Columbia Law Professor John Coffee Says Boeing Deferred Prosecution Agreement One of the Worst

Columbia Law Professor John Coffee says that the Boeing deferred prosecution agreement is one of the worst he’s seen.

The agreement included an unusual provision finding that a compliance monitor was not necessary because “the misconduct was neither pervasive across the organization, nor undertaken by a large number of employees, nor facilitated by senior mismanagement.”

“That is without precedent,” Coffee told Corporate Crime Reporter in an interview last month. “I have not seen that anywhere else and I’ve looked at a number of deferred prosecution agreements. Prosecutors themselves are not conducting the investigation.” 

“They cannot know that. In most cases, what they do is hire an independent law firm, which to some degree is staking its reputation that it will do an honest down the middle of the road straightforward job. That didn’t happen in Boeing. You don’t see any reference in that Boeing report to an independent investigation. It was done pretty much by in house staff and outside consultants. No law firm stood up and said – here is a factual statement, going on 100 pages or so, as to everything that happened.”

“That’s because by the end of the Trump administration, there was no interest in conducting a full, thorough investigation. From Trump’s perspective, Boeing was essential to the economy. And he wanted to get Boeing cleared and back to business producing the 737 Max, whether or not it was safe.”

Coffee is author of the book Corporate Crime and Punishment: The Crisis of Underenforcement (2020).

The Boeing deferred prosecution “is an egregious case and one of the worst deferred prosecution agreements I have seen,” Coffee said. 

“Not only was there no independent study by a reputable outside law firm, but when you look where the money went, only $500 million out of $2.65 billion went to victims. $1.77 billion went to airline companies. Airline companies can take care of themselves. They had commercial rights. This was imported into this settlement to inflate the amount of the settlement.” 

“By giving the $1.77 billion to the Uniteds, Deltas and Americans of the world, the prosecution is serving its own interest by inflating the size of the settlement. Those airlines could have negotiated for themselves, and Boeing as a producer has to satisfy its customers. They were going to negotiate a settlement. Instead, they moved it over and made it part of the deferred prosecution agreement so they could extend the amount of the settlement and make it sound better to the press.”

In his book, Coffee recommends that the Justice Department abolish non prosecution agreements –  “plea bargains need to be subject to at least some judicial oversight” – and end the promiscuous use of deferred prosecution agreements – “a deferred prosecution agreement today reads like a corporate indenture drafted by skilled corporate lawyers, and no sense of guilt or culpability surrounds it.”

In exchange for that deferred prosecution, the Justice Department wants a full and thorough investigation. 

Are you saying that the corporate law firm is so conflicted that it will not go up the organization? 

Or are you saying that the way these corporations are structured, the information doesn’t make it up the organization?

“There are a continuum of possibilities,” Coffee says. “It is always a mistake to say there is only one pattern. In the world of internal investigations, which is probably the hottest area in major law firm practice today, in New York, Washington and on the West Coast, you probably have to have some prior experience in a law enforcement agency.” 

“But you are then going to conduct this investigation. You want to establish a reputation for yourself as fair and respectable, so prosecutors think you are going to give them an honest shake, but you don’t want to be known for having a zeal for enforcement.” 

“A passion for enforcement is not what the defendant wants when it hires such a law firm. It wants someone who will find out what happened at the bottom, which probably the top doesn’t know much about. But the investigation probably doesn’t have to follow every trail up to the executive suite.” 

“Those that can find their way not to follow the clues that lead up to the executive suite are going to be more popular than those who try to push the investigation up to the chief financial officer or someone similar.”

In his book, Coffee proposes that top civil enforcement agencies like the Securities and Exchange Commission (SEC) hire outside lawyers to litigate corporate enforcement cases.       

“This is the only feasible means of multiplying prosecutorial resources in the short run,” Coffee writes. “Legislatures are simply not about to double their appropriations for enforcement, but prosecutorial manpower can be substantially increased by the use of private counsel paid on a contingent fee basis.”

What about prosecutors hiring trial law firms?

“I wouldn’t want to use private attorneys in a decision on whether or not to indict someone,” Coffee said.

“That should be the state’s decision subject to full prosecutorial discretion. When you are conducting an investigation, it is now usually done by a law firm hired by the defendant, possibly with some approval or sign off by prosecutors. If you had the prosecutor in effect say to the corporation, if you want a deferred prosecution, you have to hire a law firm acceptable to us. Here are three or four names. Give me your choice and we will go forward. That way, you will be hiring a law firm to do the deferred prosecution investigation. The bar is going to learn that the prosecutor is making the decision within some range. And that is going to make them much more ready to cooperate with prosecutors.”

Coffee would also encourage whistleblowers through bounties. 

“Right now, the only agencies using whistleblowers in this area are the SEC, the CFTC and the IRS,” Coffee said. “There may be one or two others. We don’t have the U.S. Attorneys enabled to compensate whistleblowers. If you enabled U.S. Attorneys, by an act of Congress, to pay up to ten percent of the criminal fines that we levy to whistleblowers if they give us valuable information and they are the first to give it to us, you would open up a tremendous treasure trove of new information. We have seen the SEC get more information than they can realistically absorb or handle from whistleblowers. And occasionally, there is a very large payment.”

“If we were to say U.S. Attorneys can also pay for information, that is going to end some of the logistical mismatch I have been talking about. They could get people who worked at a company. The company had a problem, laid off a bunch of workers, they are all bitter. What can they do? Not much. But if they could be a whistleblower, they have a chance of making dozens of millions of dollars in some of these cases.”

[For the complete q/a format Interview with John Coffee, see 35 Corporate Crime Reporter 7(9), Monday February 15, 2021, print edition only.]

Copyright © Corporate Crime Reporter
In Print 48 Weeks A Year

Built on Notes Blog Core
Powered by WordPress