More than ever, corporate crime prosecutors are strapped for funds.
What to do? Deputize the corporation to investigate and self-report to the government.
In exchange, prosecutors enter into non-trial settlements – deferred prosecution agreements, non prosecution agreements, declinations. It’s called the leniency ladder.
Negotiated corporate settlements were a project of the corporate defense bar in the United States and are now deeply embedded at the Justice Department. And they have now been exported around the world.
Tina Soreide and Abiola Makinwa are co-editors of a new book – Negotiated Settlements in Bribery Cases (Elgar, 2020) that takes a deep dive into this uniquely American export.
Some of the authors in the book look at the settlements and whether they deter foreign bribery. How did different criminal justice systems respond to negotiated settlements? What kinds of trade-offs are governments faced with? And what are the key elements needed to ensure that negotiated settlements will deter bribery? What factors are important to ensure that a negotiated settlements framework encourages voluntary disclosure or cooperation?
Others look at negotiated settlements from the perspective of justice. What is the involvement of corporations and their counsel as co-investigators in corporate crime enforcement? What is the underlying purpose and rationale of negotiated settlements? Do they serve as an instrument to obtain justice? Whose justice is it, anyway?
In your book, you have a wide range of perspectives.
Let’s say on the one end you have Jennifer Arlen of NYU Law School who seems to be a booster, to on the other end, someone like Susan Hawley who raises a lot of red flags about them.
Some people see these non-trial resolutions as a project of the corporate defense bar. This is the kind of deal that the corporations initially wanted to prevent a criminal guilty plea or a trial on the merits.
Where do you come down on that spectrum?
“If they are developed and regulated so that they can be used in a manner that is compatible with some sanctioned principles – principles like deterrence and justice, if there are some mechanisms in them that make them possible to protect some of these criminal law aims, it is possible to enforce efficiently with the help of settlements,” ,” Soreide told Corporate Crime Reporter in an interview last week.
“But we are concerned about how this enforcement mode is being used. They are applied in so many different ways with prosecutors looking at what happened in the past combined with what companies promise to do in the future, the facts of the case can be negotiated, companies get benefits for cooperation even if they did not self-report. So, there are concerns.”
“In some countries, you have judicial control. In others, there is no judicial control. The enforcement action has a different status across countries. In some countries, it will lead to debarment. In others, it will not. It is not predictable at all in some countries. In others, there are very clear routes. In some countries there is a separate law regulating bribery while in other countries the definition of liability is very unclear.”
“You ask if I like them. It is very difficult to say if we like them or not. They can be used in a sensible manner. And it is important to find ways that end some of these cases. One of the reasons these are in use is that they can lead to a quicker resolution with fewer resources. We see an increase in the number of enforcement cases in the countries that use these settlements. It is also a way of encouraging companies to cooperate and self report.”
“I do have concerns about them, but they do have benefits.”
Someone in your book points out that governments don’t have the resources to bring these prosecutions against the corporations without the help of the corporations.
But what if the government had the resources to focus on corporate crime and to bring robust corporate criminal prosecutions?
“What you asked has to be considered across several dimensions. When it comes to corporate bribery cases, some governments don’t want to enforce those rules. They are not very interested in enforcing rules about how companies get contracts abroad. That is one side of it. For some of these counties, it doesn’t matter how many resources they have.”
“Look at competition law, antitrust and how those laws are being enforced with leniency. Regardless of how many resources the government has, all of the cartel cases in Europe are driven by self-reporting. But you are pointing to a valid concern.”
Are corporations more favorable or not to these non-trial resolutions?
“That depends on the estimated sanctions gap. If you are a corporate manager, whether you like the idea of a settlement would depend on what would happen if there is no settlement. Look at the United States as an example. The difference between what a corporation may expect if the case goes to court compared to the expected settlement outcome is probably larger than in other countries.”
“We say that these settlements happen in the shadow of the law. But the difference between the expected outcome in law compared to the settlement outcome we call the sanctions gap. That gap differs enormously in countries.”
“In European countries, the company may well consider the idea of rejecting the idea of a settlement and bring the case to court because they assume maybe they will get off and if they are found guilty the penalty will not be much bigger compared to what the settlement is.”
“In the United States, the fines are often bigger. It appears that the settlement sanctions are very large. But the consequences of a trial will often be much bigger. Also, in the United States there are many other laws. And the prosecutors have broader authority. Companies that are being prosecuted may consider the higher risk of being found guilty if the case is brought to court. And they are often very worried about the consequences.”
There is controversy here about using these settlements even where the company did not self report and covers up the problem and pressures whistleblowers. Or where there is a recidivist company that gets these settlements over and over again. And the issue of prosecutorial discretion is raised in your book.
In the United States, it could be argued that the settlement process is being abused, that individuals are not being prosecuted when the companies get these settlements. These questions are being raised in the public sphere here by judges like Jed Rakoff and journalists like Jesse Eisinger.
Do you sense that these negotiated settlements were an export from the United States to Europe and the rest of the world?
“That is quite clear. You have far more enforcement there and the U.S. prosecutors have been generous in terms of cooperating with their European counterparts. The United States has been far ahead of most countries when it comes to holding corporations liable. And you have developed clearer principles.”
“You have strived to make these predictable. The Department of Justice has tried to keep a high benchmark penalty. Maybe it is not high enough to deter corporate crime. That would mean extremely high penalties. And in many settings it is just not doable. At least there is an attempt to have a clear leniency ladder.”
“The eagerness to get companies to self-report may reduce the risk associated with corporate crime. It is quite serious.”
One of your authors pointed out that these settlements are riddled with conflicts. You have the corporation investigating itself. The corporation decides what to report.
“This is just one side of this flexibility associated with settlements. At the same time, a case that is negotiated is not necessarily completed. A government that settles without identifying the whole story – that results in an incomplete process. And then an enforcement agency that accepts such a settlement cannot expect other countries to consider the investigation completed.”
“The more flexible, the quicker and softer the solution, the higher the risk of other countries investigating. In a case where there are incomplete investigations – these will not make the settlements stronger. You need a solid process – regardless of whether it is a court process or a settlement process. There has to be a solid independent investigation and, there has to be transparency and some ability for the public to consider the relationship between the sanction and the crime. When none of this is in place, it’s not really an enforcement process, is it?”
[For the complete q/a format Interview with Tina Soreide, see 34 Corporate Crime Reporter 24(13), Monday June 15, 2020, print edition only.]