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FCPA Blog Daily News

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Wednesday
Apr062016

DC Circuit Court overrules Judge Leon in Fokker DPA case

United States Circuit Judge Sri SrinivasanA three-judge federal appeals court said Tuesday the DOJ's settlement with Fokker Services B.V. for alleged sanctions violations could go ahead after a district court judge rejected the arrangement as "anemic."

The U.S. Court of Appeals in Washington, DC said prosecutors and not judges make decisions to enter into deferred prosecution agreement with corporate defendants.

In February 2015, federal district court judge Richard Leon refused to approve the settlement. He said the proposed $21 million penalty was "grossly disproportionate to the gravity of Fokker Sercvices' conduct in a post-911 world."

Holland-based Fokker Services admitted in a 2014 plea deal that it made more than 1,100 illegal shipments of aircraft parts, technology, and services worth $21 million to Iran, Sudan, and Burma.

In the settlement, Fokker agreed to forfeit $10.5 million and pay a civil fine of $10.5 million.

The settlement included an 18-month deferred prosecution agreement. Fokker Services promised to enhance its trade sanctions compliance.

In his February 5, 2015 opinion (pdf), Judge Leon said:

In my judgment, it would undermine the public’s confidence in the administration of justice and promote disrespect for the law for it to see a defendant prosecuted so anemically for engaging in such egregious conduct for such a sustained period of time and for the benefit of one of our country’s worst enemies.

Fokker appealed Judge Leon's ruling.

Tuesday's appellate opinion (pdf) written by Circuit Judge Sri Srinivasan said, "The Constitution allocates primacy in criminal charging decisions to the Executive Branch."

In an FCPA case, Judge Leon in 2012 rejected a proposed $10 million civil settlement between the SEC and IBM. He said IBM should be required to report all accounting violations and not just FCPA anti-bribery problems.

He approved a revised IBM settlement in mid 2013. The new terms included enhanced reporting by IBM to the court about its compliance program and any potential FCPA violations.

In its opinion Tuesday, the appeals court said: "It has long been settled that the Judiciary generally lacks authority to second-guess those Executive determinations, much less to impose its own charging preferences."

The DOJ uses deferred prosecution agreements to resolve most corporate FCPA cases. DPAs typically run for three years. They usually impose a criminal fine and require enhanced compliance, training, cooperation, reporting, and sometimes appointment of an independent monitor.

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Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.