Regulators Finding New Ways to Use DPAs, NPAs
As the use of deferred- and non-prosecution agreements to settle government investigations has skyrocketed since 2000, regulators have found new ways to deploy such agreements in 2013, according to Gibson, Dunn & Crutcher’s “2013 Mid-Year Update on Corporate Deferred Prosecution Agreements and Non-Prosecution Agreements.”
Based on publicly reported figures, the Department of Justice’s Antitrust Division entered into its first DPA in February (together with the DOJ’s Fraud Division), settling with the Royal Bank of Scotland. That same month, the U.S. Attorney’s Office for the District of Puerto Rico also signed its first DPA, with LLC Wholesale Supply.
Then in April, the Securities and Exchange Commission for the first time used an NPA to settle an antibribery case, reaching an agreement with Ralph Lauren over illicit payments in Argentina.
All in all, the DOJ has entered into 257 publicly disclosed DPAs or NPAs since 2000, and the SEC, since 2010, has signed onto six, Gibson Dunn reports—with a total of more than $37 billion in monetary penalties.
“As DPAs and NPAs have grown—both in number and size of monetary recoveries—so has the universe of prosecutorial entities employing them,” the Gibson Dunn report notes. “And so too has the list of unlawful types of conduct that can lead to such an agreement.”
2013 allegations by the numbers
The 13 agreements prosecutors have reached with companies this year “span the spectrum of corporate conduct,” according to Gibson Dunn, with fraud and antibribery charges making up the bulk of the primary allegations. Here’s how the total number of NPAs and DPAs breaks down by category:
Controlled Substances Act: 1
False Claims Act: 1
Foreign Corrupt Practices Act: 4
Food, Drug, & Cosmetic Act: 2
New territory for DOJ Antitrust Division
The antitrust division has used NPAs in the past—but, the report notes, it had historically avoided DPAs as part of an effort to create “the strongest possible incentive for companies to be the first to disclose antitrust violations” under the division’s leniency program.
That stance could change now that the division took the deferred prosecution route with RBS (incidentally, the largest such agreement this year at $475 million). “As antitrust enforcers, the last thing we want to do is punish someone out of business if that is going to mean a reduction in competition,” Peter Huston, assistant chief of the antitrust division's San Francisco field office, commented earlier this year.
DPAs spread to the United Kingdom
In April, DPAs were created in law for the first time in the United Kingdom, under the U.K. Crime and Courts Act 2013. They’ll mostly be applicable to economic offenses, such as fraud, money laundering, and bribery. And prosecutors still have to finalize guidance before they can go into effect, so stay tuned for a 2014 implementation date.
Gibson Dunn calls the new legislation “a highly significant change to the enforcement of criminal law in the U.K., a jurisdiction in which legislators, courts, and prosecutors alike have long exhibited skepticism about consensual arrangements as means to resolve criminal investigations and prosecutions.”
Lesson from the farm
A DPA between Groeb Farms Inc and the U.S. Attorney’s Office for the Northern District of Illinois shows how DPAs and NPAs can strike “a balance among penalties, deterrence, minimizing collateral consequences, and promoting compliance,” Gibson Dunn opines.
Groeb avoided a potential criminal conviction over the illegal importation of honey, reportedly by following Justice Department guidance to a tee—the Principles of Federal Prosecution of Business Organizations [PDF]. The company took “important remedial actions,” explains Gibson Dunn, “that included revamping the company's compliance and auditing programs, conducting employee training, terminating employees responsible for the conduct, and cooperating comprehensively with the government.”