Justice Deferred is Justice Denied: We Must End Our Failed Experiment in Deferring Corporate Criminal Prosecutions

INTRODUCTIONOn December 12, 2012, the New York Times editorial page stated the following:It is a dark day for the rule of law. Federal and state authorities have chosen not to indict HSBC, the London-based bank, on charges of vast and prolonged money laundering, for fear that criminal prosecution would topple the bank and, in the process, endanger the financial system. They also have not charged any top HSBC banker in the case, though it boggles the mind that a bank could launder money as HSBC did without anyone in a position of authority making culpable decisions.1Instead of indictment and prosecution, HSBC was invited to join what some call "Club Fed Deferred"2-a club that has a large corporate membership3-by entering into a deferred prosecution agreement with the U.S. Department of Justice wherein the bank would (1) pay money through forfeiture and other penalties, (2) work to enhance its internal controls, and (3) submit to the oversight of an external monitor for a period of five years.4 In assessing this end result, the New York Times editorial commented:When prosecutors choose not to prosecute to the full extent of the law in a case as egregious as this, the law itself is diminished. The deterrence that comes from the threat of criminal prosecution is weakened, if not lost. . . . [O]nce criminal sanctions are considered off limits, penalties and forfeitures become just another cost of doing business, a risk factor to consider on the road to profits.5My own reaction to the disposition of the case was more in line with that of Professor Jimmy Gurule, a former enforcement official at the U.S. Treasury Department, who said that deferred prosecution in a case like HSBC makes a "mockery of the criminal justice system."6At the time, I thought the HSBC agreement would surely be the final low point in a two-decades-long experiment in deferring prosecution of alleged corporate criminal wrongdoing.7 I thought the case would be the proverbial straw that broke the camel's back, prompting swift and resolute reform, including bringing corporate deferred prosecutions to a well-deserved end. Since that time, however, deferred prosecution has been applied across the full spectrum of corporate conduct, generally falling into six categories of violations or statutes, including various types of fraud and trade offenses; the Foreign Corrupt Practices Act; the Controlled Substances Act; the False Claims Act; and the Food, Drug & Cosmetic Act.8We know "that criminal charges or potential criminal charges against corporations are almost always resolved by a negotiated resolution rather than through litigation."9 While these negotiations can result in guilty pleas,10 prosecutors may also choose to resolve the matters using Deferred Prosecution Agreements ("DPAs") and Non-Prosecution Agreements ("NPAs"). While DPAs and NPAs are largely similar in form and substance,11 this Article will focus on DPAs, with the understanding that the observations and conclusions put forth herein are applicable to both.In a September 2012 speech before the New York City Bar Association, then-Assistant Attorney General Lanny Breuer declared that over the last decade DPAs have "become a mainstay of white collar criminal law enforcement."12 Professor Julie O'Sullivan appears to concur, calling their increased use part of the "biggest change in corporate law enforcement policy in the last ten years . . . ."13 Moreover, federal prosecutors have come to rely heavily on such agreements:14 since 2000, the U.S. Department of Justice has entered into 283 publicly disclosed agreements.15 The U.S. Securities and Exchange Commission also uses deferred prosecution in its corporate enforcement regime, having entered into seven such agreements since 2010.16 Of the 290 agreements that the DOJ and the SEC have entered into since 2000, more than half (152) have been made since January 1, 2010. These agreements have led to monetary penalties totaling more than $42 billion. …