In a first for the Department of Justice ("DOJ") Antitrust Division, the Division entered into a Deferred Prosecution Agreement ("DPA") with a financial institution for its involvement in an alleged LIBOR-rate manipulation scheme. As part of the agreement, the company's Japanese subsidiary agreed to plead guilty to wire fraud in connection with the alleged LIBOR rate-rigging.
The LIBOR Investigation
The Criminal Division and Antitrust Division (collectively, the "Department") alleged that during 2006 to 2010, the company's Yen derivatives traders made efforts to move LIBOR in a direction that benefited their trading positions. According to the government, the derivative traders requested favorable LIBOR Yen-rate submissions from its LIBOR Yen-rate submitter. The DPA attached a two-count criminal information charging one count of wire fraud (18 U.S.C. § 1343) and one count of price-fixing (15 U.S.C. § 1), and required a Japanese subsidiary to plead guilty to one count of wire fraud. As part of the agreement, the financial institution and its subsidiary were required to pay a $150 million penalty. The Department entered into the DPA because of the company's cooperation in the investigation and disclosing misconduct, cooperating with the Department, and taking measures to expand and enhance its compliance program. The Department notes that while the company was not the first to step forward with helpful information, and thus did not receive leniency pursuant to the Antitrust Division's Leniency Policy, it did provide "highly valuable information that expanded and advanced the criminal investigation."
The Use of DPAs and NPAs
The DOJ, through its Criminal Division, began using DPAs and non-prosecution agreements ("NPAs") in the 1990s.1 Prior to that time, the government was forced to indict or to drop the investigation. According to the DOJ front office, "over the last decade, DPAs have become a mainstay of white collar criminal law enforcement."2 The government sees a sizable benefit to using DPAs. In 2012, the DOJ entered into at least 19 DPAs and 16 NPAs. Ten of the DPAs involved the Criminal Division. The Criminal Division's 2012 DPAs included charges of FCPA violations, money laundering3 and trade sanctions.4
Offering DPAs allows the government to elicit an admission of wrongdoing, gain cooperation by the company in the government's investigation, receive payment of a large fine and set up or improve a company's compliance program.5 The DOJ believes that DPAs are powerful because they have a similar "punitive, deterrent and rehabilitative effect as a guilty plea."6 Indeed, publicly reported fines from DPAs and NPAs amount to several billion dollars in just 2012 alone. By any measure, DPAs have been a strong weapon in the government's arsenal.
Until the Obama Administration, the Antitrust Division refused to use DPAs and NPAs because it did not want to "water down" its leniency program. The leniency program has been the source of the Antitrust Division's criminal investigations as it provided an incentive to be the first company to disclose an antitrust violation. Among other perceived benefits, companies accepted into the leniency program are not prosecuted. It is not yet clear what, if any, effect the use of DPAs will have on the leniency program. Certainly, however, that practice could cause firms that may be exposed to liability from conduct that implicates both white collar fraud and antitrust to consider that a DPA may be a fallback option if for any reason it has any doubt about the merit of seeking amnesty.
Despite their past objections, within the last few years the Antitrust Division agreed to NPAs with financial institutions in its grand jury investigation of the muni-bond industry.7 Antitrust Division Deputy Assistant Attorney General Scott Hammond explained that the Division may offer NPAs to companies that harm competition by violating bid-rigging and fraud statutes, but would not offer such a deal for violations of antitrust statutes.8 More recently, the Antitrust and Criminal Divisions entered into a NPA with a different financial institution for its alleged participation in the Yen LIBOR scheme. That institution (a Japanese division of a Swiss company) was a leniency candidate in the investigation, which was a likely factor in determining whether to offer a NPA, a DPA, or nothing at all.
While this DPA is a first of sorts, the Antitrust Division has not previously entered into a DPA for a purely antitrust investigation. Cadwalader attorney – and the former head of the Antitrust Division's National Criminal Enforcement Section – Tony Nanni notes that "matters such as this illustrate the tension between antitrust criminal enforcement and the more general white collar enforcement relating to criminal frauds. The Antitrust Division has traditionally avoided both DPAs and NPAs. It has wisely modified that practice when the alleged conduct at issue is properly seen as primarily a criminal fraud rather than an antitrust violation." Interestingly, while the Antitrust Division joined an NPA with another financial institution, the agreement was signed by the Chief of the Criminal Division's Fraud Section and written on Criminal Division letterhead.
Offering a DPA may be a signal of a changing approach for the Antitrust Division. As it becomes more comfortable with the results, the Antitrust Division may see DPAs and NPAs as a complement to the leniency program. In 2012, the Criminal Division required compliance monitors in four of its ten DPAs. While the Criminal Division does not have a specific formula as to when it requires monitors, it tends to require them when the industry lacks a strong regulator or when the company cooperates but has "systemic problems" identified by DOJ.9 It is possible that the Antitrust Division will follow this trend if it continues to use DPAs in its prosecutions. On the other hand, at least publicly, the Division's position is clear – it is silent on DPAs and only willing to use NPAs in limited situations. Until its use of DPAs spreads beyond joint resolutions with the Criminal Division, it is unlikely to see a change in the Division's approach to antitrust matters.
1 Lanny A. Breuer, Speech to the New York City Bar Ass'n (Sept. 13, 2012).
3 DOJ Press Release, Moneygram International Inc. Admits Anti-Money Laundering and Wire Fraud Violations, Forfeits $100 Million in Deferred Prosecution (Nov. 9, 2012). See also, Moneygram DPA, United States v. Moneygram International, Inc., No. 1:12-cr-00291-CCC (D. M.D. Pa.), ECF No. 3.
4 Standard Chartered Bank DPA, United States v. Standard Chartered Bank, No. 1:12-cr-00262-JEB (D.D.C. December 10, 2012), ECF No. 2.
5 Lanny A. Breuer, Speech to the New York City Bar Ass'n (Sept. 13, 2012).
7 Leah Nylen, MLEX, DOJ may grant non-prosecution for fraud, bid-rigging, but not for antitrust breaches – Hammond (Jun. 7, 2012), http://www.law.northwestern.edu/searlecenter/conference/international/NPAs_chicago.pdf .
9 Lanny A. Breuer, Speech to the New York City Bar Ass'n (Sept. 13, 2012). When a company self-discloses conduct that the DOJ would not have otherwise known, the DOJ has "rewarded" the company with a DPA that forgoes a compliance monitor. Remarks of Charles Duross and Kara Brockmeyer, with Q&A, Main Justice Just Anti-Corruption Blog (Nov. 19, 2012).