Joe D. Whitley, Shareholder, Baker, Donelson, Bearman, Caldwell & Berkowitz, PC*
Editor’s Note: This is the fourth in a series of six guest commentary posts that will address the six distinct topic areas covered in Washington Legal Foundation’s recently released Timeline: Federal Erosion of Business Civil Liberties. To read the other posts in this series, click here.
Over the past 15 years, Deferred-Prosecution Agreements (DPA) and Non-Prosecution Agreements (NPA) have become a vehicle of choice for resolving complex criminal investigations. This progression is chronicled in the Washington Legal Foundation’s (WLF) “The Federal Erosion of Business Civil Liberties” Timeline. It is commonly believed that DPAs and NPAs are useful tools for prosecutors in investigations of corporations where prosecutors can find no corporate executive directly culpable for any alleged misconduct. DPAs and NPAs permit the Department of Justice to enter into agreements totally outside of courts’ jurisdiction.
Additionally, the traditional use of criminal remedies or indictments to pursue corporate misconduct can result in many potential collateral consequences, including the shattering of many innocent employees’ lives. This consequence was observed in the havoc caused to the employees of Arthur Anderson after Arthur Anderson’s indictment in 2002. That case prompted the growing use of DPAs up to the present day. Some would argue that the pendulum has swung too far in the direction of DPAs and NPAs as the path of choice for prosecutors faced with mountains of documents and complex conduct.
Voices are being raised against DPAs and NPAs by judges, like Judge Richard Leon’s in U.S. v. Fokker Services B.V., with is currently on appeal before the U.S. Court of Appeals for the D.C. Circuit. The Department of Justice has taken notice of these growing concerns and on September 9, 2015, the Department issued guidance that may address the rush to corporate-criminal dispositions that do not consider individual misconduct. This new policy direction is a further iteration of the 2003 Thompson Memo (also noted in the Timeline) that has been revised several times leading up to the latest Individual Accountability for Corporate Wrongdoing version, which many are referring to as the Yates Memo.
In the Yates Memo, the Department of Justice has identified six key steps to be used by the leadership of each division within the Department of Justice and in the U.S. Attorney offices in pursing culpable individuals and executives at all levels within a corporation to include the following:
- In order to qualify for any cooperation credit, corporations must provide to the Department all relevant facts relating to the individuals responsible for the misconduct;
- Criminal and civil corporate investigations should focus on individuals from the inception of the investigation;
- Criminal and civil attorneys handling corporate investigations should be in routine communication with one another;
- Absent extraordinary circumstances or approved departmental policy, the Department will not release culpable individuals from civil or criminal liability when resolving a matter with a corporation;
- Department attorneys should not resolve matters with a corporation without a clear plan to resolve related individual cases, and should memorialize any declinations as to individuals in such cases; and
- Civil attorneys should consistently focus on individuals as well as the company and evaluate whether to bring suit against an individual based on considerations beyond that individual’s ability to pay.
Legislative fine tuning of the DPA and NPA process is afoot in Congress, even as some in the Judiciary, such as Judge Leon, want to reign in the power of prosecutors. These efforts by the Legislative and Judicial branches are laudable; however, I would argue for the advancement of the current internal policy reassessment of the DPA and NPA process within the Department of Justice and in the 93 U.S. Attorneys Offices that is both explicit and implicit in the Yates Memo.
As noted, criminal investigations of corporations are both costly and lengthy, leading to many unforeseen consequences. DPAs and NPAs have been one way to reduce the burden on prosecutors and investigators and at the same time permitting corporations to survive in the aftermath of employee misconduct. I submit the Yates Memo may be a movement in the right direction. At this moment however, we do not need micromanagement of the Department of Justice in the final months of the current Administration. Instead, beginning in 2017, the new Administration should undertake a review of the entire DPA and NPA process within the Department of Justice. By this time, the new Department of Justice policy advocated by the Yates Memo will have been tested in numerous investigations and prosecutions over the course of a full year. Real data will arise from these applications of the Yates Memo, which commentators, the Judiciary, and Congress can use to measure the need for further oversight of prosecutorial discretion in these matters.
*Mr. Whitley chairs Baker Donelson’s Government Enforcement and Investigations Group. He previously served as Acting Associate Attorney General of the United States and as United States Attorney in the Middle (Macon) and Northern (Atlanta) Federal Districts of Georgia. Mr. Whitley is a member of WLF’s Legal Policy Advisory Board.