Category Archives: DPAs and NPAs

DOJ Expands and Codifies Policy Incentivizing Corporations to Voluntarily Self-Disclose FCPA Violations

by Eric Volkman, Erin Brown Jones, and Bridget R. Reineking

On November 29, 2017, Deputy Attorney General Rod J. Rosenstein announced that the US Department of Justice (DOJ) has implemented a permanent, revised version of the Foreign Corrupt Practices Act (FCPA) Pilot Program.[1] The Pilot Program — which was launched as a one-year trial in April 2016 by then-Assistant Attorney General for the Criminal Division (and now Latham partner) Leslie Caldwell — was extended indefinitely in April 2017 to allow DOJ to evaluate the program’s efficacy.[2] Rosenstein announced that the enhanced policy — now called the FCPA Corporate Enforcement Policy (FCPA Policy) — will be incorporated into the United States Attorneys’ Manual (USAM). Like its predecessor, the FCPA Policy aims to encourage companies to make timely and voluntary disclosures of wrongdoing under the FCPA, while providing additional concrete incentives rewarding corporations for cooperation.

This policy announcement is likely the first of several DOJ policy changes and/or enhancements under the new administration. As detailed in Latham’s October 2017 Client Alert, Rosenstein recently announced that DOJ was reviewing a wide range of existing corporate enforcement policies, including the Pilot Program, DOJ’s policy on “Individual Accountability for Corporate Wrongdoing” (the Yates Memo), and other DOJ policies and memoranda — with the intention of ultimately incorporating the revised policies into the USAM. Continue reading

A French Court Authorizes the First-Ever “French DPA”

by Frederick T. Davis

In December 2016 the French government finally passed the so-called “Loi Sapin II” in order to bolster its ability to penalize overseas bribery. Its unstated but clear goal was to achieve some degree of parity with US efforts in this area, which had led to a number of highly publicized cases where well-known French companies had paid fines totaling well over $2 billion to the US treasury to resolve criminal matters that could well have been resolved in France.  A key provision of the new law is a procedure that permits a negotiated outcome, similar in concept to a US Deferred Prosecution Agreement (“DPA”), that avoids a criminal conviction.  On November 14, 2017, the first such agreement was announced by the National Financial Prosecutor of France.  While many details of the deal will not be known until the release of the court’s opinion approving it, which may be available as early as the end of November, the fact of the outcome and its known parameters are very significant. Continue reading

Negotiated Corporate Criminal Settlements: Bringing DPA Mandates Within the Rule of Law

by Jennifer Arlen

Countries around the world are beginning to embrace negotiated corporate criminal settlements, cognizant of U.S. federal prosecutors’ success in using deferred and non-prosecution agreements (hereinafter D/NPAs) to impose both substantial monetary sanctions and mandated reforms. Negotiated settlements, and the mandates they impose, can materially enhance governments’ ability to deter corporate crime when used effectively (Arlen and Kahan 2017).

Yet the existing U.S. approach to mandates needs to be reformed because it suffers from a material weakness: the Department of Justice provides less guidance and formal oversight over mandates imposed through D/NPAs than is required to ensure that prosecutorial authority over mandates is consistent with the Rule of Law.

Continue reading

Second Circuit Limits District Courts’ Supervision of Deferred Prosecution Agreements

by Brandon Fox and Natalie K. Orpett

The Second Circuit Court of Appeals has issued an important decision limiting district courts’ authority to supervise Deferred Prosecution Agreements (DPAs), a method companies and the Department of Justice (DOJ) frequently use to resolve criminal investigations.  Under DPAs, companies are charged with – but not convicted of – crimes, so long as they abide by the terms of the agreement.  In United States v. HSBC Bank USA, N.A., — F.3d –, 2017 WL 2960618 (2d Cir. July 12, 2017), the companies (collectively, HSBC) and DOJ agreed to a DPA based on HSBC’s alleged failure to prevent money laundering by Mexican drug cartels and violations of sanctions laws.

Under the terms of the DPA, HSBC consented to the appointment of a monitor who was to provide DOJ with periodic reports regarding HSBC’s compliance with the agreement.  After arraignment on the charges, DOJ and HSBC requested that the court grant an exclusion of time under the Speedy Trial Act, which was necessary so that HSBC could fulfill its obligations under the DPA rather than go to trial in 70 days.  As a condition to granting the motion, the district court ordered the parties to file quarterly reports apprising it of significant developments in HSBC’s efforts to comply with the DPA. Continue reading

Second Circuit Limits Judicial Scrutiny of Deferred Prosecution Agreements

by John F. Savarese, Ralph M. Levene, David B. Anders, Marshall L. Miller, and Christopher R. Deluzio

In an anticipated and important decision, the Second Circuit Court of Appeals overturned a district court’s order requiring the unsealing of an independent monitor’s report detailing HSBC’s compliance with a deferred prosecution agreement. United States v. HSBC Bank USA, N.A. (Nos. 16-308, 16- 353, 16-1068, 16-1094, July 12, 2017). In so doing, the Second Circuit substantially limited a district court’s power to scrutinize DPAs, thereby following a course similarly embraced by the D.C. Circuit (as discussed in our prior memo).

In the district court, Judge Gleeson granted the joint request by DOJ and HSBC to approve the DPA, subject to the Court’s ongoing oversight of the DPA’s implementation pursuant to the Court’s asserted “supervisory authority”—a decision we discussed in our earlier memo. As part of its oversight, the Court ordered the government to file under seal an independent monitor’s report, which eventually led to a member of the public requesting access to the report. Construing that request as a motion to unseal, the Court granted the motion, finding that the monitor’s report was a “judicial document” subject to the public’s qualified First Amendment right of access. The government and HSBC appealed. Continue reading

CFTC Non-Pros Agreements with Citibank Traders Reflects Implementation of New Cooperation Advisories

by Aitan Goelman

On January 19, 2017, the CFTC Enforcement Division issued new advisories outlining the factors that the Division would consider in evaluating cooperation by individuals and companies.  Intended to underscore the high value the Division placed on cooperation, these advisories were issued on the same day that the Commission announced a $25 million fine against Citigroup Global Markets, Inc., (“Citi”) for violating the CEA’s anti-spoofing provisions.  The accompanying Order included a discussion of Citi’s cooperation and its impact on the terms of the settlement.  On March 30, 2017, the Commission announced settlements with two former Citi traders, including the former desk head, for the same misconduct.  These settlements included significant fines and market bans. Continue reading

UVA Corporate Crime Registry

by Brandon Garrett

Monday, the University of Virginia School of Law launched a newly revamped registry containing documents and data related to federal corporate prosecutions.  The database, called the Corporate Prosecution Registry, allows researchers to view more than 3,000 decision documents, many of them previously hard to find or once shielded from the public eye, while also allowing them to better search specific subject matter and look at overall trends. Continue reading

Firsts for UK SFO with In Principle False Accounting DPA, and for FCA with Market Abuse Compensation, Against Tesco

by Stuart Alford QC, Daniel Smith and Yasmina Borhani

Following a two-year investigation, Tesco PLC has announced that its subsidiary Tesco Stores Limited (Tesco Ltd) had agreed in principle the terms of a Deferred Prosecution Agreement (DPA) with the UK Serious Fraud Office (SFO), subject to final judicial approval at a hearing scheduled for 10 April 2017 before Sir Brian Leveson PC.  The DPA would result in Tesco Ltd paying a $129 million fine to the SFO, together with the SFO’s costs.  It is also likely to include an admission of criminal liability and an agreed statement of facts, albeit publication of details may be withheld to avoid prejudicing the ongoing prosecution of former Tesco executives. Continue reading

2016 DOJ and SEC FCPA Resolution Tracker

Courtesy of Davis Polk & Wardwell LLP

On October 27, 2016, Davis Polk presented its 2016 DOJ and FCPA Resolution Tracker, updated through the end of Q3. The tracker details key characteristics of corporate and individual FCPA resolutions, and is available through the link below.

Q3 Highlights include: Continue reading

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