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Too Big to Jail

Brandon Garrett has pulled together a database of all the deferred and non prosecution agreements and plea agreements since 2001. And he’s sliced and diced them.

And now he’s writing a book for Harvard University Press about what he’s finding.

The working title?

Too Big to Jail: How Prosecutors Take On Corporations.

Garrett is a Professor at the University of Virginia Law School.

Garrett wonders, for example, why the Justice Department secures guilty pleas for environmental crimes while getting primarily deferred and non prosecution agreements in Foreign Corrupt Practices Act (FCPA) cases.

“There is nothing inherent in environmental crimes that requires guilty pleas and FCPA that requires deferred prosecution agreements, right?”

“No, if anything they are kind of similar,” Garrett said in an interview last week.

“For environmental cases – are customers going to stop buying the products of a company that makes plastics or steel because their factory was out of compliance with the Clean Water Act or the Clean Air Act? Customers may not know.”

“It may not hurt the company’s reputation so that it will be the death knell.”

“And we know that there have been companies convicted multiple times, seemingly without significant effect.”

“But the same might be true of foreign bribery. When Siemens was convicted for bribery around the globe, did that affect whether someone bought a Siemens coffee maker or not? Probably not. It might cause a government to have doubts when walking into negotiations for a major contract.”

“The difference in the way FCPA and environmental cases are handled just has to do with different divisions at Main Justice that are handling those cases and how they have developed their own practices over the years.”

And Garrett is troubled by the wording and details of the deferred and non prosecution agreements.

“The fines are sometimes not particularly impressive at all,” Garrett says. “There are many agreements with no fines.”

“And if the purpose of these agreements is to not necessarily impose the most severe penalty or fine to a corporation, but to instead trade off of that to insure compliance, to rehabilitate the company – I’m not convinced that rehabilitation is being taken seriously enough either.”

“The bargain reflected in these agreements may not be strong enough. Some of these agreements have pretty detailed terms about what compliance is supposed to look like going forward, but in plenty of them, it is quite vague.”

“Some of these agreements impose monitors, but even there, the duties of the monitors are left somewhat vague.”

“And we have no idea what the monitors are doing – or even who the monitors are in many cases.”

“So, it’s pretty hard to tell from the outside whether these agreements are performing or not.”

Do we get access to monitor reports?

“No one has ever seen monitor reports, except for a prologue that was released in one case, but that was really more of an extended press release,” he says.

“My understanding is that in most of the cases, the company retains the monitor. The agreement typically says that the monitor reports are to remain confidential, that they will be disclosed to prosecutors and maybe regulators, but to no one else.”

“And there may be portions of those reports dealing with employment matters and the like that shouldn’t be public.”

“But the public should know more about what the companies have done and what has happened.”

“When the deferred prosecution agreement is entered, there is a lot of detailed information describing the nature of the alleged crimes – what employers did, what employees did, maybe without naming them – describing the pattern of criminal behavior, what was the breakdown in corporate governance that permitted it to happen.”

“And then identifying, sometimes specifically, what needed to be done to repair the company.”

“And you would think that there could be a similar report at the end of the agreement – maybe not every monitor’s quarterly report – but some detailed accounting of – this is where things stand now – two or three years after the agreement was entered into.”

Garrett says corporate crime cases differ from street crime cases in fundamental ways.

“One of the many ways corporations are not like regular criminal defendants is that in regular criminal cases, prosecutors and police have access to some of the best information about what really happened,” Garrett said.“In violent crimes that I have been looking at, you worry about Brady violations, you wonder whether prosecutors and police are doing a good investigation and getting accurate evidence.”

“But it all gets flipped around in these corporate cases, where the corporation may have the best information about what really happened. They all have access to e-mails and documents, to any interviews their own lawyers did investigating it.”

“And the cases can be incredibly complicated with millions and millions of documents. They are incredibly difficult cases for prosecutors to bring. If you have conduct that occurred around the globe, can the FBI really take on the job of sorting through it all or trying to get a hold of millions of documents distributed around the globe?”

“Both the corporations and the executives can afford brilliant top lawyers.”

“In regular criminal cases, it is the defendant that may find out later – what evidence did the police gather? When the police are investigating the crime scene, there might not even be a defendant who has a lawyer. There might be a suspect later.”

“It is all reversed in corporate cases. In some ways, you have to applaud prosecutors for taking more of these on. And you can understand why they need to negotiate these agreements. Without the cooperation of the companies, they might not easily get access to those documents and records to find out what happened.”

“It’s not a surprise that in the hardest cases to bring, in these antitrust cases where there is a cartel, they need special tools like the leniency program to crack that nut and encourage defection, encourage corporation-on-corporation snitching.”

“What you see is that prosecutors are able to bring more and more of these cases in areas where they can leverage their admittedly sometimes thin resources to produce more self-reporting and cooperation.”

“How are they supposed to find out about ocean dumping at sea? The statute has whistleblower provisions to encourage shipmates to come forward, take pictures on their cell phones and get a share of the fine.”

“And prosecutors offer companies similar rewards. They can say – we can offer you significant leniency if you come forward, self-report and cooperate – give us the documents and help us prosecute individual employees that committed wrongs.”

“If we really are going to take these difficult cases more seriously, it’s going to be a question of resources.”

“You would think those resources should flow to the prosecutors working on these cases, since they are, after all, bringing in significant fines and money.”

“I would like to learn more about the degree to which some of that can be sent back to the people doing these cases – so they have the resources to get more agents working on future cases.”

Russell Mokhiber edits the Corporate Crime Reporter. 

More articles by:

Russell Mokhiber is the editor of the Corporate Crime Reporter..

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