In June 2002, a federal jury convicted Arthur Andersen LLP of obstruction of justice for impeding an investigation by securities regulators into the financial debacle at Enron Corp. Soon afterward, Andersen stopped auditing public companies, effectively ending the life of the 89-year-old firm. Since then corporations as well as prosecutors have feared the “Arthur Andersen effect”—the idea that criminal charges are the death knell for a public company. Over the last decade deferred prosecution agreements (DPAs) have been the dominant enforcement tool in the federal government’s prosecution of criminal cases against public companies. Since 2006, the government has entered into more than 200 DPAs with corporations.
But recently prosecutors have shown a willingness to charge companies, and conversely companies have demonstrated less fear of criminal charges. In roughly the last year the federal government has reached settlements involving criminal pleas with Wal-Mart Stores Inc., Johnson & Johnson, Credit Suisse Group and BNP Paribas. Rather than reach a precharging settlement, companies like FedEx Corp. and Pacific Gas & Electric Co. have allowed themselves to be charged criminally and take their chances in court. FedEx’s indictment came a little more than a year after the same U.S. Attorney’s Office resolved similar allegations against United Parcel Service Inc. through a nonprosecution agreement.
