What’s a Deferred Prosecution Agreement?
A deferred prosecution agreement, or “DPA,” is a mechanism for resolving a case against a company that is, essentially, an unofficial form of probation. Although usually used to resolve a criminal case, civil enforcement agencies like the SEC have begun to use them as well.
Under a DPA, the government will bring charges against a defendant but agrees not to move forward on those charges. In exchange, the defendant agrees to abide by certain requirements or conditions. If the defendant satisfies its end of the bargain, the government agrees to drop the charges. But if the defendant reneges and violates the conditions of the DPA, the government can move forward with the prosecution.
The conditions of a DPA are negotiated between the defendant and the government. For example, the agreement might require the defendant to admit wrongdoing, to pay restitution, or to take certain actions to prevent future wrongdoing. For example, a DPA might require a corporation to fire the executives responsible for the wrongdoing, to implement a more robust compliance program, to submit to an independent monitor to ensure upright conduct, or all of the above – and maybe, even more.
A DPA is not the same as a plea bargain or a sentence of probation. Under a plea bargain or a sentence of probation, a defendant is convicted of a crime. Compliance with the terms of the plea bargain or terms of probation is overseen by the court. A DPA, by contrast, is largely imposed and monitored outside the judicial system. A defendant who submits to a DPA is not convicted of any crime. The charges are dismissed if the company complies with its obligations under the DPA.
The Department of Justice (DOJ) has called DPAs an “important middle ground” between indictment of a corporation and declining to bring charges altogether. DOJ will typically consider a DPA when the collateral consequences of indicting a corporation will be significant and cause harm to innocent third parties.
For example, Enron’s auditor, the accounting firm Arthur Andersen, essentially folded after it was indicted and convicted for obstruction of justice related to its employees’ actions during the Enron investigation. Although the Supreme Court ultimately reversed the firm’s conviction, the firm could not recover and has not functioned as a viable business enterprise since. Tens of thousands of employees – most of whom had nothing to do with Arthur Anderson’s audit of Enron or the conduct that led to the firm’s indictment – lost their jobs.
Resolving a corporate case through a DPA might allow DOJ to avoid collateral consequences that harm individuals who had nothing to do with the misconduct. Simultaneously, the DPA can ensure the company restores integrity to its operations and complies with the law, can prevent recidivism, and can provide a mechanism through which the company compensates victims of corporate misconduct for their losses.
Perhaps because of the Arthur Andersen case – and the many innocent employees who suffered hardship as a result of that prosecution – resolving a case through a DPA has become more common in recent years. According to one study, the Department of Justice entered into more than 150 such agreements with corporate defendants from 2015 to 2017.
Foreign jurisdictions have even begun to implement the practice. In the United Kingdom, for example, a DPA used to be unheard of as a means for resolving a white-collar investigation. But as use of DPAs has increased in the United States, enforcement authorities like the U.K. Serious Fraud Office have begun to deploy them as well.
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