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This article was reprinted with permission from FCPA Professor
If you have an interest in the DOJ’s frequent use of deferred prosecution agreements (DPAs), then this recent judicial opinion by U.S. District Court Judge Emmet Sullivan (D.D.C.) should be required reading.
Prior to Judge Sullivan’s opinion, there have been (it is believed) just two prior judicial opinions to address the issue of what power, if any, courts have in approving DPAs. The DOJ’s position in all three cases has been that the courts have no role.
In all three cases, federal courts have rejected such a minimalist role of the courts.
See here for the prior post concerning a July 2013 decision by U.S. District Court Judge John Gleeson (E.D.N.Y.) in a DOJ prosecution of HSBC. See here for the prior post concerning a February 2015 decision by U.S. District Court Judge Richard Leon (D.D.C.) in a DOJ prosecution of Fokker Services. As noted in the post, Judge Leon rejected the DPA, an issue that is currently on appeal before the D.C. Circuit (see here for the post highlighting the oral argument in September).
Like Judge Gleeson in the HSBC matter, Judge Sullivan approved two DPAs in separate matters involving Saena Tech Corp. and Intelligent Decisions Inc. In doing so however, Judge Sullivan wrote a law review-like opinion concerning the issue of “the Court’s role, if any, in determining whether [the DPAs] should be approved at all.”
To begin, Judge Sullivan set forth the history of the Speedy Trial Act, the “statutory provision upon which deferred-prosecution agreements are based and concludes that court involvement in the deferral of prosecution was specifically intended by Congress.” Judge Sullivan also examined, apart from the Speedy Trial Act, whether a court has power to approve or reject DPAs under its general supervisory power. According to Judge Sullivan, “the Court agrees that the Speedy Trial Act and the judiciary’s supervisory power appear to be the only potential sources of court authority to review deferred-prosecution agreements.”
Speedy Trial Act
Regarding the Speedy Trial Act, “the Court discusses the extent to which the current use of deferred prosecution agreements for corporations rather than individual defendants strays from Congress’s original intent when it created an exclusion from the speedy trial calculation for the use of such agreements.”
In the words of Judge Sullivan:
“The relevant legislative history demonstrates that deferred prosecution agreements were originally intended to give prosecutors the ability to defer prosecution of individuals charged with certain non-violent criminal offenses to encourage rehabilitation. At this time, however, [...] deferred-prosecution agreements appear to be offered relatively sparingly to individuals, and instead are used proportionally more frequently to avoid the prosecution of corporations, their officers, and employees.
The legislative history thus demonstrates that Court involvement in the deferral of a prosecution was specifically intended by Congress when it passed this legislation. The Court analyzes the contours of that involvement.”
After noting and reviewing case law concerning the traditional reluctance of courts to wade into prosecutorial decisions, Judge Sullivan concludes that the Speedy Trial Act subjects DPAs to “limited, but meaningful, court review.”
According to Judge Sullivan, the language of the Speedy Trial Act “does not grant the Court plenary power to review” DPAs but rather the “approval authority is located within a sentence stating that the agreement must be “for the purpose of allowing the defendant to demonstrate his good conduct.” 28 U.S.C. § 3161(h)(2).”
Judge Sullivan then states:
“Arguably, then, court review must be tied to determining whether the agreement satisfies this purpose. Had Congress intended courts to review a deferred prosecution agreement for other purposes, it presumably would have provided courts with guidance as to those purposes.
Faced with arguably ambiguous text that most clearly reads as tying the Court’s authority to approve the agreement to determining whether it is truly designed to hold prosecution in abeyance while a defendant demonstrates good conduct, and arguably ambiguous legislative history that most clearly reads as intending that same result, the Court concludes that its authority under the Speedy Trial Act is limited to assessing whether the agreement is truly about diversion. This limited interpretation is especially appropriate where a broader one could effectively seize authority by the Judicial Branch over a traditional Executive Branch function. Accordingly, the Court finds that approval of a deferred prosecution agreement should be granted under the Speedy Trial Act when the agreement is intended to hold prosecution in abeyance while a defendant demonstrates good conduct.”
Notwithstanding the above, Judge Sullivan stated in a footnote:
“This ambiguity, combined with the fact that Congress’s original purpose had nothing to do with the broad-ranging corporate deferred-prosecution agreements that have become commonplace, suggests that congressional action to clarify the standards a court should apply when confronted with a corporate deferred prosecution agreement may be appropriate.”
Elsewhere in the opinion, Judge Sullivan stated:
“This authority necessarily involves limited review of the fairness and adequacy of an agreement, to the extent necessary to determine the agreement’s purpose. In this respect, the Court finds that its authority is greater than the largely administrative authority contemplated by the government. The Court must determine whether an agreement is truly about permitting a defendant to demonstrate reform.
Accordingly, the Court is persuaded that it retains authority under the Speedy Trial Act, albeit limited, to consider the terms of a deferred-prosecution agreement to determine whether they provide the defendant an opportunity to demonstrate good conduct while prosecution is deferred.”
Turning next to the court’s general supervisory powers, Judge Sullivan noted “of utmost importance, the supervisory power serves “to protect the integrity of the federal courts.”
“In the context of prosecutorial decisions, “the federal judiciary’s supervisory powers over prosecutorial activities that take place outside the courthouse is extremely limited, if it exists at all.”
In this vein, the Court would have little authority, if any, to review an out-of-court non prosecution agreement between the government and a defendant.
The question remains what standard the Court should apply in deciding whether a request for approval of a deferred prosecution agreement and placement of that agreement on the Court’s docket must be rejected “to protect the integrity of the federal courts.”
With respect to the contents of the agreements, the Court is of the view that the amicus’s proposal of largely plenary court review, discussed above in connection with the Speedy Trial Act, is too broad. The power to protect the integrity of the judiciary keeps courts from becoming accomplices in illegal or untoward actions, but the Court’s review is necessarily limited. Here, in particular, Congress, in passing the Speedy Trial Act, has arguably prescribed a narrower role for courts in reviewing these very sensitive and important decisions. Respect for the separation of powers thus counsels in favor of Judge Gleeson’s view of the role the supervisory power plays [as noted in the HSBC opinion]:
An agreement with especially problematic collateral consequences—whether intended or not—might be viewed as involving the Court in something inappropriate. In that regard, the Court can envision an especially unfair or lenient agreement as transgressing these bounds and therefore justifying rejection, independent of a court’s review under the Speedy Trial Act.
The Court need not opine further on the precise circumstances in which the Court’s authority under the Speedy Trial Act or the supervisory power would warrant rejection of an agreement. The agreements in these cases [...] do not implicate the integrity of the Court. For that reason, the Court will approve both agreements and grant the requested exclusion of time under the Speedy Trial Act.”
The final section of Judge Sullivan’s opinion is titled “Original Intent vs. Current Use of Deferred-Prosecution Agreements” and states:
“Although the Court approves the two deferred-prosecution agreements in these cases, the Court observes that the current use of deferred-prosecution agreements for corporations rather than individual defendants strays from Congress’s intent when it created an exclusion from the speedy trial calculation for the use of such agreements.
The legislative history of the Speedy Trial Act [...] shows just how far the use of Section 3161(h)(2) to defer the prosecution of corporations departs from what Congress intended. The history demonstrates that the provision was intended to encourage practices that had been ongoing in certain courts, which permitted the deferral of prosecution on the condition that a defendant participate in a rehabilitation program
Notwithstanding Congress’s intent in enacting Section 3161(h)(2) of the Speedy Trial Act, rather than offering deferrals to individuals charged with certain non-violent criminal offenses to encourage rehabilitation, the government increasingly now offers—as it did to the defendants in these cases—to defer prosecution of a corporation for criminal misconduct in exchange for the payment of a fine and the institution of compliance measures.
Often, but not always, [...] the corporation is the only entity ever charged and the individuals responsible face no charges.
In response to criticism surrounding the practice of failing to prosecute the individuals whose actions are actually the cause of corporate crimes, the Department of Justice recently issued guidance designed to strengthen its ability to hold individuals accountable for corporate wrongdoing in future investigations and pending investigations “to the extent it is practicable to do so.”
Despite this evolution in the use of deferred-prosecution agreements, the Court does not find that approving such agreements with corporations to be legally improper: Congress provided the deferred-prosecution tool without limiting its use to individual defendants or to particular crimes. Notwithstanding clear congressional intent, however, the Court is disappointed that deferred-prosecution agreements or other similar tools are not being used to provide the same opportunity to individual defendants to demonstrate their rehabilitation without triggering the devastating collateral consequences of a criminal conviction.”
The last part of Judge Sullivan’s opinion focuses on individual prosecutions and the general lack of DPAs.
“Regrettably, despite the renewed focus on such reforms [concerning individual prosecutions], the deferred-prosecution agreement and other similar tools have not been used as much as they could to achieve reform. This oversight is lamentable, to say the least!
The Court recognizes that prosecutors are confronted regularly with difficult questions of how to exercise their discretion. The decision how to proceed in each case is within the expertise and constitutional responsibility of the Executive Branch, and this Court has neither the desire nor the authority to dictate charging decisions. The Court is, however, extremely dismayed that despite all of the focus on providing tools for prosecutors to reduce over-incarceration, attack the root causes of crime, and mitigate where possible the collateral consequences of criminal convictions, deferred-prosecution agreements for individuals and other similar tools have gone largely unmentioned.
Deferred-prosecution agreements could provide a powerful opportunity for a second chance for deserving individuals.
The Court is of the opinion that people are no less prone to rehabilitation than corporations. Drug conspiracy defendants are no less deserving of a second-chance than bribery conspiracy defendants. And society is harmed at least as much by the devastating effect that felony convictions have on the lives of its citizens as it is by the effect of criminal convictions on corporations. Extending the use of deferred-prosecution agreements to individuals who are charged with certain nonviolent offenses would be a powerful tool to achieve one of the goals proposed by President Obama this year: “give judges some discretion around nonviolent crimes so that, potentially, we can steer a young person who has made a mistake in a better direction.”
In conclusion, Judge Sullivan states:
“Unless and until Congress amends the Speedy Trial Act to provide for broader involvement by the judiciary in assessing the substance of deferred-prosecution agreements, courts will be constrained to reviewing an agreement for: (1) whether it is truly intended to hold prosecution in abeyance while a defendant demonstrates rehabilitation, as required by the Speedy Trial Act; and (2) whether the agreement involves the Court in the type of illegal or untoward activity that might impugn the Court’s integrity. That authority, however, is not as limited as the government might prefer. Because the agreements in these cases transgress neither boundary, the Court approves them, and does not have occasion to set forth the full scope of a district court’s authority to review and reject a deferred-prosecution agreement. Nothing in this Opinion should be interpreted to approve the judicial abdication of this review authority. Even agreements that clearly meet the requirements of the Speedy Trial Act and do not at all implicate a court’s supervisory authority warrant searching review to establish why they should receive court approval.
The Court respectfully requests the Department of Justice to consider expanding the use of deferred-prosecution agreements and other similar tools to use in appropriate circumstances when an individual who might not be a banker or business owner nonetheless shows all of the hallmarks of significant rehabilitation potential. The harm to society of refusing such individuals the chance to demonstrate their true character and avoid the catastrophic consequences of felony convictions is, in this Court’s view, greater than the harm the government seeks to avoid by providing corporations a path to avoid criminal convictions. If the Department of Justice is sincere in its expressed desire to reduce over-incarceration and bolster rehabilitation, it will increase the use of deferred-prosecution agreements for individuals as well as increase the use of other available resources as discussed in this Opinion.”
Read more articles on the FCPA by Mike Koehler at FCPA Professor.
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