Corporate nonprosecution agreements dropped dramatically in 2016 from the previous year, but the government is still offering deals to penitent white-collar defendants, according to a recent study by Gibson, Dunn & Crutcher.
Last year the U.S. Department of Justice and the U.S. Securities and Exchange Commission collectively entered into 35 corporate nonprosecution agreements (NPAs) or deferred prosecution agreements (DPAs). That compares with 102 such agreements in 2015, according to the report.
But there’s a big caveat to what appears to be a steep slide in corporate NPAs and DPAs. It follows a dramatic spike in 2015, driven by the Justice Department’s Swiss Bank Program. Most of the 2015 agreements were offered by the DOJ’s Tax Division as part of a structured agreement to bring foreign bank accounts into compliance with U.S. tax law, which brought in $6.4 billion in recoveries, according to the report.
Last year, of the 35 NPAs and DPAs, the majority, 26, involved matters other than tax-related and monetary transaction offenses. In all, they brought in $4.6 billion in recoveries, according to the report.
“If you back out 2015, the numbers are essentially in the heartland of what NPAs and DPAs have been for nearly a decade,” said F. Joseph Warin, chair of Gibson Dunn’s Washington, D.C., office’s litigation department. “On balance is what we’re seeing is this vehicle has become an alternative to a plea of guilty for businesses that are in a regulated industry.”
While the use of NPAs and DPAs has proliferated across the country and such agreements have been offered in all 94 federal judicial districts, the government is selective about which corporate defendants deserve them, Warin said. “They are hard to get. You just don’t walk and get one,” he said.
To prove they are worthy of an NPA or DPA, a corporate defendant must show they have a compliance program in place, assure regulators that they’ve remediated the problem, and demonstrate an acknowledgement of wrongdoing by corporate senior leadership, Warin said.
“If you have those three vehicles in place, you can have the government say, ‘Why don’t we get them another opportunity?’” he said.
While there’s no guarantee that such agreements will continue under the administration of President-elect Donald Trump, there’s also no reason to believe that they won’t, Warin said. “There’s not a track record,” he said of the incoming Trump administration. “And one of the things we do know is the people on the transition teams, these are serious professionals that were in the Justice Department before and they would respect the precedent.”
Matt Orwig, a former U.S. attorney for the Eastern District of Texas who now represents white-collar defendants as a partner in the Dallas office of Jones Day, said an uptick in NPAs and DPAs tends to reflect that government lawyers are willing to take on more complex, multidefendant cases.
“With the complexity of the cases, increasingly the government has thrown a broader net in white-collar matters,” Orwig said. And the number of NPAs or DPAs offered may also depend on how closely government lawyers screen potential defendants before pursuing cases against them, he said.
Orwig served as U.S. attorney from 2001 until 2007 in a district that had a heavy white-collar docket and offered NPAs or DPAs to corporate defendants less than a dozen times during his tenure, he said.
“We took pride in the fact that we evaluated cases very early on and made the determination if civil or criminal investigation were appropriate,” Orwig said. “When the department is not as discerning early on in the process, the result may be more nonprosecution agreements.”