Ropes & Gray Partner Brien O’Connor on Guilty Pleas and Deferred and Non Prosecution Agreements

Credit Suisse pled guilty last week. No deferred prosecution agreement. Collateral consequences were dealt with in global settlement with regulators.

Has the pendulum swung? Will the Justice Department start moving back to corporate criminal guilty pleas and away from deferred and non prosecution agreements?

That’s still unclear. But at the least, the swing is back toward admissions.

“You are hearing indications of that from the Department of Justice, from Mary Jo White at the SEC, from Judge Jed Rakoff and others,” Brien O’Connor, a partner at Ropes & Gray told Corporate Crime Reporterin an interview last week.

(Ropes & Gray was listed as one of the top five firms in Corporate Crime Reporter’s survey of law firms that handle deferred and non-prosecution agreements.)

“The theme is — they want admissions. Having settlements or resolutions where the company doesn’t admit or deny — or might deny the allegations — from a public policy perspective may not be enough. The trend toward having admissions is stronger than it was five to ten years ago. And that trend is having an effect in all of these negotiations.”

Despite the forward looking compliance provisions of these agreements, corporations still prefer them to outright criminal guilty pleas, right?

“It can depend to some extent,” O’Connor says. “If you have a deferred prosecution agreement where the company is admitting to certain wrongdoing, that’s a big deal. It makes it very much like a plea. You can have a plea where there is an admission, but it can be a very narrow factual admission. And it may be an admission that isn’t going to cause others — like state Attorneys General or class action plaintiffs — to piggyback onto it.”

“Whether it’s a plea or a deferred prosecution agreement, the big question is — what is being admitted to? Very often, that is the biggest question in these resolutions. When you go through the investigative process, find common ground with the Department of Justice, get to yes, you want it to be over. You don’t want it to be the beginning of a new chapter of actions against the company.”

“So, it depends. Can a plea be less harmful than a deferred prosecution agreement with terms that are onerous and aggressive? Yes, it could be better. But on balance, you don’t want to be taking a plea because there are reputation costs. And it is an admission. And whenever there is a criminal plea, you are going to have folks on the civil side thinking of trying to piggyback on that to get something for their clients after the plea.”

Prosecutors say that the reason we have these deferred and non prosecution agreements is to avoid collateral consequences. But in the Credit Suisse plea, the debarring agencies — the charter stripping agencies — were all on board. They made sure there were no collateral consequences as a result of the plea. It was a global settlement.

Given the Credit Suisse plea and the rhetoric coming out of the Justice Department, what are the chances we will see more pleas and global settlements like this one?

“That type of global settlement has been going on for years,” O’Connor says. “When you look at the corporate criminal pleas over the last fifteen years, they involve just what you are talking about — some global resolution. On the healthcare side, you will see a global settlement so that the plea does not bring about mandatory exclusion from participation in government programs.”

“You can do that and take care of certain issues and problems, but not all of them. While you can line up other government agencies to get on board to protect the company going forward from certain collateral consequences, if you enter a plea, there are private parties out there that you have to keep your eye on. Maybe state Attorneys General. Folks who might not be at the table when you negotiate the resolution and discuss collateral consequences. And those folks are able to cause harm to a company because of the plea.”

So, what’s the big factor in driving deferred and non prosecution agreements? The reputational hit of a guilty plea? The company doesn’t want to be known as a corporate criminal? Or was it the uncertainty of collateral damage from actors not at the table?

“First, it is the reputational hit. That is on everyone’s mind all of the time. That’s part of it. But then secondly, there can be these automatic mechanical consequences of a plea that deferred and non prosecution agreements help avoid.”
“For example, take a case where the government’s position is that a company has been paying kickbacks to doctors. Everyone recognizes that the law says that if the company pleads guilty to a violation of that statute, it is going to be excluded from participation in Medicare and Medicaid and other government programs. That’s a huge problem. And it has to be dealt with in the settlement if you want the company to continue to serve patients, to continue to exist.”

“So, there is the reputational harm. That is always on the mind of defense lawyers. On the government’s side, they want to avoid an agreement that will hurt innocent third parties — shareholders, patients, employees. That’s where you get the government agreeing to structure the agreement in a way where there will not be those direct collateral consequences.”

[For the complete q/a transcript of the Interview with Brien O’Connor, see 28 Corporate Crime Reporter 21(8), May 28, 2014, print edition only.]


Copyright © Corporate Crime Reporter
In Print 48 Weeks A Year

Built on Notes Blog Core
Powered by WordPress