DPAs and NPAs in 2014
March 31, 2015
Over the last ten years, American prosecutors have emerged as a new force regulating businesses, both domestic and foreign. A series of out-of-court - indeed, non-court - "settlements," known as deferred prosecution agreements (DPAs) and non-prosecution agreements (NPAs), have imposed on businesses both hefty "fines" and extensive, specific mandates from the U.S. Department of Justice (DOJ) that affect management and business practices.
In the last decade, the government entered into 303 DPAs and NPAs. Since the beginning of 2010, 16 of the 100 largest U.S. businesses by revenues have been under the supervision of federal prosecutors through a DPA or an NPA - as have another 13 of the world's 300 largest companies headquartered outside the United States. Total fines and penalties collected under DPAs and NPAs in 2014 totaled $5.1 billion.
Three key issues arise under the DPAs and NPAs:
- Enforcement efforts can undermine compliance. Federal prosecutors often punish companies notwithstanding extensive compliance programs, even when the companies self-report offenses and even when "rogue" employees go to extraordinary lengths to hide misconduct from their employers.
- The DPA-NPA process lacks definite terms and judicial oversight. The agreements typically grant prosecutors the sole authority to determine whether an agreement has been breached. Indeed, the DOJ argues that federal judges have no authority over DPAs, beyond ensuring that such agreements comply with the terms of the Speedy Trial Act.
- The DPA-NPA process is ill suited for application to individuals. The recent decision of the Securities and Exchange Commission to apply DPAs and NPAs to individuals is a troubling new application of this power.
One proposed solution is the Accountability in Deferred Prosecution Act. Although this proposed legislation does not go far enough to address some of the serious problem with DPAs and NPAs, the legislation would add substantial clarity, transparency, and oversight, as compared with current practice.
Source: James R. Copland, Isaac Gorodetski, "Without Law or Limits," Manhattan Institute for Policy Research, March 2015.
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