Author Archives: Jennifer H Arlen

Corporate Governance Reform Through Deferred Prosecution

by Jennifer Arlen and Marcel Kahan

Over the last decade, corporate criminal enforcement in the U.S. has undergone a dramatic transformation. Federal officials no longer simply fine publicly held firms that commit crimes. Instead, in addition to imposing a fine, prosecutors regularly use their enforcement authority to impose mandates on firms that alter their internal governance.

Prosecutors generally impose mandates through pretrial diversion agreements (PDAs), specifically deferred and non-prosecution agreements. PDAs are criminal settlements that subject the firm to sanctions without formally convicting it. In return, firms usually agree to cooperate in the investigation and admit the facts of the crime.

Most PDAs contain mandates that govern the firm’s future behavior. These mandates impose new prosecutor-created duties on the firm. They may require the firm to adopt a corporate compliance program with specified features not otherwise required by law, to alter its internal reporting structure, to add specific individuals to the board of directors, to modify certain business practices, or to hire a prosecutor-approved corporate monitor.

Prosecutors’ use of PDAs to create and impose such mandates on firms with detected misconduct fundamentally alters both the structure of corporate criminal law and the role of the prosecutor. Continue reading

Assessing the Fraud Section’s FCPA Pilot Program

by Jennifer Arlen

The U.S. Department of Justice (DOJ) recently launched a new pilot program (PDF: 51 KB) designed to encourage more corporations to voluntarily report their own violations of the Foreign Corrupt Practices Act (FCPA), but the program does not go far enough to achieve its goals.

The pilot program is the first time that the DOJ has offered specific benefits to corporations that self-report that are unavailable to firms that fail to disclose detected wrongdoing and cooperate only when caught. This is an important reform. Yet closer examination reveals that the benefits detailed in the pilot program are not sufficient to lead corporations to disclose significant wrongdoing that will otherwise likely remain hidden. Continue reading