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Thursday
Sep282017

What does Paul Pelletier really think about DPAs, individual prosecutions, and the DOJ?

Pepper Hamilton's Paul PelletierThe Chickenshit Club: Why the Justice Department Fails to Prosecute Executives by Jesse Eisinger talks about what has brought us to present-day enforcement challenges and controversies.

I enjoyed the book cover to cover. But my interest spiked at chapter six, “Paul Pelletier’s White Whale.”

Paul, now a partner at Pepper Hamilton and based in DC, has written some terrific posts for the FCPA Blog. But he was already a familiar name to me.

He was the Acting Chief of the Fraud Section at the DOJ’s Criminal Division at the time of my indictment. His name appears on the charging document on my conviction.

It was under much different and happier circumstances that I reached out to Paul recently with some questions about Eisenger's provocative book, and he was gracious enough to talk with me.

*     *     *

Question: A former colleague of yours from the DOJ, Guy Singer, has said you “came out of the womb divisive.” True?

Paul Pelletier: I hope you understand that Guy Singer, like me, cut his prosecutorial teeth in Miami so you should automatically question the substance and veracity of his comments.

Question: Hahaha. Ok, then. In his book, Eisinger says deferred prosecution agreements shield executives and minimize the regulatory consequences. Others disagree. SFO Director David Green, for example, recently said DPAs allow a company to mitigate the prior misconduct and move on without hurting innocent employees and customers. Isn't that a reasonable goal?

Paul Pelletier: I have always believed strongly that, when used appropriately, that is, in conjunction with provable individual charges, DPAs were the primary vehicle to tailor an appropriate criminal remedy for an otherwise lawful organization. When used in this manner, DPAs can be fashioned by the DOJ to promote strengthened corporate governance, robust internal compliance and financial controls and provide restitution and disgorgement of illicit profits.

Eisinger’s views, I think, are more an understandable reaction to the larger perception that, as least for a time, corporate DPAs were used as the exclusive means to address corporate criminal wrongdoing and perhaps a convenient substitute for the hard work of establishing the actual culpability of corporate executives.

Other than in highly regulated industries like drug and medical device manufacturers where strict liability may be an issue, corporate criminal liability attaches only when the criminal acts of agents and corporate officers are imputable to the corporation -- not vice versa. Logically then, most people would expect it to be the rare case when corporate liability is rectified absent individual criminal sanctions.

DPAs and NPAs, because they have been linked to the perception of overreach when coupled with the perceived prosecutorial timidity in assessing the true culpability of individual corporate malfeasors, sadly have become the symbolic targets of much of the negative public reaction.

But I do agree wholeheartedly with SFO Director Green’s assessment that the societal and corporate  benefits of DPA relief are important and real.

Question: Eisinger implies that a fear of failure is restraining the DOJ's prosecution of individuals, along with what appears to be an unhealthy dynamic that has developed between Big Law and the Department of Justice. Is that true?

Paul Pelletier: Solutions to these vexing issues are never simple, but in my mind, with sustained effort, a fix is achievable. It’s not like career federal prosecutors just woke up one day and decided to leverage DPAs with corporations in lieu of seeking to charge culpable employees.

What the book quantifies, and what I observed, was a durational, multi-faceted retrenchment. To me, the Yates Memo was both a tacit admission of enforcement lassitude and an earnest attempt to take back some of the lost ground by reorienting prosecutors with their obligations in the area of individual prosecution.

A memo alone, however, rarely will be enough to rectify the intractable problems identified by Eisinger throughout his in depth examination.

Given the articulated breadth and depth of these failings, it is certainly incumbent upon DOJ’s leaders to perform their own “root cause” analysis to both identify the specific problems and  effectuate a fix. I am fairly confident that no such “look back” was ever initiated.

With the understandable caution that absent experienced oversight the prosecution pendulum could swing too far, the long slog of  taking back the lost ground must begin with DOJ leadership making significant and durable programmatic and cultural changes that focus on training and retaining prosecutors and agents engaged in economic crime prosecutions. Frustratingly, there is no public evidence that such work has begun in earnest.

Question: As a follow up, I recently read speeches by both McFadden and Sessions which both pointed towards greater prioritization of individual prosecutions. One of the points that Eisinger well makes is that line prosecutors who might have had experience prosecuting gang or organized crime members, understand complex organizations, and have great experience in the nuances of individual indictments. So, given these public statements, could there be change ahead, or are the vested interests that Eisinger describes too entrenched in our legal "complex" to really allow such dramatic departure from the current model?

Paul Pelletier: Prosecutors experienced in quickly building cases from the ground up possess a skill set that surely enhances their effectiveness in the white collar arena. Unfortunately, however, during the first term of the last presidential administration legions of experienced white collar prosecutors left public service.

The Criminal Division’s Fraud Section alone saw the unprecedented departure of 70 percent of its career economic crime prosecutors. As such, it should be of little surprise to anyone that since 2011 fraud prosecutions have dropped precipitously, down by more than 25 percent. And all this despite the addition of substantial prosecutorial resources.

Whatever the exact reasons for this decline, speechifying alone will not provide the cure. It will take determined and informed leadership to bring about the necessary changes in the enforcement culture that values bold but responsible casework marked by a focus on individual accountability and corporate dispositions grounded in principled calculations rather than headline grabbing metrics.

It is perhaps then unsurprising that one concept routinely missing from the lexicon of DOJ leaders is the importance of prosecutors bringing “real time” prosecutions. As Eisinger points out, during the post-Enron days of the Corporate Fraud Task Force senior leadership empowered prosecutors by exhorting them to not let the perfect be the enemy of the good and to bring good cases now, not perfect cases months or years down the road.

I am hopeful that the concept of restorative justice can once again be the norm for DOJ white collar enforcement with a return to fundamentals -- well formulated and recurrent professional training and an enduring commitment to retaining good prosecutors by fostering a supportive and empowering environment.

Question: Ok, let’s end on a lighter note. The book addresses many “Pelletierisms.” Tell us more about “fugitate.”

Paul Pelletier: Are you trying to tell me that fugitate is not a real word? That’s nuts -- it sure should be.

Seriously though, I learned a lot from my experience as an AUSA in Miami. One of the many hard lessons I learned was that it was no fun to prepare and then have the defendant not show up for trial.

More than you can imagine, getting a judge to set the appropriate bond sometimes required intense advance preparation. As with anything else, I tried to let younger prosecutors know the importance of setting the right conditions of release for defendants so they wouldn’t be denied the benefit of all their hard work; a defendant having fugitated prior to trial was simply not a scenario you wanted to encounter.

And I always tried to make the tough work of prosecuting as enjoyable as possible. I suppose coining such phrases was just part of that fun. If you asked people they may recall similar ”isms,” most of which can't be printed here.

Question: Thank you Paul. It's been great talking with you.

Paul Pelletier: My pleasure Richard.

*     *     *

The Chickenshit Club: Why the Justice Department Fails to Prosecute Executives is available from Amazon here.

___

Richard Bistrong is a contributing editor of the FCPA Blog and CEO of Front-Line Anti-Bribery LLC. In 2010 he pleaded guilty to a conspiracy to violate the FCPA and served fourteen-and-a-half months at a U.S. federal prison camp. He was named to Compliance Week's list of Top Minds in 2017 and was one of Ethisphere's 100 Most Influential in Business Ethics in 2015.

His popular real-life compliance training video, Behind the Bribe, produced in cooperation with Mastercard, was released in June.

To request a demo of the full eleven-minute video or a licensing fee schedule, please click here.

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