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 Non-prosecution & Deferred Prosecution Agreements 

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Michael Santos

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Deferred prosecution & non-prosecution agreements help resolve criminal and civil law enforcement matters before formal charges or trials.

KEYS TO UNDERSTANDING NON-PROSECUTION & DEFERRED PROSECUTION AGREEMENTS 

INTRODUCTION

Over the last two decades, the United States Department of Justice (“DOJ”) and other government agencies have increased the use of alternative criminal settlement arrangements, such as Deferred Prosecution Agreements (“DPAs”) and Non-Prosecution Agreements (“NPAs”). Although typically used to resolve criminal matters, civil enforcement agencies like the Securities and Exchange Commission also use DPAs and NPAs.

DPAs and NPAs enable federal authorities to reach settlements with companies and individuals accused of breaking federal law. The defendants in these cases are essentially on a form of probation. 

With an NPA, companies and individuals avoid formal criminal charges altogether. This result is mainly because the defendant comes forward to self-disclose possible violations of the law and cooperate with the government. 

The government files formal criminal charges with a DPA while also agreeing to enter into a settlement agreement with the company or individual. Under a DPA, the government files charges but agrees not to move forward in court on those charges.

In 2021 so far, the government has entered into 18 corporate NPAs and DPAs. The trend on the corporate side heavily favors DPAs: 15 of the 18 agreements so far this year are DPAs. NPAs may be more difficult to obtain absent voluntary self-disclosure. That said, voluntary self-disclosure alone does not guarantee non-prosecution. 

The government evaluates and negotiates NPAs and DPAs on a case-by-case basis.

When deciding whether to enter into a DPA or NPA, one of the prosecutors’ primary considerations is whether criminal prosecution is in the public interest. The severity of the conduct is a significant factor, measured in terms of:

  • the amount of money gained or lost; 
  • the risk of harm to the general public, unidentified victims, and other stakeholders such as employees, creditors, and shareholders; and 
  • the impact on the stability and integrity of financial markets and international commerce.

The typical length of an NPA or DPA is 36 months.

Individual Defendants

Are NPAs and DPAs as readily available for individual defendants as opposed to corporations? That is unclear.

In theory, yes. In practice, reports suggest that VIPs in high-profile cases can more readily negotiate NPAs or DPAs. Non-VIPs are more often stuck with the standard plea bargaining process as the only way to mitigate their sentences. Reports also suggest that individual defendants can best make a case for non-prosecution or deferred prosecution by cooperating with the federal government. 

https://www.forbes.com/sites/insider/2016/02/09/non-prosecution-agreements-reserved-for-vips/?sh=72c8ab8172bd/

Click here to read Forbes’ detailed article Non-Prosecution Agreements: Reserved for VIPs?  

In this article, Forbes describes the key differences between a plea agreement and a non-prosecution or deferred prosecution agreement: 

  • In a typical plea agreement, a cooperator agrees to plead guilty to a felony charge and to testify against others in exchange for a promise from prosecutors to file what is known as a 5K1.1 letter—a letter that seeks a lower sentence based on the substantial assistance the cooperator provided to the government.” 
  • This arrangement provides a benefit to the cooperator because courts often impose lower sentences when prosecutors send a 5K1.1 letter. But the arrangement also has significant drawbacks, as it requires that the cooperator suffer the collateral consequences accompanying any felony plea. The cooperator bears the risk that a court will still impose a significant prison term.
  • “In a typical non-prosecution agreement, a cooperator agrees to testify against others in exchange for a promise from prosecutors not to prosecute the cooperator for specific conduct. Because this arrangement does not involve a guilty plea, it allows the cooperator to avoid the consequences that accompany a felony conviction, including potential jail time.”

Federal prosecutors use three main factors to determine whether to offer a cooperation plea agreement or a non-prosecution agreement:

  • the value of a person’s cooperation;
  • an individual’s relative culpability and criminal history; and 
  • the importance of the case.

*Pro-Tip: Remember to consult legal counsel regarding any court case. Prison Professors, an Earning Freedom company, helps clients with sentencing mitigation strategies. Our team also assists clients in locating and vetting experienced white-collar counsel.

 DPAs 

In general, a deferred prosecution agreement or DPA is a settlement agreement between prosecutors and defendants (corporate or individual) to address a criminal issue that the government might pursue otherwise. The DPA provides for the suspension of a prosecution for a specified period of time if the defendant meets specific conditions. A DPA is a legally binding agreement, sometimes entered into with the authorization or oversight of a federal court.

DPAs occur in cases of potential fraud, bribery, price-fixing, Foreign Corrupt Practices Act violations, securities violations, and other criminal conduct. In the United States, DPAs have been in use for decades. Some DPAs include the appointment of an independent monitor to oversee the agreement and ensure compliance with the terms. 

NPAs

A non-prosecution agreement is a legally binding agreement between prosecutors and corporate or individual defendants subject to a criminal (or civil enforcement) investigation. Under an NPA, a government agency agrees not to bring charges in exchange for a company or individual taking remedial action and demonstrating compliance with specified government demands. 

Many NPAs come about as a result of voluntary self-disclosure of possible wrongdoing. Among the government’s requirements, an NPA can include restitution payments, for example. Or, the government may require that the defendant waive the statute of limitations so that the government can bring charges later if need be. 

Other typical provisions of an NPA include the defendants’ agreement to

  • cooperate with the government; 
  • acknowledge specific facts negotiated between the government and the company; 
  • commit to comply with all applicable laws;
  • accept a corporate compliance monitor; and 
  • waive certain legal defenses should a formal prosecution take place in the future. 

*Pro-Tip: The agreement to acknowledge specific facts with the government is essential. If a company or individual breaches the agreement, prosecutors can restart the case and use the company’s or individual’s admissions against them in subsequent proceedings.

Defendants’ Point of View

There are many compelling reasons for defendants to enter into a DPA or NPA with the government. Often, companies accused of criminal conduct will not survive a full-blown prosecution. A DPA or NPA can be a lifeline.

For example, a criminal conviction can disqualify companies or individuals from bidding on government contracts. In the federal system, penalties after conviction are much harsher following a trial or a plea bargain. 

A DPA or NPA can help minimize the damage to an organization’s or individual’s brand image. The company or individual can use the refrain “we found the problem, and we fixed it” and live to fight another day. 

The example of accounting firm Arthur Andersen is instructive. The government won an obstruction of justice conviction against the company, which went under as a result. By the time the US Supreme Court reversed the conviction, the company could not recover as a business concern. Tens of thousands of employees having nothing to do with the alleged criminal conduct lost their jobs in the Arthur Andersen case. Since the Arthur Andersen case, defendants point out when the collateral consequences of prosecution include significant harm to innocent third parties.

Prosecutors’ Point of View

The government’s incentives for entering into these agreements are many. They are related to the economics of criminal prosecution, as well as promoting sound criminal enforcement policy. 

According to DOJ policy, DPAs and NPAs help deter future criminal conduct, conserve judicial resources for other matters, and provide a vehicle for compensation to communities and crime victims. 

To be sure, the government believes there are sufficient grounds to prosecute the defendants in these cases. However, a detailed cost-benefit analysis leads the government to conclude that, on balance, the situation warrants a DPA or NPA rather than a full-blown criminal prosecution.

For example, there are substantial benefits from a defendant’s voluntary self-disclosure and cooperation. Also, when possible, the DOJ appreciates the value of avoiding the collateral consequences of penalizing innocent victims (e.g., employees who were not involved). These goals are often best accomplished with NPAs and DPAs.

The growing use of NPAs and DPAs also enables federal prosecutors to expand from their conventional role focused mainly on punishing defendants who commit crimes. With NPAs and DPAs, prosecutors can also foster increased compliance with the laws. This can be a win-win: the government commits not to prosecute or to defer prosecution while enticing defendants to accept sanctions and penalties and make necessary structural changes to their business.

NDAs and DPAs allow people to resolve allegations of criminal conduct, reform themselves, and potentially stay in business. Corporate defendants get an opportunity to strengthen internal compliance programs to prevent future wrongdoing. Again, these agreements can be a lifeline.

As with the DOJ, the Securities and Exchange Commission’s (SEC) stated reasons for entering into NPAs and DPAs reflect similar policy objectives. The SEC places a strong emphasis on deterring future misconduct while simultaneously protecting the interests of corporate shareholders and promoting integrity in the markets. 

When entering into NPA’s and DPAs, the SEC can specifically require defendants to: 

  • cooperate truthfully and fully with the SEC’s investigation and related enforcement actions;  
  • waive the statute of limitations or enter into long-term tolling agreements; 
  • agree to express prohibitions and undertakings during the period of the NDA or DPA; and 
  • admit to specific underlying facts.

Whistleblower Programs

People who report potential criminal conduct that leads to an NPA or DPA can obtain whistleblower rewards from the SEC and other government agencies. For example, on February 23, 2021, the SEC announced a $9.2 million award to a whistleblower who provided information that led to a successful DPA or NPA with the DOJ. 

Federal government agencies also appear willing to reward whistleblowers who provide information leading to NPAs and DPAs in the context of antitrust enforcement and anti-money laundering investigations. 

Click here for an article on whistleblowers’ role in government investigations: Prison Professors Blog: Whistleblowers.

CONCLUSION

Deferred prosecution and non-prosecution agreements enable federal authorities to reach settlements with companies and individuals accused of breaking federal law. The defendants in these cases are essentially on a form of probation. There are many compelling reasons for defendants to enter into a DPA or NPA. For one, many companies cannot survive a full-blown prosecution, in which case these sorts of agreements can be a lifeline. From the government’s view, DPAs and NPAs help deter future criminal conduct, conserve judicial resources, and provide a vehicle for restitution. 

Prison Professors, an Earning Freedom company, works alongside (not in place of) civil and criminal defense counsel to help clients proactively navigate through investigations and prosecutions. Our team also helps clients prepare mitigation and compliance strategies.

If you have any questions or are uncertain about any of the issues discussed in this post, schedule a call with our risk mitigation team to receive additional guidance.

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