Four years ago, coming into the Trump administration, many thought corporate crime prosecutions would decline.
Gibson Dunn
Washington, D.C.
But it didn’t happen.
Deferred and non prosecution agreements were on a steady pace throughout the four Trump years.
Gibson Dunn has just put out its report on deferred and non prosecution agreements. One of the authors of that report is M. Kendall Day, a partner at Gibson Dunn in Washington, D.C.
“The thesis going into the Trump administration was that corporate and white collar enforcement would decline,” Day told Corporate Crime Reporter in an interview last month. “Statistics show that that thesis didn’t bear out. In fact, in the new administration, they are starting from what is already a robust enforcement foundation.”
“The year 2020 was the highest year on record for financial penalties and recoveries due to deferred and non prosecution agreements. We are halfway through 2021, and we are trending to where we are usually at this point. It’s roughly $3.4 billion in recoveries through deferred and non prosecution agreements through the end of June 2021. And that is on par with the June 30 mark going back ten years.”
“Right now through June, we have 18 deferred and non prosecution agreements. And if you look back historically, that’s more than 50 percent of the final of most years. The mean has been between 30 and 40 agreements per year.”
These settlements are controversial. An argument can be made that these settlements undermine corporate criminal justice.
“I understand that reasonable people can have differing views on this,” Day said. “But if you look at what prosecutors achieve through these settlement agreements, it often goes beyond what they could achieve with a guilty plea or an indictment and guilty verdict at trial.”
“Going to a resolution is one of the most complicated aspects of representing a company. What undertakings does the prosecution seek to impose going forward? There are often compliance and reporting undertakings that go beyond what a judge would ordinarily impose as part of a guilty plea. It is one of the most vexing problems for our clients. It’s much more than a financial penalty attached to a deferred or non prosecution agreement.”
“But what are they signing up for from a remediation perspective, from a compliance program perspective – that they will be obligated to do for the duration of the agreement? And if they are unable to meet that obligation and there is not a really good reason for it, they could be found in breach of the agreement.”
“That’s another theme that comes out of the report. The Department of Justice periodically updates its guidance to prosecutors on how to interpret and evaluate the effectiveness of a company’s compliance program. They do that at the resolution to assess what penalty or resolution vehicle is appropriate. But it is also now finding its way into enhanced remediation undertakings. And you are seeing that in terms of additional obligations imposed on the company for the life of the agreement.”
People anticipate that when a Democratic administration comes in there is going to be an uptick in corporate crime enforcement. What’s your sense?
“There probably will be an uptick, for a couple of reasons. One is new tools coming online. In January of this year, for example, the National Defense Authorization Act passed. Part of what was included in that legislation was a series of anti-money laundering enhancements. One specific part of those enhancements is a new whistleblower provision. This is similar to the whistleblower program created under Sarbanes Oxley in 2010.”
“It included things like requiring payments for anti-money laundering cases that resulted in recoveries to the government. The payment amounts were significantly increased, all the way up to 30 percent. These types of enhancements will lead to a lot more whistleblowing. And if that is true, and we suspect it will be, that will lead to more work by the plaintiffs’ bar to help promote especially significant cases.”
“If you think about the universe of individuals at financial institutions who might have access to how the money laundering program is functioning and therefore might be candidates to be a potential future whistleblower if the incentives are correct, we will see more matters being reported to the agencies and we will see more enforcement.”
Right now, the SEC is announcing maybe one whistleblower award a week over $1 million or more. It’s a robust program.
“For anti-money laundering whistleblowing, it’s new legislation. There was an historic program that was underutilized. The rewards were very low. They were in the six figures and it was capped at a lower amount.”
“Now, it’s up to 30 percent of the government’s recovery that will go to the whistleblower. The Treasury Department is still in the rulemaking process. The new system hasn’t come on line. But when it does, it will lead to a lot more whistleblowing activity. It will be similar to what you are seeing now at the SEC.”
Gibson Dunn has also put out a report on the False Claims Act and it reports that in this area also, the Trump administration kept up with previous years.
Is it your sense that white collar and corporate crime prosecutions are on auto-pilot?
“The systems are in place to continue white collar enforcement without regard to which administration is in place. But where it matters is more in the forms and types of resolutions. One area where there is a question mark right now is in the imposition of corporate monitorships as part of deferred and non prosecution agreements.”
“Whether or not to accept a monitor is an issue. There is distraction and cost. It was an issue that I would wrestle with when I was a supervisor at the Department given the concerns I had for the potential of mission creep, the broadening of a monitor’s remit once a monitor began. There is a bit of a question mark over whether monitors will see a resurgence. During the Trump administration, there was messaging by the political leadership about how monitorships were not going to be automatic. And there certainly was a decline in the number of resolutions that included corporate monitorships.”
“There will continue to be robust white collar enforcement across administrations, but certain components of that enforcement will ebb and flow with who is in the chair.”
[For the complete q/a format Interview with M. Kendall Day, see 35 Corporate Crime Reporter 32(13), Monday August 9, 2021, print edition only.]
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