Corporate Crime: DOJ Has Taken Steps to Better Track Its Use of Deferred and Non-Prosecution Agreements, but Should Evaluate Effectiveness
Released: 2010-01-08T00:00:00

Letter

Background

Factors Considered When Using and Setting the Terms of DPAs and NPAs

As part of its mission to defend the interests of the United States, DOJ controls all criminal prosecutions in which the United States has an interest, including those against corporations. Prosecutors’ decisions on investigating, charging, and negotiating a plea or other agreement with respect to corporate crimes are guided by DOJ’s Principles of Federal Prosecution of Business Organizations, which instruct prosecutors to consider nine factors when determining how to treat a corporation suspected of criminal misconduct and provide guidance on when the nine factors most appropriately apply. The principles also provide a number of actions prosecutors may take regarding a corporation, including declining to prosecute, entering into a DPA or NPA, or criminally prosecuting the corporation. According to the principles, DPAs and NPAs are an important alternative to declining prosecution against a corporation and obtaining the conviction of a company through prosecution. The nine factors, and examples of the manner in which they influence the prosecutors’ choices of action, are shown in figure 1 below.

As part of DPAs and NPAs, companies are generally required to comply with a set of terms for a specified duration in exchange for prosecutors deferring the decision to prosecute or deciding not to prosecute. These terms have included: monetary payments—such as restitution to victims of the crime, forfeiture of the proceeds of the crime, and monetary penalties imposed by DOJ; requirements that the company improve or enhance its compliance program; requirements that the company hire, at its own expense, an independent monitor to assist the company in establishing a compliance program, review the effectiveness of a company’s internal control measures, and determine whether the company has otherwise met the terms of the agreements (The agreements typically require monitors to periodically submit written reports to track the company’s progress in complying with the terms of the DPA or NPA.); and extraordinary restitution provisions, which are payments or services to organizations or individuals not directly affected by the crime. (DOJ issued guidance in May 2008—which was incorporated into the United States Attorneys’ Manual—prohibiting the use of terms requiring payments to charitable, educational, community, or other organizations or individuals that are not the victims of the criminal activity or are not providing services to redress the harm caused by the criminal conduct. According to DOJ, the use of such terms could create actual or perceived conflicts of interest or other ethical issues.)

Judicial Approval of Deferred Prosecutions

NPAs typically are not filed with the court, but instead are maintained by DOJ and the corporation. On the other hand, DPAs are typically filed with the court, along with a document that identifies the charges that the prosecution has brought against the corporation. The Speedy Trial Act sets time limits for the various phases of the criminal justice process—for example, a defendant’s trial must begin within 70 days of charges being filed or the date when the defendant appeared before the court —and violations of these time limits may result in the dismissal of the case. However, the Speedy Trial Act also includes provisions that allow for certain delays that do not count towards the act’s time limits. Under one of these provisions, courts have the authority to approve the deferral of a prosecution pursuant to a written agreement between the government and the defendant.

The Number of DPAs and NPAs Has Generally Been Less Than the Number of Corporate Prosecutions, and DOJ Recently Began Tracking Its Use of These Agreements

DOJ’s Use of DPAs and NPAs Peaked in Fiscal Year 2007, Then Declined, and USAOs Have Used Fewer DPAs and NPAs Than Corporate Prosecutions While the Criminal Division Has Used about the Same Number of Each

DOJ has made more frequent use of DPAs and NPAs in recent years, entering into four agreements in fiscal year 2003 compared to a high of 38 agreements in fiscal year 2007, although use declined in fiscal years 2008 and 2009 when DOJ entered into 24 and 23 agreements, respectively. According to DOJ officials, the decrease in the use of DPAs and NPAs cannot be attributed to any specific reason because DOJ is a reactive agency and experiences fluctuations in the types of cases that occur each year. However, the officials noted that fiscal year 2007 appeared to be an aberration because the use of DPAs and NPAs in fiscal year 2007 was significantly higher than in any other fiscal year. Figure 2 below depicts the number of DPAs and NPAs by fiscal year.

From 1993—when the first DPA or NPA was reached—to September 2009, 38 of the 94 USAOs have entered into at least one DPA or NPA, with the total number of agreements per office ranging from 1 agreement entered into by 21 of these USAOs, to 23 agreements entered into by the USAO for the Southern District of New York. In addition, during this same time period, of the seven litigating components based in DOJ headquarters, five have entered into DPAs or NPAs, with the total number of agreements per division ranging from one agreement entered into by the National Security Division to 49 entered into by the Criminal Division. See appendix II for the number of DPAs and NPAs entered into by the USAOs and Divisions.

As shown in table 1, the number of DPAs and NPAs entered into by the USAOs is small compared to the number of corporate prosecutions they pursued, but the number of DPAs and NPAs entered into by the Criminal Division is similar to—and in some fiscal years, more than—the number of corporate prosecutions it pursued. For example, USAOs pursued almost 18 times more corporate prosecutions than DPAs and NPAs from fiscal years 2004 to 2009. For the same time period, the Criminal Division pursued 0.9 times more prosecutions than DPAs and NPAs, or rather 1.2 times more DPAs and NPAs than prosecutions. According to Criminal Division officials, unlike the USAOs, the number of DPAs and NPAs the division has entered into was similar to the number of corporate prosecutions it carried out for two reasons. First, the Criminal Division more often handles cases against larger multinational corporations—many of which may have federal contracts—than the USAOs do. Prosecution of such companies may have significant collateral consequences, such as the inability to contract with the federal government—a factor prosecutors are to consider based on the Principles of Federal Prosecution of Business Organizations when determining whether to enter into a DPA or NPA versus prosecute. Second, the Criminal Division handles all cases involving violations of the Foreign Corrupt Practices Act, for which cases have increased since fiscal year 2007 and for which the Criminal Division has entered into DPAs to improve companies’ compliance.

DOJ Has Improved Its Ability to Centrally Track Its Use of DPAs and NPAs

Prior to 2009, DOJ did not have a mechanism to centrally track its use of DPAs and NPAs, which inhibited its ability to accurately report the number and terms of the agreements to the Congress and the public. However, in response to our requests for information, DOJ has recently taken steps to better track its use of DPAs and NPAs, steps that will allow it to more accurately report on the number and terms of DPAs and NPAs to Congress and the public, and identify best practices and ensure consistency across agreements.

In January 2008, as part of its oversight of DOJ’s efforts to combat corporate crime, the House Judiciary Committee requested that DOJ disclose all of the DPAs and NPAs that DOJ had entered into since January 20, 2003. On May 15, 2008, DOJ submitted a total of 76 agreements entered into during this 5-year time frame, but acknowledged that the DPAs and NPAs it provided to the committee did not represent all agreements entered into during the requested time period. According to DOJ, to respond to the committee’s request, it had to ask the USAOs and litigating divisions to submit all DPAs and NPAs entered into by their respective offices. However, it appears that the USAOs and divisions did not provide all the DPAs and NPAs they had entered into because, in conducting our audit work, we found that DOJ had actually entered into 99 agreements during that time period. According to standards for internal control in the federal government, information—which could include entering into a DPA or NPA—should be recorded and communicated to management in a form and within a time frame that enables it to carry out its internal control and other responsibilities. Subsequently, in response to our inquiries, DOJ has taken several steps to better track its use of DPAs and NPAs, steps that will better position DOJ to more accurately report to Congress and the public on the number of existing DPAs and NPAs, the outcome of the cases, and the terms of the agreements. According to the Senior Counsel to the ODAG, DOJ wants to track the agreements internally to help identify best practices and ensure consistency across agreements, with the recognition that the agreements will need to vary based on the facts of each case. The new tracking efforts include: In April 2009, EOUSA—which provides administrative and operational support to the USAOs—updated the case management system USAOs use to maintain workload information, the Legal Information Office Network System (LIONS), and issued guidance to prosecutors on the procedure for tracking their use of DPAs and NPAs in LIONS. According to an EOUSA data official, instructing all USAOs to enter data on DPAs and NPAs in LIONS will provide EOUSA with the capability to centrally track the use of these agreements across the USAOs.

Similarly, in May 2009, the Criminal Division updated its case management system, the Automated Case Tracking System (ACTS), and issued guidance to prosecutors on the procedure for tracking DPAs and NPAs in this system. According to a Criminal Division data official, prosecutors were already tracking their use of DPAs and NPAs largely in the manner described in the guidance, but the updates to the system allowed the Criminal Division to centrally track DPAs and NPAs separately, a process that it could not do previously. Doing so will provide the Criminal Division with the capability to centrally maintain data on the use and characteristics of both types of agreements.

DOJ is currently in the process of developing a new case management system—the Litigation Case Management System (LCMS)—that seven of DOJ’s litigating components are to eventually use, including the USAOs and four of the five headquarters-based components that have entered into DPAs and NPAs. According to officials from DOJ’s Justice Management Division (JMD) responsible for the implementation of LCMS, the system is to enable prosecutors to centrally track their use of DPAs and NPAs as it is implemented throughout the USAOs and litigating components. This in turn will provide DOJ with the ability to centrally collect data on its use of DPAs and NPAs across all DOJ components.

According to the Senior Counsel to the ODAG, centrally tracking its use of DPAs and NPAs will provide DOJ with the capability to internally monitor the circumstances in which the agreements are being used by prosecutors, including whether the agreement requires a monitor. Further, centrally tracking DPAs and NPAs in these databases will allow DOJ to assure itself that it has a reliable count of the universe of DPAs and NPAs in order to be responsive to requests from Congress.

In addition to tracking DPAs and NPAs in DOJ data systems, the March 2008 Morford Memo required, among other things, that prosecutors submit copies of DPAs and NPAs involving the use of a monitor to the Assistant Attorney General for the Criminal Division in order for DOJ to capture data on agreements that required monitors. As such, on January 15, 2009, DOJ issued guidance outlining the process by which prosecutors were to submit DPAs and NPAs to the Criminal Division, and requiring that all DPAs and NPAs—not only those involving the use of monitors—be submitted, along with a reporting form detailing certain information about the agreement, including whether it required a monitor and whether it was filed in court. Since the issuance of the January 2009 guidance, DOJ has entered into 13 agreements, and the Criminal Division has received copies of the agreements and the associated reporting forms for all of these agreements. As a result, according to the Senior Counsel, DOJ is in a position to review and analyze the characteristics of these agreements— for instance, DOJ can determine whether there is variation among the DPAs and NPAs and whether any such variation is appropriate given the facts and circumstances of the case.

DOJ Lacks Performance Measures to Evaluate How DPAs and NPAs Contribute to Its Strategic Objective to Combat Corporate Crime

According to DOJ, along with prosecution, DPAs and NPAs are invaluable tools in achieving its strategic objective to combat public and corporate corruption, fraud, economic crime, and cybercrime, although the public, as well as the Congress, have called into question the effectiveness of these agreements. However, DOJ cannot evaluate and demonstrate the extent to which DPAs and NPAs—in addition to other tools, such as prosecution—contribute to the department’s efforts to combat corporate crime because it has no measures to assess their effectiveness. Specifically, DOJ intends for these agreements to promote corporate reform; however, DOJ does not have performance measures in place to assess whether this goal has been met. Therefore, it could be difficult for DOJ to justify its increasing use of these tools.

The Government Performance and Results Act of 1993 requires that federal agencies prepare annual performance plans that articulate performance goals and indicators that are aligned with their long-term strategic goals in order to generate information congressional and executive branch decision-makers need in considering measures to improve government performance and reduce costs. In addition, standards for internal controls in the federal government state that activities need to be established to monitor performance measures and indicators, and that controls aimed at both organizational and individual performance need to be implemented. Performance measures are established in order to assess whether a program has achieved its objectives and are expressed as measurable, quantifiable indicators. Outcome-oriented performance measures, in particular, assess a program activity by comparing it to its intended purpose or targets. Although DOJ has a strategic objective to combat public and corporate corruption, fraud, economic crime, and cybercrime, which includes the use of DPAs and NPAs, it has not determined how it will measure the extent to which these agreements have helped it to achieve this strategic objective to demonstrate the effectiveness of these tools, despite its increased use of these tools in recent years.

DOJ has mechanisms to assess how litigating divisions achieve favorable results in criminal cases in general, but not for corporate criminal cases in particular, including the use of DPAs and NPAs to resolve these cases. Specifically, DOJ measures the performance of its litigating divisions in meeting the strategic goal of preventing crime, enforcing federal laws, and representing the rights and interests of the American people by measuring the percent of cases in which prosecutors achieve a favorable resolution. DOJ’s fiscal year 2009 Performance and Accountability Report stated that 92 percent of criminal cases were favorably resolved. However, this performance measure does not specifically address corporate criminal cases or litigating division efforts to achieve the strategic objective of combating public and corporate corruption, fraud, economic crime, and cybercrime. Further, while one of the measures the Fraud Section uses to report its annual accomplishments is counting and reporting on the number of DPAs or NPA it initiates, among other things, this measure does not provide an evaluation of the effectiveness of DPAs or NPAs.

DOJ officials acknowledged that one of DOJ’s goals in using DPAs and NPAs is to help reform the company. In our discussions with the Senior Counsel to the ODAG as well as the five monitors and seven companies that provided opinions on how DOJ could measure the effectiveness of DPAs and NPAs, these officials suggested two possible models for measuring effectiveness by considering (1) a company’s recidivist behavior—or the extent to which the company re-engages in criminal misconduct—after the agreement is complete or during the term of the DPA or NPA, or (2) whether the company successfully met the terms of the agreement, which often include requirements to establish or enhance compliance programs as a means to reform the company.

While half of the company officials and monitors with whom we spoke who discussed the use of recidivism as a measure did not have concerns with using such a metric, an equal number did express concerns about using this as the sole metric. One consideration is that DOJ would have to define the types of criminal misconduct engaged in by the company and the organizational level of employees engaging in the misconduct that would constitute recidivism. For example, according to the Senior Counsel to the Assistant Attorney General for the Criminal Division, DPAs and NPAs are tailored to address the violations of a specific law based on specific misconduct. Therefore, if the company entered into a DPA or NPA because it violated the Commodity Exchange Act, for example, it could be problematic to consider subsequent violations of the Foreign Corrupt Practices Act as recidivism. In addition, DOJ may have to consider whether criminal misconduct committed by an individual employee should be considered recidivism—for instance, one company official said that, at a large international company, it is possible that individual employees may engage in misconduct in violation of the company’s compliance program, but this should not constitute recidivism on the part of the entire company.

Another consideration regarding measuring recidivism after the completion of the DPA or NPA, according to DOJ officials with whom we spoke, is that DOJ does not have the resources to monitor a company’s activities after the agreement has been completed over the long term, nor is it the mission of DOJ to do so. DOJ officials further stated that criminal misconduct committed after completion of the agreement is not reasonably within DOJ’s control because, once the agreement has ended, DOJ is not monitoring the company’s behavior, and any further misconduct may be influenced by other factors—such as the characteristics of the corporation—and not the effectiveness of the agreement. Finally, according to the Senior Counsel to the Assistant Attorney General for the Criminal Division, if the company re-engaged in criminal misconduct, and the misconduct was reported to federal law enforcement officials, the Principles of Federal Prosecution of Business Organizations instruct prosecutors to consider the company’s recidivist behavior in determining how to treat the company. However, the Senior Counsel said that, because one of DOJ’s goals in entering into the DPA or NPA is to reform the company, DOJ takes responsibility for monitoring any recidivist behavior on the part of the company during the term of the DPA or NPA.

In addition to recidivism—both after and during the agreement—whether the company successfully met the terms of the DPA or NPA could be a proxy measure—or indirect indicator—for whether the agreement was effective at successfully reforming the company. As part of the DPA or NPA, companies are often required to establish or enhance internal controls or company compliance programs, or engage in training to detect and prevent further wrongdoing. According to DOJ officials, if a company meets all of these requirements, it is likely that the company has reformed. Overall, five of the seven companies and three of the five monitors with whom we discussed this issue reported that such a performance measure would be a useful way to measure the effectiveness of DPAs and NPAs. For instance, to show whether companies meet the objectives of their agreements, DOJ could report the percentage of companies that successfully meet the terms of their agreements, the percentage of companies that violate the terms of their agreements and face prosecution, and the percentage of agreements DOJ extends because the company has not yet complied with the terms of the agreement. Of the 152 DPAs and NPAs that DOJ had entered into as of October 2009, we are aware of at least one company that was prosecuted because it violated the terms of its DPA while the agreement was still ongoing and two companies for which DOJ extended the agreement because the company had not yet complied with the terms of the agreement.

However, it may be difficult to determine the extent to which the agreement itself, rather than other factors, was responsible for corporate reform. For example, according to one company official, companies can commit to making necessary compliance changes even before entering into a DPA or NPA, so the agreement did not cause the reforms. Yet, because the Principles of Federal Prosecution of Business Organizations instruct prosecutors to consider a company’s remedial actions—such as its efforts to implement or enhance an effective compliance program— when determining how to treat the corporation, this factor may motivate a company to institute reforms in order to influence DOJ’s decision as to whether to use a DPA or NPA. The Senior Counsel to the ODAG also believed that measuring whether companies successfully meet the terms of their agreements would be valuable, and that the fact that companies do not often violate their agreements and subsequently face prosecution was an indicator that agreements have helped companies to successfully reform.

Several factors would have to be considered in developing these—or any other—measures, such as clearly defining what is meant by recidivism and assessing the feasibility of tracking recidivism. However, by developing measures to evaluate DPAs and NPAs, DOJ will be able to gauge whether the agreements are effective tools in achieving its strategic objective and reassure those with concerns about the appropriate use of these tools that they are effective in deterring and combating corporate crime.

Courts Generally Had Limited Involvement in the DPA Process, and Prosecutors, Company Officials, Monitors, and Judges More Frequently Cited Disadvantages Than Advantages to Greater Court Involvement

Judges Reported Limited Involvement in the DPA Process

The Speedy Trial Act allows judges to approve the deferral of prosecution pursuant to a written agreement between the government and the defendant, for the purpose of allowing the defendant to demonstrate his good conduct; however, the law does not otherwise specify judicial involvement in the DPA process. We obtained responses from 12 U.S. district and magistrate judges who handled cases involving a DPA, and these judges reported they were generally not involved in the DPA process. Specifically: Nine of the 12 judges stated that they did not hold a hearing to review the DPA or its terms, while the 3 remaining judges held hearings. One of these judges did so in the context of a plea hearing. Another judge held a hearing to arraign the company; at which time, the company and DOJ informed the judge that they intended to enter into a DPA. The judge then had a second hearing to approve the DPA. The third judge conducted a hearing to arraign the company and verify that the company’s decision to enter into the DPA was informed and voluntary. Ten of the 12 judges reported that they relayed their decision approving the DPA through a written order. One judge relayed the decisions orally at a hearing, and one judge did both.

Ten of the 12 judges reported that they did not have a role in the selection of a monitor required under the DPA, while the remaining 2 judges did. In one of the 2 cases, the company identified the names of five monitor candidates, the DOJ prosecutors in the case determined three of the five candidates were acceptable, and the judge extensively interviewed the three candidates before selecting one of the candidates to serve as monitor. In the other case, the DOJ prosecutors interviewed and identified monitor candidates, and the judge made a final selection from this group.

Ten of the 12 judges stated that the monitors did not report any information to the court during the DPA, and the remaining 2 judges stated they received information from the monitor. In one of these two cases, the monitor filed quarterly reports with DOJ and the company’s board of directors, and the court received a copy of the monitor’s final report. In the other case, the court received a copy of the reports the monitor was required to prepare as part of the DPA and also spoke with the monitor occasionally. Similarly, 11 of the 12 judges did not receive any information from DOJ regarding the monitor’s compliance with monitoring obligations under the DPA. The remaining judge received calls from DOJ after the monitor submitted bills to the court in order for DOJ to confirm to the court that the monitor was in compliance with the monitoring obligations in the DPA.

Eleven of the 12 judges reported that they played no role in determining the terms of the monitor’s contract or setting the monitor’s fees. The remaining judge set, reviewed, and approved the monitor’s fees. Ten of the 12 judges did not receive copies of the monitoring contracts, while 1 judge received a copy and another judge was uncertain.

Ten of the 12 judges said that they dismissed the charges against the company after receiving information or a court filing from DOJ or the monitor reflecting compliance, but did not report taking actions to independently assess the company’s compliance with the DPA. One additional judge stated that he ensured the company understood the agreement before dismissing the charges, and the final judge reported that the court would review DOJ’s submission to determine whether dismissal of the charges against the company was warranted.

Prosecutors, Company Officials, Monitors, and Judges with Whom We Spoke Identified More Disadvantages than Advantages to Greater Court Involvement in the DPA Process

Prosecutors from 7 of the 13 DOJ offices, officials from 9 of the 20 companies, and 6 of the 11 monitors with whom we spoke reported disadvantages to a greater court role, while no prosecutors, 7 of 20 company officials, and 3 of 11 monitors described advantages to a greater court role. Two company officials did not believe there were advantages or disadvantages to greater court involvement, and another company official said that the advantages and disadvantages would depend on the judge involved in the case. We also spoke with 2 judges, and 1 cited disadvantages to greater court involvement, while the other cited both advantages and disadvantages.

The advantages cited most often included: the court’s ability to act as an independent arbiter of disputes that companies and DOJ identify, or to handle significant events in the DPA process, such as the determination of a breach; court involvement in monitor selection could decrease the appearance of favoritism and add to the perception of fairness in the monitor’s selection; and court involvement could increase transparency in the DPA process by, for example, making monitor reports filed in the case publicly available.

The disadvantages most frequently cited were: the lack of time and resources available to judges to become more involved in the DPA process or their willingness to do so. For instance, three prosecutors, one monitor, one company official, and one judge noted that, because of already high caseloads, judges may not have the time or resources to thoroughly review the terms of a DPA, interview and select appropriate monitor candidates, review monitor reports, or determine whether a company is in compliance with the DPA; concerns over the appropriateness of judges playing a larger role in the DPA process. For example, two officials noted that judges are prohibited from participating in plea bargaining between two parties in a case and believed that negotiations over DPAs were similar to plea bargaining. Others believed that decisions in the DPA process—such as whether to enter into a DPA instead of prosecute, set the terms of the agreement, or determine whether a company has complied with or breached an agreement—were functions of the executive rather than the judicial branch. For example, one judge noted that if a judge disagreed with the prosecutor’s determination that a company had complied with the DPA, the judge’s authority to refuse the prosecutor’s request to dismiss the indictment and proceed with prosecution is unclear. Thus, greater court involvement might create a problem related to the separation of powers under the Constitution, as well as inhibit prosecutors’ discretion in their cases. According to DOJ officials, DOJ does not have a position on whether greater judicial involvement in the DPA process creates separation of powers issues; however, DOJ believes that judicial involvement in the NPA process would create concerns related to the separation of powers because no judicial review is involved for NPAs, as they typically do not involve court filings. the additional time and processes associated with court involvement, such as hearings, which may slow down the DPA process; and judges’ lack of knowledge and expertise about the case or its subject matter, such as the operation of an environmental management system at a wastewater treatment plant, which prosecutors in the case may have spent years developing.

Conclusions

According to DOJ, DPAs and NPAs can be invaluable tools for fighting corporate corruption and helping to rehabilitate a company, although use of these agreements has not been without controversy, including questions about the effectiveness of these tools. DOJ has taken several steps to better track its use of DPAs and NPAs, steps that will better position DOJ to more accurately report to Congress and the public on the number of existing DPAs and NPAs, the outcome of the cases, and the terms of the agreements. However, while DOJ has stated that DPAs and NPAs are useful tools for combating and deterring corporate crime, without performance measures, it will be difficult for DOJ to demonstrate that these agreements are effective at helping the department achieve this goal. Models exist that would allow DOJ to create such measures, including measuring whether a company reengages in misconduct over the long- term or during the course of the agreement or whether a company successfully meets the terms of its DPA or NPA. By developing performance measures to evaluate DPAs and NPAs, DOJ will be better positioned to gauge whether they are effective tools in deterring and combating corporate crime.

Recommendation for Executive Action

To assess its progress toward meeting its strategic objective of combating public and corporate corruption, the Attorney General should develop performance measures to evaluate the contribution of DPAs and NPAs towards achieving this objective.

Agency Comments and Our Evaluation

On December 15, 2009, DOJ provided written comments on a draft of this report, which we discussed with the Associate Deputy General Counsel for ODAG and the White Collar Crime Coordinator for EOUSA on December 17, 2009. DOJ agreed with our recommendation. The full text of DOJ’s written comments is included in appendix III.

In its letter, DOJ stated that the department uses a variety of tools to achieve its mission of protecting the public from corporate corruption, and in some cases, DPAs and NPAs are appropriate tools and offer a number of benefits, such as the avoidance of negative collateral consequences of prosecution and conviction to companies and innocent third parties.

DOJ agreed with our recommendation that the Attorney General develop performance measures to evaluate the contribution of DPAs and NPAs toward achieving its strategic objective of combating public and corporate corruption, and recognizes the value of appropriate performance measures in this area. DOJ did not think that the Government Performance and Results Act of 1993 (GPRA) was a relevant a criterion for the development of performance measures for DPAs and NPAs, stating that it requires agencies to develop performance measures for broader program activities, such as those set forth in agency budgets, and not for tools such as DPAs and NPAs, which are used less frequently and are narrowly defined to rectify specific wrongdoing. While we acknowledge that GPRA does not require the department to develop performance measures at levels below the program activities set forth in the agency’s budget, we also note that a practice among leading organizations when implementing results-oriented management practices consistent with GPRA has been to develop performance measures for each organizational level, which could help managers and staff understand how their daily activities contribute to attaining organizationwide strategic goals. Also, there are other criteria in addition to GPRA that we cited in our draft report—specifically, the standards for internal control in the federal government—which state that agencies should establish activities to monitor performance measures and indicators and implement controls aimed at organizational performance. Additionally, with regard to DOJ’s comment that DPAs and NPAs are relatively few in number, while that may be the case for the U.S. Attorneys’ Offices, as we stated in our report, the Criminal Division has entered into about the same number of DPAs and NPAs as the number of prosecutions it has pursued.

As to the specific types of performance measures DOJ could adopt, we proposed in our draft report that DOJ might measure whether the company successfully met the terms of the agreement or whether the company re-offended, as two potential measures of the effectiveness of DPAs and NPAs. In its comments, DOJ identified some of the same limitations as we did in our report regarding the use of recidivism as a performance measure. Specifically, DOJ stated that it would be difficult to determine whether a company recidivated if the company’s subsequent violation was different than the original violation that resulted in the DPA or NPA. However, DOJ stated that the recent efforts under way by EOUSA and the Criminal Division to track the department’s use of DPAs and NPAs and monitor the disposition of these agreements will help DOJ know whether the corporation has fulfilled all of the terms of the agreement, knowledge that could be useful information for the department as it develops its performance measures for DPAs and NPAs.

We also received written comments from the Administrative Office of the U.S. Courts (AOUSC) on December 17, 2009, and the full text of the Office’s written comments is included in appendix IV.

AOUSC in its comments emphasized concerns about greater judicial involvement in the use of DPAs and NPAs, including concerns about constitutional and other separation of powers issues contained in the report, and suggested these be given greater emphasis. We maintain that we have accurately and objectively represented the views of prosecutors, company officials, monitors, and judges as presented to us in the course of our review and have reflected these issues in the report.

As agreed with your offices, we plan no further distribution of this report until 24 days from its date, unless you publicly announce its contents earlier. At that time, we will send copies of this report to the Attorney General, the Director of AOUSC, selected congressional committees, and other interested parties. The report will also be available at no charge on the GAO Web site at http://www.gao.gov.

If you or your staff have any further questions about this report, please contact me at (202) 512-8777 or larencee@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in app. V.

Appendix I: Terms of 57 DPAs and NPAs Reviewed and Discussed in June 2009 Testimony

The terms of the 57 DPAs and NPAs we previously reviewed for our June 2009 testimony included: durations ranging from 3 months to 5 years (One of the 57 agreements we reviewed did not specify the duration.); monetary payments ranging from $30,000 to $615 million (Forty-five of the 57 DPAs and NPAs we reviewed required monetary payments, while 12 did not.); requirements that the company improve or enhance its compliance program (Forty-five of the 57 DPAs and NPAs we reviewed included compliance program requirements, while 12 did not.); requirements that the company hire, at its own expense, an independent monitor to assist the company in establishing a compliance program, review the effectiveness of a company’s internal control measures, and determine whether the company has otherwise met the terms of the agreements (Twenty-six of the 57 DPAs and NPAs required companies to hire independent monitors.); and extraordinary restitution provisions, which are payments or services to organizations or individuals not directly affected by the crime. (Four of the 57 DPAs and NPAs we reviewed included such terms. However, DOJ issued guidance in May 2008 prohibiting the use of terms requiring payments to charitable, educational, community, or other organizations or individuals that are not the victims of the criminal activity or are not providing services to redress the harm caused by the criminal conduct.)

Appendix II: Number of DPAs and NPAs by Each U.S. Attorney’s Office and DOJ Litigating Division

Appendix III: Comments from the Department of Justice

Appendix IV: Comments from the Administrative Office of the U.S. Courts

Appendix V: GAO Contact and Staff Acknowledgments

GAO Contact

Eileen R. Larence, (202) 512-8777 or larencee@gao.gov.

Staff Acknowledgments

In addition to the contact named above, Kristy N. Brown, Assistant Director; Jill Evancho; Tom Jessor; Danielle Pakdaman; Sarah Kaczmarek; Janet Temko; Amanda Miller; Katherine Davis; and Mandana Yousefi made significant contributions to this report.