Guest column by Lawrence D. Finder, partner in the law firm Haynes and Boone in Houston and former United States Attorney; and Ryan D. McConnell, Assistant United States Attorney in Houston.*
For 2009, we updated our deferred prosecution agreement (DPA) and non-prosecution agreement (NPA) statistics (or what we have called in our prior articles “corporate pre-trial agreements”). Our co-author this year was Scott Mitchell from the Open Compliance and Ethics Group , or OCEG (www.oceg.org), a non-profit think tank. Mr. Mitchell added insight on compliance issues from the perspective of a business person, as opposed to that of an attorney.
In 2008, we found that the U.S. Department of Justice (DOJ) entered into 16 of these agreements. This was a 60% decline from the 40 agreements we saw in 2007. This brings to 112 the number of agreements we have found from 1993-2008.
Last year, violations of the Foreign Corrupt Practices Act (FCPA) remained the predominant subject matter addressed by these agreements with 7 of the 16, or 44%, resolving FCPA violations. In 2007, roughly a third of the agreements involved FCPA violations. In addition, in 2008 we saw the first corporate pre-trial agreements resolving immigration work-site enforcement investigations into corporate targets.
Our update focuses on corporate compliance programs in DPAs and NPAs. In 2008, every agreement contained some sort of corporate compliance reform provision. This was unsurprising because three-fourths of the 75 DPAs and NPAs entered into over the past 3 years have contained remedial compliance measures-13 in 2006, 29 in 2007 and all 16 agreements in 2008. Similarly in the last three years, over 40% of the agreements have had compliance monitors-10 of the 2006 agreements, 16 of the 2007 agreements, and 6 of the 2008 agreements.
Compliance programs are nothing new. A January 22, 2009, OCEG survey of 1,183 professionals indicated that over 89% of publicly traded companies have a compliance program. This year’s article looks at these compliance programs and business reforms through the lens of DPAs and NPAs as a result of a company’s criminal conduct. We also looked at the roles of monitors in these agreements. Finally, the article looks at the new DOJ policies pertaining to corporate charging, monitor selection, and extraordinary restitution, and the impact those policies have on DPAs and NPAs.
Our results were interesting. Irrespective of the conduct involved in the investigation, we generally found compliance programs in DPAs and NPAs had the following features: (1) a corporate compliance individual with dedicated resources who reports to the Board or the CEO-not the general counsel, (2) a code of conduct (ethics) and training program designed to teach employees about the code of conduct, including certification by the employees that they have received training, (3) a system of internal controls and procedures monitored by the corporate compliance individual, and designed to ensure wrongdoing is discovered, and (4) a hotline or email system, monitored by the corporate compliance individual, that ensures accurate and timely reporting of compliance issues without retribution by the employers.
For monitors, we generally found that, regardless of the criminal conduct involved in the case, monitors had the following responsibilities: (1) review documents and interview company employees and officers, (2) monitor implementation of revised business reforms and internal controls and make appropriate suggestions, (3) undertake internal investigations as necessary, (4) make periodic reports which are certified by the monitor on company’s efforts under the DPA or NPA to the DOJ, and (5) report additional company wrongdoing to the DOJ.
The full article complete with detailed charts and statistics may be downloaded at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=133203.
The article is forthcoming in Corp. Counsel Rev. – Published by S. Tex. College Of Law, Volume XXVIII, No. 1 (May 2009).
* This article represents the views of the authors only, not their respective employers.