Category Archives: DPAs and NPAs

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

FedEx Lives to Deliver Another Day

by Serina M. Vash

It happens all the time in criminal trials: the case ends after opening statements.  Ordinarily, after a powerful opening statement by the government, reality sets in for the defendant.  The defendant changes course and pleads guilty, hoping that he can still reduce his sentence under the Federal Sentencing Guidelines.

But the turn of events in the FedEx Case is unprecedented.  After marching an eight year federal criminal investigation to trial, the U.S. Attorney’s Office for the Northern District of California dismissed its criminal case against FedEx shortly after opening statements and the district court judge declared that FedEx was “factually innocent.”

So what happened in the drug trafficking case against FedEx? Continue reading

Flying Into Uncharted Territory – The D.C. Circuit’s Course Correction Over Judicial Approval of DPAs in Fokker

by David DiBari

Whether the DOJ chooses to bring criminal charges (and what charges to bring) is traditionally a decision beyond the purview of judicial intervention.  The U.S. Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) recently reaffirmed this bedrock constitutional principle with respect to the DOJ’s decision to enter into a deferred prosecution agreement (“DPA”).  On April 5, 2016, in the closely-watched case of United States v. Fokker Services B.V., the D.C. Circuit issued its opinion on a matter of first impression and vacated an unprecedented district court order rejecting the DPA between the DOJ and Fokker Services B.V..[1]  Amid the attention surrounding the D.C. Circuit’s Fokker opinion, however, several salient points are worth highlighting. Continue reading

Fokker Misses Opportunity to Provide Clear Guidance on Court’s Role in DPA Cases

by Serina M. Vash

Over the last decade, deferred prosecution agreements (“DPAs”) have been increasingly employed to resolve allegations of corporate criminal misconduct. When a DPA is reached between the government and a corporate defendant, the general practice has been for the government to file the DPA with the court, together with a charging document and a tolling agreement.  But once the power of the judiciary has been invoked by these simultaneous filings, what then becomes the role of the court?

While the narrow holding in United States v. Fokker Services B.V. correctly pointed out what the court’s role is not, the Federal Circuit missed an opportunity to provide clear guidance on the scope of judicial authority to the district courts that increasingly find deferred prosecutions pending on their dockets. Continue reading