Do DPAs and NPAs Promote Balanced Justice?

In the Bush Administration, the Justice Department turned deferred prosecution agreements (DPAs) and non-prosecution agreements (NPAs)into relevant terms for defense counsel.  Now, even the SEC has joined the club entering into the first DPA and NPA.

The distinction between a DPA and an NPA is critical -- the DPA invokes the Court's supervisory jurisdiction and requires the Justice Department to lodge a criminal information to charge the company but defer the prosecution; the NPA remains within the discretion and control of the Justice Department, the Executive Branch, and does not involve any filing with the courts.

The primary benefit of these two tools is to avoid the catastrophic consequences which can result to a public company which is indicted -- the Arthur Andersen case in the early 2000s resulted in the collapse of the company, the loss of thousands of jobs and economic harm to communities around the country.

The Justice Department's use of DPAs and NPAs has been criticized as a tool which rewards bigger companies with more effective defense counsel and lobbyists, to the detriment of mid-size and less influential corporate actors.  It is hard to find a consistent dividing line between a decision to charge a company and the decision to enter into a n NPA or a DPA.  The Justice Department has tried to articulate such standards, without much success.  However, at least the Justice Department is trying to use consistent forms of NPAs and DPAs, imposing similar burdens on actors who enter into these agreements.  

The use of corporate monitors, and when they are necessary, remains a troublesome area.  The Monfrot Memo which was adopted years ago in response to criticisms that corporate monitorships were being handed out to Justice Department cronies, has not done too much to life the opaque standards being employed for corporate monitors.  

Despite all of these concerns, the Justice Department and now the SEC continue to employ DPAs, NPAs and corporate monitors at a significant pace.  More and more component's of the Justice Department, such as the Antitrust Division, are using DPAs and NPAs for the first time, and of course, the rate of voluntary disclosures continues to rise as corporations are being scared into confessing their sins.  

The Fraud Section is the largest user of DPAs and NPAs.  The SEC plans to use these tools in more cases.  The Antitrust Division recently entered into its two NPAs in the municipal bond investment investigations under which two companies acknowledged their participation in unlawful agreements to manipulate the bidding process and rig bids on municipal investment contracts.  The two companies paid civil penalties of $160 million and $228 million, respectively.  

DPAs and NPAs are frequently used when dealing with corporations which are highly regulated and where the collateral consequences of a conviction can be devastating to the corporation.  These concerns typically occur in the financial and health care industries,e specially with the impact that exclusion from Medicare and Medicaid could have on a corporation.

Enforcement agencies are developing new tools which give them greater flexibility to resolve cases.  But they have to be careful to use these new tools to avoid situations where uneven justice is dispensed.  The more consistent the standards for use of the tools, the terms and provisions of the tools, and the more transparent the process is, the more likely the government is to earn judicial support and avoid public and political criticism.