Over the past few years more and more cases initiated in the United States for offenses of international corruption (Foreign Corrupt Practices Act, FCPA) by both American and foreign companies are settled by an original legal instrument, the Deferred Prosecution Agreement (DPA). Currently, close to 40% of these signed agreements are the result of infractions of the FCPA.
What is a Deferred Prosecution Agreement?
A DPA is an agreement with the American authorities (Department of Justice, DOJ) whereby a company or, more rarely, an individual facing a criminal investigation submits to a certain set of obligations in exchange for the charges against them ultimately being dropped. The DPA originated with a 1974 law, the Speedy Trial Act, which authorized prosecutors to defer prosecutions with the court’s approval in order to give the defendant an opportunity to demonstrate his good conduct. The specifics are defined by principles established by the Department of Justice (Principles of Federal Prosecution of Business Organisations.) Taken with the NPA (non-prosecution agreement), the DPA represents one of the primary alternatives available to companies who seek to avoid prosecution through a pre-trial diversion, thus averting a formal indictment and, ultimately, a criminal conviction. The agreement is different from a guilty plea as the company does not plead guilty, but limits itself to acknowledging the facts as presented in the government’s case. Specifically, as soon as the DPA is signed, the prosecutor files it with the relevant court and initiates prosecution by filing an Information, however the prosecution is immediately deferred. At the same time, the agreement is announced through a DOJ press release and published on the DOJ web site.
What happens once a DPA is signed?
A probationary period of between one and four years begins depending on the specifics of the agreement (two and a half years is the average), during which time the company must respect the obligations agreed to in the DPA. The obligations generally include the following: payment of the financial penalties which can be up to hundreds of millions of dollars (ex. Siemens, Alcatel, Technip, JGC Corporation) sometimes into the billions, acknowledgement of the veracity of certain alleged facts of the case and the implementation of an anti-corruption compliance program potentially under the supervision of an external monitor (monitors are appointed approximately 30% of the time). At the end of this period, if the prosecutor, using his/her discretionary powers, decides that a company has respected its obligations fully he/she can then request the original court to dismiss all charges (motion of dismissal) and this is usually granted by the Court. The government action is then definitively terminated (dismissal with prejudice).
What are the advantages of a DPA?
The DPA is an instrument of criminal policy judged effective by the American authorities to address the complexities and growing sophistication of corruption offenses. It can be viewed as both an instrument of punishment as well as one of prevention. Thus the DPA guarantees the systematic and quick repression of corruption offenses whilst avoiding long, costly trials for the authorities which have little guarantee of a positive outcome. The DPA is also aimed at avoiding the recurrence of an offense as it imposes anti-corruption compliance measures on the company. From a company’s point of view, the DPA affords more predictability by offering a shorter and less costly proceeding. Moreover, the implementation of a compliance program that could limit a company’s exposure to criminal risk, even if implemented under constraint, can only be positive.
Are there any drawbacks to the use of DPAs?
The mechanism does incite numerous questions over the extent of the powers granted to the prosecutor in the negotiation of the DPA clauses and in the implementation of the agreement, powers which allow him or her to force the company to accept drastic measures. These measures can include forbidding the company from defending itself against subsequent criminal proceedings in the USA or overseas proceedings based on facts in the DPA itself, or forcing internal anti-corruption compliance procedures on a company with the supervision of an external monitor. This situation is even more problematic on a practical level as companies don’t really have a choice but to accept the agreement. For companies, the DPA often appears to be the best and only way to avoid the potentially dramatic consequences concomitant with a formal accusation and subsequent conviction in the United States; a conviction which could result in serious penalties including debarment, the prosecution of company directors, very significant fines and, potentially, increased risks of class action law suits. These potential consequences are one of the reasons that companies must adapt to the introduction and expanded use of Deferred Prosecution Agreements. This need to adapt will remain crucial as DPAs are soon to be used outside the United States. The United Kingdom intends to add to its already repressive arsenal the use of DPAs and these will come into force shortly and be used in the context of corruption offenses (UK Bribery Act). Nevertheless, since corruption often spills across national borders, the main issue involves limiting multiple prosecutions of companies for the same facts. This issue could be addressed at an intergovernmental level such as the OECD task force on corruption.
For more information, see the article published in La Semaine juridique, Édition générale, 25 mars 2013, n° 13 (JCP G 2013, doctr. 359)