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More Monitors, More Controversy

Reporter Mary Flood writes about deferred prosecution agreements in the February 29, 2008 Houston Chronicle here. For those new to the subject, deferred prosecution agreements (sometimes called non-prosecution agreements) allow corporations to avoid trials and criminal convictions in exchange for fines and compliance monitoring.

The FCPA tops the table. Ms. Flood, who also writes the Chronicle's Legal Trade Blog, says that in 2007 the Department of Justice entered into 31 deferred prosecution agreements. Of those, 12 were for violations of the Foreign Corrupt Practices Act, 10 for health care and food and drug industry offenses, 3 for commodities fraud, 2 for banking secrecy, 2 for internet gaming and 2 for other fraud.

The story cites the work of Larry Finder, a former Houston U.S. Attorney now with Haynes and Boone, and Ryan McConnell, who interned at the firm. They started tracking deferred prosecutions a few years ago. They found that from 2002 to 2005 there were twice as many deferred prosecution agreements as in the previous 10 years. In 2006 there were 20 corporate pretrial agreements, and more than 30 in 2007.

In the spotlight.
Finder and McConnell's empirical data has become important because of the controversy now surrounding these DOJ deals. The story says, "Though there has been mounting concern about the increased use of agreements to help bad-acting corporations avoid business-crushing criminal trials, scrutiny heightened recently with revelations of prosecutors passing lucrative monitoring jobs to former colleagues. One such contract worth potentially $52 million went to ex-top prosecutor John Ashcroft's firm to monitor Zimmer Holdings in a case about kickbacks in the medical field."

Who decides? Ellen Podgor at the indispensable White Collar Crime Prof Blog gets to the heart of the matter -- as usual. The story quotes her as as saying the idea of corporate deferred prosecution is a good one "but I see enormous problems in the way they are operating."

The story continues:

"[Podgor] said the problem is the government's role. It gets to decide whether the corporation is in breach, it gets to pick the monitor and all this without the judicial oversight in regular plea bargains or probations, she said. Podgor said the requirement that a corporation sometimes waive attorney-client privilege is worrisome. And, she said, some of the terms can be very specific and skewed, as in a Bristol-Myers Squibb agreement wherein the company has to set up an endowed chair at the prosecutors' alma mater. 'Oversight is what is needed,' Podgor said."

The story reports that in earlier testimony before Congress, U.S. Attorney General Michael Mukasey "could not say when his department will develop better guidelines. Mukasey himself was in line for one of the monitoring deals before he was nominated for his current post. The Justice Department did not return a call about this story."

View prior posts about monitors here.

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