actually expired in December 2015 according to its terms. Even before the DC Circuit ruled, it was Fokker Services’ position that the agreement had expired. When the DC Circuit ruling came down in April 2016, the Department of Justice soon thereafter went before Judge Leon and filed a motion to dismiss the information. Once Judge Leon got jurisdiction back from the Circuit Court, Judge Leon entered an order dismissing the case. It is completely resolved at this point.”

[For the complete q/a format Interview with Edward O’Callaghan, see page 30 Corporate Crime Reporter 32(12), August 8, 2016, print edition only.]


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