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The government is on a let’s-make-a-deal spree with corporate America. In the first six months of this year, the U.S. Department of Justice completed at least 12 deferred-prosecution or nonprosecution agreements with companies. By contrast, only eight were signed last year, which was already a record high. The sharp rise in prosecution pacts showed up in a review of the Web sites of the Justice Department and major U.S. attorney’s offices done by Corporate Counsel, an affiliate of The National Law Journal. Most of the businesses that settled with the government this year were accused of financial and securities fraud. Other companies have been faulted for money laundering, trade secret theft and environmental violations. The federal indictment of Arthur Andersen four years ago is widely credited with destroying the giant accounting firm. Ever since, companies accused of wrongdoing have sought to avoid the same fate by striking a deal with the Justice Department. In a deferred-prosecution agreement, the government files criminal charges against a defendant in court but doesn’t take the case to trial. Under a nonprosecution agreement, no charges are filed. A price to pay These pacts come at a price, however. For one thing, businesses must cooperate with prosecutors through the length of the agreement, which typically lasts from 12 months to three years. Cooperation, as defined by the government, has forced some companies to take extreme actions, such as waiving attorney-client privilege or cutting off the legal fees of indicted employees. Also, a prosecution deal generally requires a business to admit its wrongdoing and accept a statement of facts describing the illegal behavior. Private plaintiffs often use this admission against the company in later litigation. Though the number of deferred and nonprosecution agreements is soaring, the country isn’t necessarily experiencing a resurgent corporate crime wave. Lawrence Finder, a former U.S. attorney in Houston who is now a partner at Haynes and Boone of Dallas, cites two factors behind the increase. One is that the government is trying to exert more pressure on companies, yet wants to avoid being blamed for causing another collapse like Andersen’s. The other reason, Finder said, is that “prosecutors are simply becoming more comfortable with them.” The Justice Department isn’t saying much about why it’s completed so many agreements this year. A spokesperson would only note that the agency “uses a variety of approaches to ensure compliance with the law while protecting shareholder value.”

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