Legislation

Bill Would Place Judicial Constraints on Deferred Prosecution Agreements

A New Jersey congressman introduced legislation on Tuesday that would require federal prosecutors to meet set guidelines before entering deferred prosecution agreements and that would put into judges' hands the power to appoint and oversee monitors.

The sponsor, U.S. Rep. Frank Pallone Jr., D-6th Dist., said in a statement that the bill is intended to rein in U.S. Attorneys' unbridled discretion to enter DPAs with corporate defendants and to select monitors to ensure the entity's compliance.

"In the absence of any guidance from the Justice Department on how to use, craft and implement deferred prosecution agreements, legislation is desperately needed that lays out a specific framework," Pallone said.

Monitorships can be lucrative posts for those appointed, often lasting months or years, during which the monitor is paid by the defendant corporation at an agreed-upon rate. Under a DPA that U.S. Attorney Christopher Christie entered last fall, the monitor, former U.S. Attorney General John Ashcroft, stands to be paid anywhere from $29 million to $52 million.

Corporate managers consent to such arrangements because they are preferable to facing criminal penalties. But the sticking point for critics is that no one but the U.S. Attorney is in a position to review a DPA or the selection of monitor, thus permitting inferences of favoritism.

Pallone and another Democrat, Rep. Bill Pascrell, vowed to seek scrutiny of the process after Ashcroft's fee became public last year.

Christie, a Republican, has characterized their criticism as partisan politics and has defended the monitors he picked as highly qualified. On Tuesday, he declined to comment on the bill.

Pallone's bill would require that any DPA be submitted to a federal judge and/or magistrate judge for review to ensure it comports with public interest, applicable laws and guidelines. Among the criteria to be considered:

• The potential harm to employees, shareholders and other stakeholders of the target corporation that could result from entering into a deferred prosecution agreement.
• The corporation's degree of cooperation with investigators, including its willingness to provide documents and make available employees, officers, and directors for questioning.
• Remedial action taken by the corporation, such as internal investigation, dismissal of employees, acknowledgment of wrongdoing, payment of restitution, and other structural, management and policy changes.
• Availability of criminal charges against specific employees who may have engaged in illegal acts relative to the corporate wrongdoing.
• Availability of sufficient alternative punishments or remedial actions pursuant to a deferred prosecution agreement.

The legislation would direct the judge or magistrate judge, upon approving the DPA, to choose a monitor from a pool of prequalified firms with experience in complex criminal and civil litigation.

Monitors would be paid according to a pre-determined fee schedule set by the federal courts.

The bill would also require that every DPA include the number and frequency of reports that the monitor would have to make to the U.S. Attorney and to the federal judge or magistrate.

A U.S. Attorney who believes a DPA has been breached would have to seek the review of the chief judge of the federal district where the DPA was approved.

Attorney General Michael Mukasey said two weeks ago that he is considering the adoption of internal guidelines for the monitor-selection process and rules for entering into DPAs.

(Published by Law.com, January 24, 2008)