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 Top Terms in a Federal DPA (Part2) 

Michael Santos

Michael Santos

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A deferred prosecution agreement is a good possible outcome when non-prosecution is not available to resolve criminal charges

TOP TERMS IN A FEDERAL DEFERRED PROSECUTION AGREEMENT (PART 2)

When a non-prosecution agreement is unavailable to someone involved in a criminal investigation, a Deferred Prosecution Agreement (or DPA) could be the next best possible outcome. 

RECAP PART 1 

Part 1 covers:

WHAT IS A DPA?

A deferred prosecution agreement is a mechanism to resolve a criminal case where the government brings charges but agrees not to move forward on them for a specified time period.

A RECENT FEDERAL DEFERRED PROSECUTION AGREEMENT.

The Baier case is a recent cyber security criminal case in which the DOJ entered into a DPA to resolve the matter. 

KEY TERMS 1-7

1. Agreement to Criminal Charges and Factual Statement

2. Agreement to Waive Constitutional Right to Indictment

3. Agreement to Selected Venue

4. Admission of Factual Statement

5. Term of the Agreement

6. Definitions

7. Agreement to Specific Restrictions (Employment) 

PART 2: TOP TERMS IN A FEDERAL DEFERRED PROSECUTION AGREEMENT

Next up is #8, a provision covering employment disclosures and prior approval requirements.

8. Employment Disclosures & Prior Approval Requirements

In addition to possible employment restrictions, the DOJ is likely to request some disclosures regarding employment. These disclosures can sometimes be quite extensive and burdensome. 

The defendants in the Baier case DPA agreed to provide significant disclosures, set forth below. Moreover, they agreed to obtain the prior approval of the DOJ concerning employment and other related activities.

Here is the actual language on employment disclosures:

The defendants shall inform the [DOJ] of their current employment (including as employees, consultants, contractors, or sub-contractors) and any changes in such relationships, or change in ownership of the employer. The defendants shall obtain preapproval from the [DOJ] prior to obtaining or engaging in any employment that would involve the defendants engaging in, advising about, consulting about, training or teaching CNA and CNE techniques, as well as any employment regarding the support of CNA and CNE activities (including, but not limited to,

software or malware development, infrastructure development, operations management, targeting techniques, cryptology, and data analysis). 

For the purposes of this Paragraph, “employment” shall also include the retention or engagement of defendants by anyone for any duration of time, in exchange for compensation, including but not limited to speaking engagements, presentations at conferences, writing contracts, memoirs, book/movie deals, or training sessions.”

Also:

“The defendants have to provide at least 30 days’ notice to the FBI Cyber Division before “seeking or accepting (whichever comes first) any paid or unpaid employment, consultancy, teaching or subcontracting relationship for the benefit of a foreign government, or for an organization that contracts or subcontracts with a foreign country’s intelligence, law enforcement, military or defense services.”

Finally:

The defendants shall not engage in any employment (including as employees, consultants, contractors, or subcontractors) that would involve the defendants exporting any defense articles or providing any defense services under the ITAR, including but not limited to,

any defense services involving CNA or CNE techniques.

Criminal defendants need to fully understand their disclosure obligations under a DPA to prevent unwittingly breaching their agreement. 

NOTE: Remember that under most DPAs, the DOJ will have sole discretion and authority to declare that a defendant breached the agreement, allowing DOJ to begin prosecution on the original charges.

9. Cooperation Requirements

It is not uncommon for DPAs to include a requirement that defendants continue to cooperate with the federal government. The Baier case DPA provides an excellent example of how demanding cooperation can be, especially when investigations are still pending.

In the Baier case, the defendants agreed to: 

“…cooperate fully with the [government] and to meet with and provide full, complete, and truthful information to the FBI or any other US government organization, upon request of the Federal Bureau of Investigation (FBI), including any follow-on meetings requested (the first meeting to occur within 90 days of signature of the agreement unless otherwise agreed to by the parties) at places and times to be determined by the FBI. This includes providing any documents, material, data, or information requested by the FBI that are in the possession or control of the defendants as of the time of the acceptance of this agreement. Cooperation does not require the defendants to waive their attorney-client or attorney-work product privileges. However, the defendants must provide to the [government] a log of any information or cooperation that is not provided based on an assertion of law, regulation, or privilege, and the defendants bear the burden of establishing the validity of any such assertion.

The DOJ and the FBI expect full cooperation, and compliance can become time-consuming and costly as well.

10. Financial Disclosure Requirements

The Baier case DPA includes onerous financial disclosure requirements spanning the six years before the agreement and the 3-year term of the agreement regarding tax returns, assets, bank accounts, cryptocurrencies, IOUs, and more. 

Here is the exact language:

“The defendants shall disclose to the [DOJ] and FBI all tax returns (and related attachments) and identify all assets owned or controlled by themselves and their immediate family members, including property, bank accounts, virtual currency assets and wallets, and agreements

to be paid monies (including IOUs, financial commitments, or promises of repayment or reimbursement), from 2016 to present. Following the initial disclosures, the defendants shall make annual disclosures by May 1 of each year during the Term.”

These financial disclosures should come as no surprise. They may not always be as detailed as those in the Baier matter, but most white-collar DPAs are likely to have them. 

11. Other Assurances

This provision is a catch-all for specific matters that do not fit neatly into other sections of a DPA. For example, in the Baier case DPA, this section requires defendants to agree: 

(a) not to seek work in any capacity from any UAE government organization responsible for law enforcement, national security, intelligence, armed forces, or defense services; and 

(b) if a defendant accepts payment for work that violates this provision, that defendant agrees to forfeit any monies received to the federal government, even after the DPA expires. 

The specific language states:

“The defendants agree that if a defendant violates this provision after the expiration of the Term, the violating defendant will agree to forfeit and pay liquidated damages to the United States in the amount of their full compensation from such employment, payable on the 1st day of January of each subsequent year.”

NOTE: Defendants’ agreement to forfeit unapproved income and to pay liquidated damages survives the end of the 3-year term.

12. Monetary Penalties

In the Baier case, Baier, Adams, and Gericke each agreed to pay $750,000, $600,000, and $335,000, respectively, over a three-year term. They cannot accept reimbursement for this payment without the express approval of the US government.

A monetary penalties provision sets forth an agreement with DOJ regarding civil or criminal fines, civil or criminal forfeitures, restitution, and other related matters. 

The specific language of the monetary penalties clause is instructive. It states in part:

In lieu of a criminal prosecution and sentence or fine, or a

civil or criminal forfeiture action, the [government] and the defendants agree that a monetary penalty based on the total amount they earned as employees of or its successor entities is appropriate in this case (the “Monetary Penalty”)

Not only do defendants in the Baier case consent to make the specified payments, but they also cannot challenge the fact that a monetary penalty is appropriate to begin with “given the facts and circumstances of this case, including the nature and seriousness of the conduct.” 

The government can reserve its right to seek even higher fines if there is a future prosecution.

“[N]othing in this Agreement shall be deemed an agreement by the [DOJ] that the Monetary Penalty is the maximum fine that may be

imposed in any future prosecution, and the [DOJ is] not precluded from arguing in any future prosecution that the Court should impose a higher fine.” 

13. Deferral of Prosecution

The most fundamental benefit defendants get from a DPA is the DOJ’s agreement to defer any prosecution for the conduct outlined in the factual statement and criminal charges. If defendants comply with all of their obligations under their DPA, the DOJ: 

  • will not continue to prosecute; 
  • will ask the Court to dismiss the criminal charges with prejudice; and 
  • will not seek charges in the future based on the conduct described in the original criminal complaint. 

CONCLUSION

Defendants must understand all of the obligations in a DPA to prevent unwittingly breaching the agreement. It is important to remember that under a DPA, the DOJ has sole discretion and authority to declare whether a defendant breached the agreement and whether to prosecute on the original criminal charges. 

When a defendant breaches the DPA, and the government prosecutes, the DOJ has built into the DPA additional advantages for any future prosecution. Thus, a breach of the DPA, or new charges, can be exceedingly costly. 

For this reason, we encourage defendants to understand the terms of their DPAs fully and have a process in place to ensure full compliance. Federal deferred prosecution agreements are serious business, and anyone entering into a DPA with the federal government must understand all of the ramifications.

Prison Professors, an Earning Freedom company, regularly helps clients locate and vet experienced criminal defense counsel to assist with Deferred Prosecution Agreements and other criminal defense matters. We also assist clients in crafting sentencing mitigation strategies to obtain better outcomes.
Follow the Prison Professors blog for the final post in this series on Top Terms In A Federal Deferred Prosecution Agreement.

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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