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Corporate Counsel exclusive: As if the nuances of corporate governance aren’t tough enough to fathom, now the government is playing word games. On August 28, Prudential Financial, Inc., signed what it thought was a nonprosecution agreement with Michael Sullivan, the U.S. attorney in Boston. But once the deal was done, deputy attorney general Paul McNulty called a press conference in Washington, D.C., to trumpet the “deferred prosecution agreement.” McNulty’s comment has led some corporate advocates to question the government’s credibility. The question of what to call the Prudential pact isn’t just a matter of semantics�a deferred prosecution deal carries more of a stigma than a nonprosecution agreement. Everyone involved in the Prudential case at least agrees that the settlement ends the government’s three-year criminal probe of one of the company’s subsidiaries. Boston-based Prudential Equity Group admitted that some of its brokers illegally timed mutual fund trades to benefit big hedge fund clients. But there’s a split on whether to call the deal a deferred or a nonprosecution agreement. In an NPA, no charge is filed in court, but the government can still file and prosecute a charge later if the company violates the terms of the deal. In a DPA, the government files the criminal charge in court but doesn’t prosecute the claim. If the company abides by the terms of the DPA, the government dismisses the charge when the agreement expires. If not, the government can prosecute the already-filed charge. Lawrence Finder, a former U.S. attorney in Houston who has studied DPAs and NPAs over the past 15 years, explains that with a deferred prosecution agreement, “The anvil hangs a little closer to the head.” A spokesman for the Justice Department in Washington stands by McNulty’s characterization of the Prudential deal as a DPA. “This is a deferred prosecution agreement [because] it provides for the filing of charges in the event of a breach,” the spokesman says. Prudential spokesman Bob DeFillippo disagrees, saying, “I don’t know why people call it what they call it, but it is a nonprosecution agreement.” DeFillippo was in error on at least one point, though. He thought that the document is officially titled an NPA. It isn’t. In fact�unlike the vast majority of the 45 pretrial agreements on record since 1992�the signed document is simply entitled “Agreement,” and uses that word throughout its text. The U.S. attorney asked for the word change, and Prudential’s lawyers agreed. Now the U.S. attorney’s office in Boston refuses to discuss the name game, but says that the document should simply be called “the agreement.” Finder, now a partner at Haynes and Boone, says that the Prudential deal is technically a nonprosecution agreement because no charges were filed against the company. (Sullivan’s office confirms the lack of charges.) But Finder also notes that the Prudential pact has several features of a deferred prosecution agreement: It carries harsher penalties ($600 million in fines), runs for a longer term (five years), and imposes tougher requirements (the company’s GC will have to implement several sweeping compliance measures). According to Finder, the Prudential deal has morphed the two types of agreements into one. “This is a nonprosecution agreement in name only,” he concludes. “It’s the functional equivalent of a deferred prosecution agreement.” The government’s wordplay ticks off Susan Hackett, senior vice president and general counsel of the Association of Corporate Counsel. “It’s amazing to me that [the government] would actually request a change in the title of this agreement to something very unspecific, and then claim that the document was something very specific,” Hackett says. But to Hackett, the issue goes deeper than just semantics. It’s about credibility. “These guys are building quite a reputation for unfair dealing�first Stolt-Nielsen, and now this,” Hackett says. (The Justice Department indicted Stolt-Nielsen S.A. in September even though the shipping giant had previously signed an NPA with the government.) After what’s happened to both Prudential and Stolt-Nielsen, Hackett asks, “Who in their right mind wouldn’t think twice about trusting a prosecutor’s word?”

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