Corporate Crime, Prosecutorial Discretion, and Separation of Powers: U.S. v. Fokker Services
Many criminal investigations of corporations are resolved by a Deferred Prosecution Agreement (DPA) or its less frequently used cousin, a Non-Prosecution Agreement (NPA). These are essentially negotiated settlements between the Department of Justice and the defendant, in which the company agrees to certain sanctions and changes in behavior in exchange for avoiding criminal penalties. Typically the terms and conditions of such agreements are set by the prosecutors. Decisions about whether to charge at all, what charges to bring, and the terms of any resolution are at the core of prosecutorial discretion. But in 2015, in an unprecedented decision, U.S. District Judge Richard J. Leon rejected a DPA between prosecutors and a company called Fokker Services because he thought the company had gotten too sweet a deal. The U.S. Court of Appeals for the District of Columbia Circuit recently reversed that decision, chiding the judge for overstepping his bounds. As I wrote in this earlier post, I have concerns about the increased use of DPAs and the resulting effect on the criminal justice system. But regardless of how one feels about the merits of DPAs, the D.C. Circuit’s decision is a welcome reaffirmation of the importance of separation of powers and the proper role of the judiciary.
DPAs, NPAs, and Corporate Crime
The use of DPAs has been on the rise over the past decade ever since the Arthur Andersen debacle. The huge accounting company was driven out of business – and tens of thousands of people lost their jobs – as a result of a criminal prosecution that was later thrown out by the Supreme Court. To avoid such a potential "corporate death penalty," companies have a tremendous incentive to enter into a DPA and avoid a criminal conviction. In a DPA, the government files criminal charges but agrees to put the prosecution of those charges on hold. Under the agreement, the company generally admits to the charges and may agree to pay fines or restitution, undergo internal reforms, cooperate in the prosecution of individual employees, and take other remedial steps to atone for its misbehavior. In many DPAs the government requires the company to hire a monitor, at the company’s expense, to oversee its compliance with the agreement. The government agrees that when the DPA ends, usually in a few years, it will dismiss the criminal charges if the company has fully complied. A NPA may contain the same kinds of terms as a DPA. The biggest difference is that in a NPA there are no charges filed with the court – it's just a private agreement between the company and the prosecution. A NPA thus lacks the imprimatur of a court proceeding and the gravity of charges actually being filed. And because there is no public court filing, a NPA could potentially take place without the public even knowing about it.
United States v. Fokker Services B.V.
Fokker Services is a Dutch aerospace services company. In 2010 Fokker self-reported to the government that it may have violated federal export control laws in its dealings with Burma, Sudan and Iran. Over the next four years, Fokker cooperated with the government in a wide-ranging investigation of this misconduct. The investigation uncovered more than 1,000 illegal transactions, from which Fokker earned about $21 million. As part of its cooperation, Fokker instituted a number of internal reforms. It also fired its president and demoted or reassigned a number of other employees involved. The government described Fokker’s remedial efforts as “a model to be followed by other corporations.” In light of this cooperation, the government negotiated a DPA with Fokker under which the company would continue its compliance and remediation efforts for another 18 months and pay a $21 million fine. Pursuant to the DPA, the government filed a one-count criminal information against Fokker on June 5, 2014. Once federal charges are filed, the Speedy Trial Act normally requires that trial begin within seventy days. But the Act excuses any period of delay “during which prosecution is deferred by the attorney for the Government pursuant to written agreement with the defendant, with the approval of the court, for the purpose of allowing the defendant to demonstrate his good conduct.” It’s that “approval of the court” language that led to the dispute in this case. After the charging document and DPA were filed, Judge Leon indicated he might withhold his approval. That would have the effect of torpedoing the DPA, because the Speedy Trial Act clock would keep running and the government would be forced either to take the case to trial or dismiss it long before the eighteen-month term of the DPA had expired. At a series of hearings Judge Leon said he thought the DPA was “too good a deal for the defendant.” He expressed concern about why no individual employees had been charged and why the government had not required Fokker to hire a corporate monitor. After months of consideration, on February 5, 2015 Judge Leon denied the motion to exclude time under the Speedy Trial Act. He wrote it was not in the interest of justice to approve the DPA when Fokker had engaged in such egregious conduct and was being punished only “anemically.” He concluded the DPA was “grossly disproportionate to the gravity of Fokker Services' conduct in a post-9/11 world” and "[did] not constitute an appropriate exercise of prosecutorial discretion.” This marked the first time a district judge had denied a motion to exclude time under the Speedy Trial Act due to the judge’s disagreement with the terms of a DPA. Both the United States and Fokker appealed the judge’s order.
The D.C. Circuit's Decision
The D.C. Circuit reversed Judge Leon’s ruling in an unanimous opinion written by Judge Sri Srinivasan (who reportedly was on the very short list for President Obama’s most recent Supreme Court nomination). The Court went out of its way to note it was not agreeing or disagreeing with Judge Leon’s views about the merits of the DPA, and that it had no occasion to do so. The point was that a judge has no business making such a judgment. As the Court of Appeals noted, it has long been settled that criminal charging decisions – including what kind of charges to bring, when to dismiss charges, and whether to bring charges at all -- are almost exclusively an Executive Branch prerogative. These decisions involve many considerations including the strength of the evidence, deterrence value of a prosecution, allocation of scarce resources, and law enforcement priorities. The Judiciary is ill equipped to make these judgments, and absent some kind of abuse or a constitutional violation a court will almost never second- guess such decisions. Judge Leon, however, rejected the Fokker DPA because he thought the government had not been tough enough on Fokker and its employees. The Court of Appeals made it clear that was not the judge’s call. Whether he personally agreed with the terms of the agreement was irrelevant; Judge Leon should not have “assume[d] the role of Attorney General” by questioning the prosecutors' decisions. The approval of the court under the Speedy Trial Act, the Court of Appeals held, should simply be to ensure that the proposed DPA is actually for the legitimate purpose of allowing the defendant to “demonstrate his good conduct.” If it is, the judge’s inquiry is at an end. In questioning the terms of the deal and the government’s charging decisions, the Court of Appeals held, Judge Leon “significantly overstepped [his] authority.”
Consequences of the Court's Decision
The D.C. Circuit’s decision is a welcome reaffirmation of the importance of separation of powers. Although judicial scrutiny of DPAs might have some facial appeal, it would actually raise a host of problems. Not only do judges simply lack the necessary information to make such decisions, but judicial intervention would have a number of other negative consequences. When criticizing the lack of a corporate monitor in the Fokker DPA, Judge Leon remarked, “One can only imagine how a company with such a long track record of deceit and illegal behavior ever convinced the Department of Justice to agree to that!” But that’s precisely the point – the judge can only imagine. He doesn’t have the information necessary to make an informed judgment about the terms of the deal or why the government might have made that decision. There may be many explanations for a DPA that looks lenient to the outside world. The alternative to a deal is a trial, where the government must prove its case beyond a reasonable doubt. Prosecutors may have information about possible difficulties in meeting that burden -- such as problems with particular witnesses or the admissibility of certain evidence – unavailable to those not involved in the investigation. These considerations will always influence the government when deciding what kind of a deal it should make, whether it's a plea agreement or a DPA, but likely will be unknown to the judge. The government also must make judgments about the allocation of prosecution resources, law enforcement priorities, and deterring other wrongdoing while incentivizing cooperation. As the Court of Appeals noted, these are core functions of the Executive Branch, charged with faithfully executing the laws. A judge generally lacks much of the information necessary to make such judgments, and even if the judge had some relevant information, it is not the court’s place to intervene. Apart from the structural separations of powers concerns, judicial review of the terms of DPAs would also have a number of practical negative consequences. Uncertainty is never a plus for parties trying to negotiate a resolution. Defendants would rightly be more cautious and reluctant to cooperate if they knew that whatever the government is offering them is not really the last word and that a judge might second guess whatever agreement they make. Another likely, and undesirable, consequence of judicial scrutiny of the terms of DPAs would be a shift to the use of NPAs instead. Non-prosecution agreements do not require any charges to be filed with the court, and so do not require any court approval. Judge Leon himself noted that, “this Court would have no role here if the Government had chosen not to charge Fokker Services with any criminal conduct – even if that decision was the result of a non-prosecution agreement.” Prosecutors can require as part of a NPA that defendants waive the statute of limitations, so they could still preserve the right to file charges later if the defendant failed to live up to the agreement. And the other terms of the agreement may be largely the same, allowing the prosecution to achieve the same goals as a DPA. The primary difference is that a DPA generally is filed with the court and made public. A NPA could remain entirely private if the parties so chose. If DPAs were routinely second-guessed by trial judges, the logical response would be for prosecutors and defendants to shift to NPAs in order to avoid any such judicial interference. This could result in more secret deals and in less information being available to the public about any resolutions. The irony, therefore, would be that by purporting to subject the terms of these agreements to greater scrutiny, judicial review likely would instead drive such agreements underground and out of public view entirely. There are legitimate concerns about the increasing use of DPAs. Companies face tremendous pressure to resolve criminal investigations short of a trial, which gives prosecutors enormous leverage. DPAs risk transforming the criminal justice system into a sort of regulatory, administrative regime run by prosecutors relieved of their burden of proving criminal conduct beyond a reasonable doubt. But having judges play Monday morning quarterback concerning prosecutors’ charging decisions is not the answer. It’s fortunate the D.C. Circuit agreed. Click here to join the Sidebars mailing list and receive e-mail notification of future posts.