Debevoise Partner Sean Hecker on Corporate Crime Settlements

Despite a few recent major corporate criminal guilty pleas, the field is still dominated by deferred and non prosecution agreements. And that’s the way it should be.

Sean Hecker

Sean Hecker

That’s the take of Sean Hecker, a partner at Debevoise in New York.

“The fact that prosecutors can negotiate their way around the negative consequences of a guilty plea doesn’t mean that they ought to go down that road on a regular basis,” Hecker told Corporate Crime Reporter in an interview last week. “Deferred and non prosecution agreements have become attractive because they allow for a relatively subtle resolution negotiated by the parties.”

“There are times when requiring a guilty plea is simply too blunt an instrument. It fails to recognize the relevant interests of shareholders, employees and the public. It will continue to be relatively rare. But it is probably right that there have been more over the last couple of years than for a long time after Arthur Andersen. I suspect there will continue to be criminal resolutions in the coming years. But I expect and hope that they will still be relatively rare.”

If the Justice Department started pushing major corporations to guilty pleas, would you anticipate some of those companies taking the Department to trial?

“It’s rare,” Hecker says. “Those of us who are trial lawyers chomp at the bit in some of these cases. You say to yourself — it’s all well and good that there is a theory here that folks acted improperly, but if push came to shove, could they really prove it up in front of a jury? There is some skepticism in the defense bar about some of the resolutions that have been reached. It continues to be the case that it is going to be the rare public company and the rare public company board that allows the company to take an indictment and go to trial on a significant matter. But that’s not to say that it won’t happen. If the issue is sufficiently cabined and the company gets the wherewithal to conclude that it won’t be the end of the company to try the case, you may see a couple of those cases over the coming years. And that would be great for the system. It would be an important check on the system to be able to put a case in front of a jury and see whether the government could actually prove up a theory. The government is typically in a position where they have a huge sword hanging over a company’s head. All of us who do what we do think that the playing field would be more balanced if there were companies occasionally able to fight. But it will be rare.”

We wrote a story last year about Leslie Caldwell’s speech at NYU Law School titled – Caldwell Says Look for More Corporate Guilty Pleas and Declinations.

“Over the last five to six years there have been a greater number of declinations than there were in the immediately preceding period,” Hecker said.

“That’s a good thing. It’s important for the Department and the SEC as well to take a pass on some cases where companies do things exactly the way you want them to do it, where there is a real recognition that multinationals with first class compliance programs can still have bad apples, can still have one off situations where someone crosses the line, but where fundamentally the company gets it and the government should take a pass. And they should do that to increase the likelihood that those companies with first rate compliance programs, doing things the right way, will walk in cases where cases exist. That’s an area where the Department of Justice has done a better job over the past five or six years.”

“And there have certainly been a number of high profile guilty pleas recently, including most notably the BNP Paribas case. It’s clear that the government has worked hard to address the parade of horribles scenario faced by financial institutions and others that were typically associated with criminal resolution. Now, the government is far better at coordinating with relevant government agencies to ensure that it is not the death knell for a corporation to take a guilty plea.”

“And there has been increasing skepticism within the Department about those kinds of arguments in opposition to a guilty plea. That has been an important development. And it means that lawyers representing institutions facing the potential of a criminal resolution need to be much more attuned to how to mitigate the collateral consequences that could befall an institution that ends up having to take a guilty plea. And that is a relatively recent phenomenon.”

What about the criticism that the Department failed to bring the big banks or their executives to justice for the fraud that triggered the 2008 financial collapse?

“You can put me in the camp of those who are skeptical that there were criminal cases to bring that were not brought. There are a combination of factors. But the most important one is that I am not convinced that there was outright criminal activity by those at senior management levels of banks. I haven’t seen it. Don’t believe it. I am not of the view of some skeptics that the Department wasn’t out looking for those. They were out looking for those. They looked hard and didn’t find them.”

“And then, even if you accepted the premise, which I don’t necessarily accept, that there was criminal conduct, those are incredibly difficult cases to bring. And it is not surprising to me that you didn’t see too many of them. The SEC was able to bring a number of matters. And that makes sense given the civil burden of proof. But it doesn’t surprise me the way it does some that you didn’t see more in the way of criminal prosecutions at the senior level.”

What do you make of the criticism that one problem that undermines the system is the revolving door?

“People have it exactly wrong with respect to that argument. Those who go back into government on the defense side are every bit as motivated as a career prosecutor to make a big case. If anything, the incentive created by the revolving door is to bring more and more significant cases against senior folks. That’s how you get attention for your time in government. And folks don’t leave the private sector to go into government to not bring cases. My own sense is that if anything the revolving door increases the incentives for those in government to bring important cases. It certainly doesn’t create an incentive to walk away from big cases because you are thinking down the road you may want to get a job. The reality is the private sector is all too happy to hire lawyers who have impressive enforcement records while they were prosecutors.”

[For the complete q/a format Interview with Sean Hecker, 30 Corporate Crime Reporter 19(12), May 9, 2016, print edition only.]

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