The deferred prosecution agreement ("DPA") is once
again facing criticism, this time in connection with the Department
of Justice's (the "DOJ") decision to enter into a DPA
with HSBC Bank USA, N.A. and HSBC Holdings plc (together,
"HSBC") for violations of the Bank Secrecy Act, the
International Emergency Economic Powers Act, and the Trading with
the Enemy Act.
On March 6, 2013, Senator Chuck Grassley, the Ranking Member of
the Senate Judiciary Committee, questioned Attorney General Eric
Holder regarding the HSBC DPA and the Department's use of DPAs
in other cases. At the hearing, Senator Grassley described
certain financial institutions as "too big to fail" and
"too big to jail." In response to Senator Grassley,
the Attorney General acknowledged that some financial and banking
institutions are simply "so large that it does become
difficult for us to prosecute them when we are hit with indications
that if we do prosecute—if we do bring a criminal
charge—it will have a negative impact on the national
economy, perhaps even the world economy."
Prosecutors, in the exercise of prosecutorial discretion, consider a host of factors when determining whether to pursue criminal charges against individuals, corporations, and financial institutions. Beyond the standard factors to consider when deciding whether to bring charges against an individual including the sufficiency of the evidence, the likelihood of success at trial, and the probable deterrent and rehabilitative effects of conviction, to name a few, internal Department guidelines—known as the Principles of Federal Prosecution of Business Organizations—direct prosecutors to take into account additional factors related to companies.
These include the pervasiveness of wrongdoing within the corporation, the corporation's willingness to cooperate, the existence and effectiveness of the corporation's compliance program, and potential collateral consequences of the kind identified by the Attorney General. Collateral consequences may include harm to shareholders, employees, pension holders, and, more generally, to the broader economy. Indeed, as former Assistant Attorney General Lanny Breuer said last September:
Thus, the Attorney General's comments to Senator Grassley
reflect well-established Department policy.
The Attorney General's acknowledgement, however, has added fuel
to fire for those troubled by the proliferation of DPAs. Many
critics of DPAs believe that corporations view the penalties
associated with DPAs as merely a "cost of doing business"
and are thus a weak deterrent. Others have expressed concern
when a DPA has not required a corporation to admit wrongdoing or
have worried that DPAs undermine the accountability of individual
corporate employees.
Such criticisms, however, do not sufficiently account for the many
benefits that accrue from the use of DPAs. As former
Assistant Attorney General Breuer made clear in his September 2012
speech, criminal indictment is a "blunt instrument" when
combatting corporate crime, as the prosecution of former accounting
giant Arthur Anderson—and its resulting
collapse—clearly demonstrated. Indeed, DPAs are not
get-out-of-jail-free cards, but an enforcement device that the
Justice Department may employ to extract serious concessions from
corporate wrongdoers in exchange for deferring a criminal
prosecution that might unduly impact constituencies that extend far
beyond the corporation's shareholders.
In addition, any breach of a DPA can result in the full prosecution
of the company, and the Department may use all of the
companies' admissions in the DPA against the company in any
such prosecution. Further, DPAs with corporations in no way
limit the ability of the DOJ and Securities and Exchange Commission
(the "SEC") to pursue charges against individual
defendants when warranted by the evidence. Indeed, as Breuer
stated in September, "individual wrongdoers can never secure
immunity through the corporate resolution." For example,
DOJ pursued individual prosecutions against former employees of
Siemens and Alcatel-Lucent on charges related to violations of the
Foreign Corrupt Practices Act, and BDO, for tax related
crimes.
DPAs offer many of the same benefits of a guilty plea, if not more.
Aside from requiring corporations to admit wrongdoing which
is the trend today, DPAs generally require companies to agree to
cooperate in the government's investigation and pay stiff
monetary penalties. HSBC, for example, must pay $1.9 billion.
DPAs also offer a way for the DOJ and SEC to require key
changes in corporate culture. For instance, by requiring the
creation and maintenance of corporate compliance programs, DPAs
force companies to address more effectively the legal risks that
accompany their business pursuits. This, of course, is a
primary goal of the criminal justice system—to deter and
prevent additional crime.
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