Earlier this year, the New York Times criticized the widespread use of deferred and non prosecution agreements to settle corporate crime cases.
“The government’s preferred approach to corporate crime seems to have had scant, if any, deterrent effect,” James Stewart wrote in the Times earlier this year.
Michael Rosensaft disagrees.
Rosensaft, a former federal prosecutor, is now a partner at Katten Muchin in New York.
“Deferred and non prosecution agreements are achieving all of the goals we are looking for in certain situations,” Rosensaft told Corporate Crime Reporter in an interview last week. “They are not appropriate in every single situation. But in certain situations, they are achieving these goals. I don’t see what the issue is with their use.”
“For certain corporations, they are still appropriate. While many of the corporate prosecutions end in deferred and non prosecution agreements, not all of them do. It’s not as if companies are no longer pleading guilty.”
“For companies over years and years that are recalcitrant, do not cooperate, are not willing to put the controls in place to make sure future violations don’t occur, it would be entirely appropriate for that company to plead guilty.”
“But as a prosecutor, you have to balance what you are given and figure out what you are trying to achieve. Extra general deterrence will be achieved by making the company plead guilty.”
“But that doesn’t necessarily mean that is the right outcome. You have to look at general deterrence, specific deterrence, restitution to your victims. You have to look at your litigation risk. If you are forcing a lot more companies to plead guilty, that’s going to mean a lot more companies are going to take their chances at trial and decide it may be worth it.”
“And in some of those cases, even though you may have a very strong and overpowering case, you may not win, due to juries, judges – there is always a litigation risk, no matter how strong your case is.”
“And in those cases, you are not going to get restitution for your victims, and once a company wins a case like that, it’s going to be the opposite of deterrence. You are going to get more companies taking the cases to trial. They will feel emboldened.”
“The prosecutor has all of the facts. We see what the companies admit to. But that doesn’t come close to describing all the facts that the prosecutor knows. The prosecutor knows the company best – compared to what you read in the press releases. Are they really compliant? Are they sincerely trying to mend whatever errors they made?”
“The prosecutors have done an analysis of what kind of compliance is in place now and what the company is proposing. And the prosecutors have to make a determination about how effective that will be and how sincere the company is.”
“These are all things the prosecutor knows, and things we don’t know through a press release. It’s a tough decision to make. But a prosecutor is in the best position to decide what is the most appropriate outcome. Is it a deferred or non prosecution agreement? Or are those agreements not appropriate because we need to send a stronger message and we don’t believe that a deferred or non prosecution agreement will do that?”
In deferred prosecution agreements, corporations usually admit to criminal wrongdoing. So what’s the difference between those agreements and plea agreements?
“Well, first of all there is an atmospheric difference which is going to affect the company,” Rosensaft says. “In today’s climate, you are signaling to the public the severity of the crimes and how serious you are about reform.”
“If the Department of Justice is talking about your extraordinary cooperation and your compliance controls that are in place now, that obviously sends a much different message than if a company just pleads guilty. And that’s going to affect the company, it’s going to affect not just the wrongdoers in the company, but the entire company – the shareholders, the employees. So, there is a difference.”
“There could also be differences based on the company’s contracts and leases. Sometimes felony convictions will trigger certain things and agreements that admitting wrongdoing will not trigger. So, there are collateral consequences there as well.”
“So, there is a real difference. Could we go back to where we were before these agreements were used so pervasively? Sure we could go back. The question is – what would that achieve? We are going to end up with prosecutors not bringing as many cases.”
“For more minor violations, and for companies that are cooperating, it’s going to result in fewer prosecutions. It’s going to result in fewer voluntary disclosures of those minor violations.”
“It’s going to result in an atmosphere where fewer violations are being reported because the self-reporting is going to drop. Fewer prosecutions will be brought because the prosecutors will have to calculate the collateral consequences and whether even to bring the case. And that’s not a good thing.”
“The atmosphere created with the use of deferred prosecution agreements is now one of voluntary self-reporting, of cooperation, of compliance, of putting in robust controls to identify if there are crimes, to make sure they are reported, and to cooperate when crimes are identified.”
“These are all good things. These are things that help protect society, they protect the business world. They lead to restitution to victims.”
“Yes, we could go back to prosecuting or not prosecuting, but we are going to lose something by doing that.”
[For the complete transcript of the Interview with Michael Rosensaft, see 26 Corporate Crime Reporter 39(12), print edition only.]