On 5 February 2015, a judge in the US federal district court for the District of Columbia refused to approve a deferred prosecution agreement ("DPA") between Fokker Services B.V. and the US Department of Justice (the "DOJ"). The agreement related to charges that the company violated sanctions restricting the exporting of goods and services to Iran, Sudan and Burma. While the Court acknowledged that its supervisory powers over such agreements "are to be exercised 'sparingly'" and that this was "not a typical case for the use of such powers," it rejected the DPA because it found the agreement to be "grossly disproportionate to the gravity of Fokker Services' conduct."
Fokker Services is a Dutch aerospace services provider. It was accused of violating US export laws and sanction regulations from 2005 until 2010 by participating in the export of over 1,153 shipments of aircraft parts with an origin in the US, primarily to Iran (but also to Burma and Sudan). The company was alleged to have deliberately taken steps, with the knowledge of high-level management, to conceal its violations of these laws. In 2010, the company self-reported these activities to the US government and cooperated with an effort to remedy its compliance flaws. The DPA was set to last for 18 months and required the company to pay $21 million (including amounts to other US regulators), accept responsibility for its violations, continue to cooperate with US authorities, implement a compliance program and comply with US export laws in the future. The Court reviewed the DPA under the statutory requirement that the Court approve the parties' requested delay of a trial date, as well as the Court's inherent supervisory powers.
While the government could have exercised its discretion not to prosecute the case at all, once it chose to charge the company criminally and seek court approval of its agreement, the Court deemed itself duty-bound to consider whether approval was appropriate. The Court found the amount of the company's fine (which was equal to the amount of its ill-gotten revenue), the DPA's relatively short length, the fact that no individuals were charged, and the lack of independent oversight to be factors that made the DPA inadequate in light of the company's "egregious conduct" of knowingly engaging in a lengthy conspiracy to hide violations of export laws in a way that implicated serious national security and anti-terrorism concerns related to Iran. The Court stated that it would be open to considering a modified agreement, but its decision is currently being appealed to the federal appellate court in the District of Columbia.
We previously wrote in this newsletter (in the second quarter of 2014) about SEC v. Citigroup Global Markets, Inc., where a different appellate court reversed the lower court's refusal to approve a civil settlement between the SEC and a financial institution because of the limited nature of a court's review of such agreements. It will be informative to observe whether the appellate court here agrees with the district court's rejection of the parties' DPA or, rather, determines that here too the district court overstepped its bounds by becoming too involved in the terms of an independent agreement between a private party and government regulator. If the appellate court upholds the provide a roadmap for what parties can consider including in future agreements—at least within the District of Columbia and in scenarios raising the type of national security concerns at issue here. disapproval of the DPA here, the district court's observations about what was deficient with the agreement might
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