Author: Alexander Spaulding, Associate Member, University of Cincinnati Law Review
Today, due to the risk of unwarranted collateral damage to innocent employees, large corporations are too big to jail. After the Arthur Anderson case in 2002, where Enron’s accounting firm was criminally prosecuted, thousands of innocent employees lost their jobs.[1] In response, the Department of Justice (DOJ) has significantly increased its use of deferred prosecution agreements (DPAs) in cases in which corporations are criminally charged.[2] In a DPA, the prosecutor requires the corporation to fulfill certain punitive and rehabilitative obligations, such as paying fines and implementing new company policy. In return, the charges against the corporation are dropped.[3] Since prosecution is under the arm of the Executive branch, DPAs are largely free of any judicial scrutiny. In most cases, to the chagrin of some district court judges, the judiciary acts as a “rubber stamp” for DPAs. In 2015, when an Article III judge challenged this notion in United States v. Fokker Services BV[4], the DC Circuit upheld “the Executive’s long-settled primacy over charging,” by ruling that courts are not permitted to reject a DPA based on a finding that it is inadequate.[5] While DPAs serve a commendable protectionist purpose, Fokker goes too far in limiting the judiciary’s role in reviewing their terms. Prosecutors may now operate under the assumption that their DPAs will always be rubber stamped, even if a judge were to find them “grossly disproportionate” in light of the conduct, as was the case in Fokker.[6]
Fokker Services B.V.
Fokker Services B.V. is a Dutch aerospace company.[7] From 2005 to 2010, the company exported aircraft parts, technology, and services to multiple branches of the Iranian military, along with Sudan and Myanmar.[8] Furthermore, Fokker deliberately worked to evade US sanctions by performing various illegal methods to obscure their practices, such as deleting references to Iran and falsifying documents and records.[9] The company’s president and senior management were aware of both the laws and the illegal practices.[10] In 2014, the DOJ and Fokker agreed to an eighteen-month DPA, after which the company would receive amnesty.[11] The DPA required Fokker to pay a total of $21 million in fines, fully cooperate with the government, and implement a compliance policy.[12]
The District Court
The DOJ brought the DPA to the district court along with a motion to exclude the eighteen-month period under the Speedy Trial Act, which requires trials to begin within seventy days of filing charges.[13] The parties argued that the judge’s purview was “limited to reviewing the proposed exclusion of time pursuant to the Speedy Trial Act.”[14] However, Judge Richard J. Leon both denied the motion and rejected the DPA on the grounds that it was not in the public interest.[15] Judge Leon took specific objection to: (1) the company was fined no more than what it had illegally earned; (2) there was no independent monitoring established; and (3) no individuals were independently prosecuted or fired.[16] Judge Leon explained that the DPA was too lenient and therefore “did not constitute an appropriate exercise of prosecutorial discretion.”[17]
The Appeal
The parties appealed to the D.C Circuit on the grounds that the District Court should have granted the motion to exclude time, and should not have rejected the DPA.[18] The D.C Circuit vacated the District Court’s order, explaining that the Speedy Trial Act “confers no authority in a court to withhold exclusion of time pursuant to a DPA based on concerns that the government should bring different charges or should charge different defendants.”[19] The court further explained that the judiciary lacks the authority to second guess the Executive’s primacy in criminal charging, therefore, the District Court had overstepped by “rejecting the DPA based primarily on concerns about the prosecution’s charging choices.”[20] Furthermore, the D.C. circuit explained that the judiciary lacks the competence to review the government’s choices in a DPA, because its provisions manifest the government’s prosecutorial considerations which are “ill-suited for substantial judicial oversight.”[21] Thus, the court remanded with an order to exclude the eighteen months.[22]
Implications
On one hand, the Circuit Court’s ruling in Fokker gives strong guidance on the judiciary’s limited to non-existent role in evaluating and rejecting DPAs, which will allow corporations and federal prosecutors to negotiate comfortably in a predictable regime. However, the precedent set by the Fokker court only exacerbates a problem that legal scholars already lamented—that prosecutors hold an excessive amount of power in the realm of corporate criminal justice.[23] Now, when a DPA crosses a judge’s desk, he is to rubber stamp it, regardless of its contents.
This unchecked authority enjoyed by the Executive threatens the protections of the separation of powers. Under the constitution, the authority to make the law, enforce the law, and review the law are separated among the branches of government. However, after Fokker, the Executive has the power to do all three through the use of DPAs. Without judicial incursion, the prosecutors have the ability to both create and interpret the laws. The DOJ has the ability to require companies to follow codes of its own choosing, effectively creating new laws for corporations to follow.[24] Furthermore, the DOJ has the authority to interpret both the laws and the offenses, as the laws essentially become whatever the prosecutors say they are, because the prosecutors ultimately control the private agreements.[25]
Criticism
Ultimately, the Fokker court went too far in limiting the judicial role in reviewing DPAs. Judge Leon was correct to ask whether the agreement was in the public interest, and correct to rule that it was not. Under this DPA, there were essentially no punitive or deterrent measures. The company was only required to pay back the money it had made illegally, there was no monitor imposed upon them to ensure that they followed the laws in the future, and not a single employee was prosecuted or even lost their job. As Judge Leon described, this punishment was “anemic,”[26] and it did little to ensure that other corporations would not engage in similar behavior, nor that the interests of justice were served. Fokker was selling parts and services to the military of a US enemy, and the Circuit Court defended the prosecution’s supreme right to form an insufficient deal.
Moreover, even if the Circuit Court had wanted to uphold the DPA in this case, they could have done so with less broad language. The Circuit Court should have explained how Judge Leon overstepped his discretion, and provided the criteria by which this discretion was analyzed. Instead, the court stated in a blanket manner that the judiciary should not interfere with the prosecutor’s agreements.
Conclusion
The Circuit Court’s ruling was overbroad. While there are many reasons that judicial review should be limited in the context of DPAs, such as Executive deference, prosecutorial efficiency, and trust that corporate criminal deals will be upheld, the judiciary should not be rendered mute on the issue. Not only are there significant implications regarding the separation of powers, but unjust agreements can be rubber stamped—as was the case in Fokker. In most cases, the judiciary should defer to the prosecutor anyway, so in the rare case, like Fokker, where the judge rejects a DPA, the rejection should not be per se invalid. The courts would do a great service by outlining the parameters of an agreement that is outside of the public interest, rather than rejecting any judicial review.
[1] See Corporate Crime Reporter, Arthur Andersen Corporate Criminal Liability and the Rise of Deferred and Non Prosecution Agreements, https://www.corporatecrimereporter.com/news/200/arthur-andersen-corporate-criminal-liability-and-the-rise-of-deferred-and-non-prosecution-agreements/.
[2] See Brandon L. Garrett, Too Big to Jail: How Prosecutors Compromise with Corporations 41, 44, 55 (2014).
[3] Id. at 5.
[4] 818 F.3d 733 (D.C. Cir. 2016).
[5] Id. at 743.
[6] 79 F.Supp.3d 160, 167 (2015).
[7] Id. at 161.
[8] Id. at 162
[9] Id.
[10] Id.
[11] Id.
[12] Id.
[13] 18 U.S.C. §§ 3152–3156, 3161–3174 (2012).
[14] DOJ Supplemental Memorandum at 2, United States v. Fokker Servs. B.V., No. 14-CR-121 (RJL) (D.D.C. July 18, 2014), ECF No. 11.
[15] United States v. Fokker Servs. B.V., 79 F. Supp. 3d 160, 166 (D.D.C. 2015).
[16] Id.
[17] Id.
[18] United States v. Fokker Services B.V., No. 15-3016, 2016 WL 1319266, at *1 (D.C. Cir. Apr. 5, 2016).
[19] Id. at 4.
[20] Id.
[21] Id at 9.
[22] Id. at 7.
[23] See Richard A. Epstein, The Deferred Prosecution Racket, Wall Street J. (Nov. 28, 2006). https://www.wsj.com/articles/SB116468395737834160.
[24] See, e.g., Jennifer Arlen, Prosecuting Beyond the Rule of Law: Corporate Mandates Imposed Through Deferred Prosecution Agreements, 8 J. Legal Analysis 191, 192 (2016).
[25] Mike Koehler, Measuring the Impact of Non-Prosecution and Deferred Prosecution Agreements on Foreign Corrupt Practices Act Enforcement, 49 UC Davis L. Rev. 497, 505 (2015).
[26] Fokker Servs., 79 F. Supp. 3d at 167.
