Deferred Prosecution Agreements in Federal Cases.

A federal deferred prosecution agreement (DPA) postpones criminal prosecution while negotiated conditions remain effective. Although similar to a non-prosecution agreement (NPA), it is not the same. The primary difference is that the government files criminal charges with the court but agrees to stay the prosecution for a period of time.

If we can obtain a DPA for you, your case will not result in a criminal record.

If you complete all the conditions of the DPA, the prosecution will typically be dismissed. In other words, you will not be convicted of the charges. However, the charges will not go away, as the government is not dismissing them with prejudice. Instead, it is dismissing the case “without prejudice.” This means that if the prosecution finds any evidence of guilt, it could potentially reopen the case. If you breach the conditions of the DPA, the prosecution can also move to reinstate the case.

Corporate non-prosecution agreements (NPAs) and deferred prosecution agreements (DPAs) have become increasingly common over the last two decades. The Department of Justice (DOJ) entered two corporate N/DPAs during 2000, and corporate N/DPAs reached approximately forty agreements annually during the 2010s.

As reported by the federal watchdog organization Project On Government Oversight (POGO), one cited study of 200 corporate criminal cases in which corporate defendants entered N/DPAs found that 47 percent of those cases resulted in no fine being imposed.

Furthermore, while corporate criminal charges have continued to rise, federal corporate criminal prosecutions declined by approximately 25 percent from 2015 through January 2020.

How Do Federal Deferred Prosecution Agreements Differ From Plea Agreements, Non-Prosecution Agreements, Pretrial Diversion, and Deferred Prosecution?

Corporate DPAs will typically occur concurrently with criminal charges filed with the court through what is known as a criminal information. A plea agreement to an information is similar to a plea agreement to an indictment, a criminal defendant pleads guilty to avoid criminal trial. NPAs, by contrast, ordinarily involve no filed criminal charge or judicial approval. They also differ from individual federal pretrial diversion. The Justice Manual (J.M.) addresses pretrial diversion for individuals in federal cases in J.M. § 9-22.000:

“The diversion requirements of this section may require supervised release, restitution, community service, counseling and treatment, rehabilitation programs and a drug tests. The diversion requirements should be appropriate to the offense, offense history and the abilities of the defendant.”

While corporate N/DPAs differ from pretrial diversion for individual defendants in several ways, they may involve some of the same conditions (e.g., restitution, corporate self-monitoring, drug testing). The federal rules governing pretrial diversion for individuals do not apply to corporate defendants; they must be specifically adapted to a corporate case on a case-by-case basis.

While federal corporate N/DPAs have some similarities to diversion programs, they are different from state and county diversion programs. A corporate DPA also differs from a corporate N/DPA; it differs from a diversion agreement, too.

In contrast to a plea agreement, which usually requires a guilty plea and an ordinary conviction, a corporate DPA offers a way for corporate defendants to avoid criminal conviction through compliance. This difference in the outcome of corporate DPAs and plea agreements is particularly important, because a corporate criminal conviction can trigger adverse collateral consequences, such as federal debarment, loss of business licenses, and loss of government contracting opportunities.

While corporate DPAs have diverged from diversion programs over time, their origins in a federal corporate setting were based on diversion models that were originally designed for individual offenders.

Who Can Get a Federal Deferred Prosecution Agreement, and How Are the Terms Set?

No defendant has a general right to receive a federal DPA. In corporate criminal cases, defendants are sometimes eligible for DPAs if they have a record of substantial efforts to implement and enforce a meaningful compliance program. While terms in a corporate DPA can range widely, they typically include terms like:

• Payments of criminal fines and disgorgement of ill-gotten gains
• Cooperation with ongoing criminal investigations
• Pre-trial remediation of the criminal misconduct
• Implementation of substantive corporate compliance reforms

As an example, remediation may involve firing the executives who committed criminal acts, and compliance reforms may involve introducing new software and internal policies for monitoring.

Federal prosecutors are guided by Justice Manual § 9-28.000 when making corporate charging decisions. However, this doesn’t mean that defendants have any legally enforceable right to seek treatment based on these guidelines. As with other sections of the Justice Manual, § 9-28.000 consists of internal guidance that is not independently enforceable by statute, but it can have important practical implications.

The adequacy of a company’s compliance program is another factor in the Justice Department’s corporate resolution decision (Justice Manual § 9-28.800). Prosecutors use a variety of resources to evaluate the adequacy of a corporate compliance program, including the Justice Department’s “Evaluation of Corporate Compliance Programs” resource and information gathered directly from the corporate defendant during investigations.

According to the Justice Manual, corporate criminal charges filed with the U.S. Department of Justice (DOJ) can generally be resolved with a fine, and discounts for self-disclosure, cooperation, remediation, and parallel resolutions with regulators may be available. Parallel resolutions are important because they can avoid double-penalization; if a corporation resolves criminal charges with the DOJ, it might then be in a position to seek a similar settlement with regulators such as the SEC or EPA.

Corporate DPAs and NPAs often involve additional terms, too. Companies that sign DPAs generally agree to factual statements describing the corporation’s criminal conduct, and companies are usually required to certify that they did not knowingly or intentionally disclose false information or evidence (or withhold information or evidence) during the U.S. government’s investigation. In the case of corporate DPAs, defendants are required to agree not to contest the criminal charges in federal court, and, should they breach their conditions, the federal prosecutor can move to reactivate the DPA’s underlying criminal charges.

What Rights Apply in a Federal Deferred Prosecution Agreement, and What (if Any) Court Review is Involved?

Federal deferred prosecution agreements (DPAs) have been around for some time. However, in 1974, Congress passed the Speedy Trial Act, which formally recognized the use of these “diversion agreements,” making it clear that “written deferred-prosecution agreements” are permitted in federal court:

“Any period of delay during which prosecution is deferred by the attorney for the Government pursuant to written agreement with the defendant, with the approval of the court, for the purpose of allowing the defendant to demonstrate his good conduct.”

18 U.S.C. § 3161(h)(2)

Crucially, section 3161(h)(2) makes clear that the court must approve the agreement in order for the trial to be postponed:

“Any period of delay during which prosecution is deferred by the attorney for the Government pursuant to written agreement with the defendant, with the approval of the court, for the purpose of allowing the defendant to demonstrate his good conduct.”

For individual defendants whose cases are referred to diversion, waivers of all Speedy Trial Act protections are common.

In the case of corporate defendants, U.S. District Court judges may also have a role in review and approval of DPAs and NPAs. However, this role has been limited over time, and federal judges cannot rewrite DPAs (or a plea agreement or DPA) in the middle of sentencing or resolution on the basis that the DPA looks “too lenient” to them. United States v. Fokker Services B.V., 818 F.3d 733 (D.C. Cir. 2016):

“A trial judge’s role is not to re-negotiate for the government a criminal plea, nonprosecution, or deferred prosecution agreement, and to reject or modify the terms of a plea as a matter of judicial discretion.”

United States v. HSBC Bank USA, N.A., 863 F.3d 125 (2d Cir. 2017) that federal judges cannot assume continuing supervisory roles over the compliance efforts of companies that enter DPAs and NPAs, noting that:

“Such involvement would essentially force the judge to manage and review corporate internal procedures that are not in judicial hands.”

Depending on the language in their DPA or NPA, corporate defendants (and individual defendants) may need to make other waivers as well, in order to proceed with their agreed-upon resolution. These requirements are not universal; they can be identified in the DPA, NPA, or diversion agreement itself.

Ultimately, there are two major ways that corporate criminal charges and diversion cases end. Defendants who complete their DPA, NPA, or diversion program are typically released from criminal liability under their agreement. Those who breach their DPA, NPA, or diversion program face prosecution. A defendant who successfully completes a DPA will avoid a guilty verdict, and, thus, will not have a criminal judgment in hand that would support a conventional criminal appeal. The decision to impose criminal sanctions rests with prosecutors, and the scope of judicial review is limited accordingly.

Todd Spodek and the attorneys at Spodek Law Group handle federal cases of this kind from New York, Brooklyn, Queens and Los Angeles.

What Controls the Lifecycle of a Federal DPA, and When Does it Expire?

There are several aspects of a federal DPA that can be (or that are) influenced by its terms and by the circumstances surrounding its negotiation and implementation.

In each case, the U.S. Department of Justice (DOJ) or U.S. Attorney’s Office (USAO) should not be able to unilaterally terminate a DPA, and the party attempting to pursue criminal charges should be required to provide notice and evidence of the alleged breach. The terms of an agreement to resolve criminal charges in federal court should include clear provisions regarding notice and cure, the extent to which evidence of compliance is admissible against a defendant, the extent to which the prosecution must prove a breach, the scope and availability of judicial oversight, and other procedural matters, as well.

A federal DPA also includes various terms that may apply (and apply only) if the defendant breaches its obligations under the DPA. For instance, a corporate defendant that breaches its DPA must generally agree that its admissions to factual circumstances under the DPA are admissible against the corporation during prosecution.

There are several other aspects of a corporate defendant’s prosecution agreement that may depend on the agreement’s terms and on the scope of continuing judicial review.

In many corporate cases, DPAs specifically reserve to the DOJ or the USAO the right to determine whether a breach occurred. In others, the prosecution is required to show a breach by a preponderance of the evidence. Each DPA will provide the specific procedures governing notice of a breach, notice of the intent to pursue criminal charges, and the deadline and method of submitting evidence of compliance to the prosecution.

Similar to these other provisions, the scope and availability of judicial review in a DPA are governed by the provisions of the DPA, the relevant facts of the case, and the principles applicable to other federal diversion agreements. However, federal courts that review DPA compliance cases typically apply traditional contract principles to evaluate whether the government has violated its contractual obligations under a negotiated criminal resolution agreement.

How long does it take for a corporate DPA to expire? The answer to this question is also determined, in part, by the DPA’s written terms. However, several federal principles also apply. As a general rule, 18 U.S.C. § 3282 imposes a five-year statute of limitations for federal criminal offense that are not capital offenses.

Depending on the circumstances, a defendant may be required to agree to toll the statutory limitation period while its DPA (or NPA) remains in effect. Similarly, extensions, modifications, and early terminations must also be negotiated based on the terms of the DPA, NPA, or diversion agreement at hand.

Does Completing a Federal Deferred Prosecution Agreement Clear Your Record?

No, successful completion of a federal deferred prosecution agreement (DPA) does not necessarily result in a clean criminal record. While a defendant who successfully completes a DPA will not be convicted, it does not mean that there will be no evidence of an arrest or charges, or that there will be no licensing or regulatory consequences.

For example, even when the U.S. Department of Justice (DOJ) or the U.S. Attorney’s Office (USAO) dismisses the underlying charges, the dismissal will typically not automatically erase the defendant’s arrest or court records. The defendant will still have a record of the arrest, and corporate defendants that are charged in federal court will have a case on the public court docket.

In addition, the fact that a federal DPA ended with a dismissal of the charges is not always enough to avoid all adverse consequences. For example, in the corporate context, a dismissed DPA can serve as evidence of misconduct, which can be used to justify denial of certification, licensure, or other licensing and regulatory consequences.

Along with the risk of licensing or regulatory consequences, corporate defendants must also be careful about what they put on the public record. Because a corporate DPA is filed in federal court, it is generally accessible to anyone via the court’s docket system. The factual admissions included in a DPA can be used by prosecutors and private plaintiffs in civil complaints, and it will also have implications during regulatory proceedings.

Additionally, while a DPA resolves the criminal prosecution, it may not resolve all of a defendant’s liability. For example, a DOJ DPA does not bind the Securities and Exchange Commission (SEC) unless the SEC has joined in the resolution. Likewise, for federal health care providers facing exclusion, a decision about imposing exclusion remains with the U.S. Department of Health and Human Services Office of Inspector General (HHS OIG), and a separate resolution with HHS OIG is required if the defendant wants to ensure it avoids exclusion.

Disclosures in Questionnaires

What disclosures does a corporate defendant have to make in response to questions on questionnaires? This question cannot be answered without examining the questionnaire’s specific wording. Depending on the wording, corporate defendants may be required to disclose either: (i) the fact that charges were dismissed, (ii) the fact that the defendant has admitted to a crime, or (iii) its past conduct regardless of whether the conduct resulted in formal charges.

As a result, corporate defendants should thoroughly review their obligations to ensure they are compliant not only with their DPA but also with their other reporting and disclosure obligations. However, if a questionnaire specifically asks about criminal convictions, a corporate defendant that successfully completes a DPA will not need to disclose a criminal conviction in response to that question.

Can Cooperation or Monitor Reporting Under a Corporate DPA Waive Legal Privilege?

Corporate Monitors and Their Responsibilities

In corporate cases, a federal deferred prosecution agreement (DPA) or nonprosecution agreement (NPA) might also require the company to retain an independent monitor at its own expense. While monitors can be appointed by the DOJ or any other administrative agency, they can also be appointed by the courts in some cases. Generally speaking, the monitor is responsible for observing the company’s operations and reporting compliance findings back to the government based on the mandate negotiated under the company’s resolution agreement.

Corporate Cooperation and Privilege

Similarly, the requirement to cooperate in federal corporate criminal investigations also raises potential (and sometimes avoidable) privilege concerns. Corporate cooperation often depends substantially on a company-funded internal investigation, and the DOJ may (or may not) expect the company to voluntarily disclose the investigation materials to the government. In contrast to many other areas of the government’s compliance monitoring system, the Justice Manual has clarified that corporations do not generally need to waive attorney-client or work-product privilege in order to cooperate:

“When calculating a corporate defendant’s cooperation discount, prosecutors should focus on whether the corporate defendant’s efforts provided relevant facts. Prosecutors should not award credit for waivers of attorney-client privilege or attorney work product protection.”

Justice Manual § 9-28.710(C)

While the DOJ’s corporate criminal enforcement policy makes it clear that corporate defendants are not expected to voluntarily waive legal privilege in the context of cooperation, voluntary disclosure of privileged or protected investigation materials to the DOJ will constitute a waiver.

Monitors and the Waiver of Legal Privilege

Whether a corporate monitor is entitled to access materials protected by the attorney-client privilege or the attorney work-product doctrine depends on the DPA or NPA in question, and on the monitor’s mandate, as well, as well as any applicable law or court order. Monitor budgets, reporting frequency, and termination criteria are also determined under a negotiated governing document (or agreement) that outlines the monitor’s specific authority and responsibilities.

In most cases, companies should be able to rely on their lawyers to make appropriate determinations regarding privilege protection. While companies should have the right to present their concerns about the scope of the monitor’s authority to the DOJ, prosecutors should not be able to demand to have a legal professional pre-screen the company’s monitors’ reports in all cases. While this may be necessary in some cases, it is not a federal requirement to have a legal professional present in every case. Companies need the ability to protect their legal privilege while cooperating with monitors.

Talk to Spodek Law Group

Every case turns on its own facts, and general information is no substitute for advice about yours. Todd Spodek, managing partner of Spodek Law Group, and the firm's attorneys defend federal criminal and white collar matters nationwide. Reach the firm at 212-300-5196.