Crime Without Conviction: Report Details 34 Special Deals with Major Corporations
20 Corporate Crime Reporter 1(1), December 28, 2005

Federal and state prosecutors are increasingly offering major corporations – including Adelphia, Computer Associates, KPMG, Merrill Lynch, Monsanto, Sears, Shell, WorldCom/MCI – special deals – known as deferred prosecution or non prosecution agreements.

Under these agreements, prosecutors agree not to criminally prosecute the corporation to conviction in exchange for cooperation against culpable executives, implementation of corporate monitors, and fines.

That’s according to a report released today by Corporate Crime Reporter.

The report – titled Crime Without Conviction: The Rise of Deferred and Non Prosecution Agreements – details 34 such agreements – 17 deferred prosecution agreements and 17 non-prosecution agreements.

“It used to be that major corporations caught committing serious crimes would be brought to justice – convicted of a crime and sentenced,” said Russell Mokhiber, editor of Corporate Crime Reporter. “No longer.”

Now, under a policy implemented by the Department of Justice since 2003, major corporations caught committing serious crimes are not convicted of a crime and sentenced.

In fact, no major corporation caught engaging in accounting or securities fraud has been convicted since the Arthur Andersen conviction in June 2002.

The report finds that prosecutors have entered into twice as many non-prosecution and deferred prosecution agreements with major American corporations in the last four years (23 agreements between 2002 to 2005) than they have in the previous ten years (11 agreements between 1992 to 2001).

“It used to be that a obstruction of justice would change a decision not to prosecute into a decision to prosecute,” Mokhiber said. “No longer. In some cases, as in the KPMG case, where obstruction is alleged, line prosecutors who want to criminally prosecute the corporation to conviction have reportedly been overruled by their superiors.”
The report finds that deferred prosecution and non prosecution agreements were originally intended for minor drug cases and juvenile delinquency cases.

In fact, the U.S. Attorney’s manual is explicit in this regard stating that a major objective of these agreements is to "save prosecutive and judicial resources for concentration on major cases."

But now these agreements are being routinely employed to relieve large U.S. corporations of their criminal liability in major bribery and fraud cases.

The report profiles thirty-four cases where prosecutors –– confronted with solid evidence of corporate criminal wrongdoing –– have chosen instead to enter into a non-prosecution agreement or a deferred prosecution agreement with the corporation.

Seventeen (17) of the thirty-four cases were settled with non prosecution agreements.

That is where the prosecutor agrees not to criminally prosecute the corporation in exchange for fines, cooperation, monitors, and changes in the corporate structure.

The seventeen companies that settled their cases with non prosecution agreements are:

American Electric Power (January 2005), Adelphia Communications (May 2005), Aetna (August 1993), Aurora Foods (January 2001), Bank of New York (November 2005), Coopers & Lybrand (September 1996), Hilfiger (August 2005), John Hancock Mutual Life (March 1994), Lazard Freres (October 1995), MCI (September 2005), Merrill Lynch (September 2003), Merrill Lynch (October 1995), Micrus Corporation (March 2005), Salomon Brothers (May 1992), Sequa (June 1993), Shell Oil (June 2005), Symbol Technologies (June 2004).

The other seventeen (17) cases were settled with deferred prosecution agreements. Under a deferred prosecution agreement, the prosecutor charges the corporation with a crime, but agrees to drop the charges if the corporation fulfills its promises to the prosecutor.

These promises include fines, cooperation –– including the highly controversial waiver of attorney-client privilege –– and monitors.

The seventeen companies that settled their cases with deferred prosecution agreements are:

American International Group (November 2004), America On-Line (December 2004), Amsouth Bancorp (October 2004), Arthur Andersen (April 1996), BDO Seidman (2003), Banco Popular De Puerto Rico (January 2003), Bristol Myers Squibb (June 2005),Canadian Imperial Bank of Commerce (December 2003), Computer Associates (September 2004), InVision Technologies (December 2004), KPMG (August 2005), MCI (March 2004), Monsanto (January 2005), New York Racing Association (December 2003), PNC Financial (January 2003), Prudential Securities (October 1994), Sears (April 2001).

“There has been a sea-change in corporate criminal prosecution over the last couple of years,” Mokhiber said. “Just a few years ago, corporations would protect the individuals executives from federal prosecutors and plead the corporation. Today, corporate defense counsel are working with federal prosecutors to send the executives to jail. In return, federal prosecutors are agreeing not to convict the corporation. This has undermined corporate criminal liability and may be doing serious damage to the federal campaign to deter corporate crime.”

The area is ripe for what defense attorneys see as an abuse of prosecutorial discretion.

In the Bristol Myers Squibb case profiled in the report, the U.S. Attorney in New Jersey insisted that as a condition of the deferred prosecution agreement, the company fund a chair in business ethics at Seton Hall Law School – the law school the U.S. attorney graduated from.

In the MCI case, the Attorney General of Oklahoma demanded that, as a condition of the deferred prosecution agreement, the company create 1,600 jobs over ten years.

And in December 2003, the New York Racing Association was required as a condition of the agreement to bring slot machines into its racing venues.

“Some defense attorney see these demands as a form of prosecutorial abuse since they are totally unrelated to the underlying alleged criminal activity,” Mokhiber said. “But another form of prosecutorial abuse is to give up the store, to forfeit the criminal conviction of the company – and the sanction that big companies fear most – the fear of adverse publicity that results from that criminal conviction. And it doesn’t have to be.”

Mokhiber said that federal prosecutors can get the same results with corporate probation.

“They don’t have to give up the conviction to get where they want to go,” he said.

“In November 1994, Consolidated Edison was convicted of environmental crimes and placed on court supervised probation,” Mokhiber said. “A monitor was appointed. And the monitor reported on the changes within Consolidated Edison to the judge over the entire probationary period. When the judge was satisfied that the corporation had rehabilitated itself, he lifted the probation.”

By contrast, the report found, conditions of deferred prosecution and non prosecution agreements are generally outside the judicial system – judges have little or no control over them.


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