As Kees noted Monday, the use of American-style deferred prosecution agreements (DPAs) to resolve corporate corruption cases short of trial is on the rise. The United Kingdom, France, Argentina, and most recently Singapore now permit prosecutors to suspend or even drop altogether the prosecution of a firm for a corruption offense in return for the accused firm paying a fine, adopting measures to prevent future offenses, and cooperating with ongoing investigations. Australia and Canada are on the verge of approving DPAs, and influential voices in India and Indonesia are urging their adoption too.
Apostles say DPAs allow governments to realize the benefits of a criminal conviction without the need for a lengthy, expensive, arduous trial against a well-funded corporate defendant where defeat is always a risk. Former U.K. Attorney General Lord Peter Goldsmith told a New Delhi audience last October that once India begins using DPAS, companies would start coming forward and admit wrongdoing. During the recent debate in Singapore one commentator observed that DPAs “provide an incentive to corporate entities to confront criminal conduct within their ranks,” and a group of Indonesian professors claim DPAs will be particularly valuable in their country. In Indonesia, conviction of a corporation provides no assurance the defendant will not commit the same offense again while, they write, a DPA does.
DPA evangelists are about to learn what DPAs have in common with Chinese cuisine. The first-time visitor to China soon discovers that Chinese food in China is unlike Chinese food at home. Beef broccoli tastes much different outside China than in. Connoisseurs of DPAs will shortly find that what American prosecutors are able to cook up looks much different when prepared abroad.
As an earlier post explained, what makes DPAs and other types of pre-trial settlements “work” in the United States is the threat that if the corporation does not agree to settle, a trial will be had where conviction followed by a serious, possibly firm-destroying penalty is likely. Not all prosecutions of corporate corruption are “slam dunks” of course, which is one reason why not all DPAs result in as large a fine and as stringent a set of conditions on the defendant firm as observers might like. There are too, as then professor and now Judge Stephanos Bibas explained in a seminal article, psychological and structural factors that explain why prosecutors don’t always extract the most severe terms they might from a corporate defendant. But nonetheless, the basic proposition holds: what drives corporations accused of corruption by American authorities to agree to a fine, introduce ethics and anticorruption compliance programs, and even help prosecutors gather evidence against their officers, employees, and agents is the fear of conviction if a trial were held.
Proponents of American-style DPAs seem unaware of this essential prerequisite. An otherwise thoughtful, wide-ranging review of the use of DPAs and other types of pre-trial settlements by Transparency International’s Anticorruption Help Desk ignores the issue. Reports recommending the adoption of DPAs by Indonesian and Indian policy institutes misapprehend the causal issue entirely; both say their parliaments should authorize DPAs precisely because it is virtually impossible to successfully prosecute a corporation in their courts. When, after his Delhi remarks, Lord Goldsmith was asked why a corporation would choose to enter into a DPA, thus having to pay a fine immediately, when it could delay a prosecution for years if not decades by insisting on a trial, he ducked the question, mumbling that India can move quickly on matters of public import.
It surely is possible that once a country authorizes the use of DPAs, some corporations will take advantage of them to become good corporate citizens, rushing to prosecutors’ offices to admit their crimes, agree to a fine, changes in company policy, and help in the investigation of those in the company responsible for the wrongdoing. Indeed, during the DPA debate in Singapore, one professor suggested companies would use DPAs as an excuse to clean house, firing employees known to have paid bribes and creating strong incentives for whistleblowers to come forward.
That certainly might be true for some firms – although one might ask why such firms would need a DPA to take such steps. But it might also be true that other firms will see a DPA as a form of amnesty, allowing them, for a modest fine and some toothless changes in policy, to avoid any risk of prosecution for past violations, secure in the knowledge that so long as the enforcement environment remains weak, the chances of getting convicted for future crimes will be slight.
No one can be sure how DPAs will operate outside the United States — with its well-funded, expert investigators and prosecutors, speedy, reliable court system, and stiff penalities upon conviction. One thing is certain, however. Just as “beef and broccoli” prepared in Denver or “rindfleisch und brokkoli” in Munich tastes nothing like 牛肉和西蘭花 served in Beijing or Shanghai, DPAs in India, Indonesia, and many other nations are likely to be quite different than those cooked in the United States.
Rick as usual – you are bang on with this. However one correction – we do know DPAs work in other jurisdictions where Americans have influenced the methods for corruption prosecution. For example under the Saakashvili the Republic of Georgia fell in love with American style plea bargaining. See the TI Georgia report of 2010: http://www.transparency.ge/sites/default/files/post_attachments/Plea%20Bargaining%20in%20Georgia%20-%20Negotiated%20Justice.pdf which largely positive. However, the issue remains for all its efficiencies – DPAs can be open to abuse. In Georgia there were accusations that the DPAs were a way to extort money from organised criminals in a very opaque way. Currently our Georgian friends and the US has introduced DPAs into the Ukraine – were potentially it could be abused or may help resolve the backlog of corruption cases. Let’s see how the beef and broccoli turns out but I also have my doubts.
Very true, Rick. Beyond the threat (or lack thereof) of a trial, it seems like much will hinge on the actual terms of DPAs in particular countries going forward. For example, you note that companies might see a DPA as an easy way to write off some past misdeeds, while not fretting about future violations. Perhaps, but also perhaps not — especially if a DPA deal includes installation of a corporate monitor. Of course, just because corporate monitors have become more popular in U.S. settlements doesn’t mean they will be used the same–or at all–in the countries introducing DPAs. And their effectiveness on the ground in any given country will remain to be seen. So yes, many ways for the beef and broccoli to taste quite different.
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Super interesting post on the rise of DPAs. I’d be curious to hear what you make of pro public writer Jesse Eisinger’s diagnosis of DPAs in the “Chickenshit Club.” His central premise is that it’s prosecutors, not companies, who are afraid of trials. While he talks a good bit about top prosecutors’ cultural disdain for “losing” cases (hence their avoidance of big, complex corruption cases where victory is uncertain), his main point is that the searing memory of the Arther Anderson verdict, which resulted in job losses for many innocent parties, has incentivized prosecutors to prevent companies from going under for corrupt acts at the top. While his work doesn’t directly challenge your analysis in any way, it does suggest that prosecutors, not companies, are DPA dependent suggesting a certain temerity that plays to hand of corrupt corporate execs.