DC Circuit Opinion Limiting District Court Oversight of Deferred Prosecution Agreements (5/2/16)

The Government has used deferred prosecution agreements (DPAs) in tax cases (e.g. the UBS DPA in 2009 and the DPAs offered in the DOJ Tax Swiss Bank initiative).  For the UBS Deferred Prosecution Agreement and other DOJ Preferred Prosecution Agreements see Brandon Garrett's excellent compilation on his UVA Law Website here; and for the DOJ Tax Swiss Bank Initiative which offered nonprosecution agreements but reserved the right to required a DPA in a particularly egregious case (see Program for Non-Prosecution Agreements or Non-Target Letters for Swiss Banks, par. II.K. (apparently, as yet DOJ Tax does not seem to have exercised that discretion, see here.))

Readers interested in DPAs likely will want to read the opinion in United States v. Fokker, ___ F.3d ___, 2016 U.S. App. LEXIS 6176 (DC Cir. 2016), here.  Bottom line, the decision gives wide deference to prosecutiorial discretion in charging decisions and limits the district court's discretionary oversight in accepting DPAs.  The opinion is notable for its content, but also notable because it is written by Judge Srinivasan, Wikipedia here, who was recently on the short list for appointment to the Supreme Court and who, likely, will be on the short list for the next President, to use President Obama's phrase, "whoever she is."  I focus in this blog only on the content of the opinion limiting the district court's discretion.

Although I strongly encourage federal tax crimes and white collar crimes enthusiasts to read and study the opinion, I offer here the opening of the opinion to introduce the summary background and holding in the opinion:

The Constitution allocates primacy in criminal charging decisions to the Executive Branch. The Executive’s charging authority embraces decisions about whether to initiate charges, whom to prosecute, which charges to bring, and whether to dismiss charges once brought. It has long been settled that the Judiciary generally lacks authority to second-guess those Executive determinations, much less to impose its own charging preferences. The courts instead take the prosecution’s charging decisions largely as a given, and assume a more active role in administering adjudication of a defendant’s guilt and determining the appropriate sentence.  

In certain situations, rather than choose between the opposing poles of pursuing a criminal conviction or forgoing any criminal charges altogether, the Executive may conclude that the public interest warrants the intermediate option of a deferred prosecution agreement (DPA). Under a DPA, the government formally initiates prosecution but agrees to dismiss all charges if the defendant abides by negotiated conditions over a prescribed period of time. Adherence to the conditions enables the defendant to demonstrate compliance with the law. If the defendant fails to satisfy the conditions, the government can then pursue the charges based on facts admitted in the agreement. 

This case arises from the interplay between the operation of a DPA and the running of time limitations under the Speedy Trial Act. Because a DPA involves the formal initiation of criminal charges, the agreement triggers the Speedy Trial Act’s time limits for the commencement of a criminal trial. In order to enable the government to assess the defendant’s satisfaction of the DPA’s conditions over the time period of the agreement—with an eye towards potential dismissal of the charges—the Speedy Trial Act specifically allows for a court to suspend the running of the time within which to commence a trial for any period during which the government defers prosecution under a DPA.  

In this case, appellant Fokker Services voluntarily disclosed its potential violation of federal sanctions and export control laws. After extensive negotiations, the company and the government entered into an 18-month DPA, during which Fokker would continue cooperation with federal authorities and implementation of a substantial compliance program. In accordance with the DPA, the government filed criminal charges against the company, together with a joint motion to suspend the running of time under the Speedy Trial Act pending assessment of the company’s adherence to the agreement’s conditions. The district court denied the motion because, in the court’s view, the prosecution had been too lenient in agreeing to, and structuring, the DPA. Among other objections, the court disagreed with prosecutors’ decision to forgo bringing any criminal charges against
individual company officers. 

We vacate the district court’s denial of the joint motion to exclude time under the Speedy Trial Act. We hold that the Act confers no authority in a court to withhold exclusion of time pursuant to a DPA based on concerns that the government should bring different charges or should charge different defendants. Congress, in providing for courts to approve the exclusion of time pursuant to a DPA, acted against the backdrop of long-settled understandings about the independence of the Executive with regard to charging decisions. Nothing in the statute’s terms or structure suggests any intention to subvert those constitutionally rooted principles so as to enable the Judiciary to second-guess the Executive’s exercise of discretion over the initiation and dismissal of criminal charges. 

In vacating the district court order, we have no occasion to disagree (or agree) with that court’s concerns about the government’s charging decisions in this case. Rather, the fundamental point is that those determinations are for the Executive—not the courts—to make. We therefore grant the government’s petition for a writ of mandamus and remand for further proceedings consistent with this opinion.

JAT comment: Even if the courts had authority to review the merits of deferred prosecution agreements (they apparently do not based on Fokker), the Government can achieve basically the same "benefits" from nonprosecution agreements (NPAs) that are not reviewed by the district court at all.  NPAs can toll the criminal statute of limitations by agreement and permit subsequent prosecution if the target does not meet the terms of the agreement.  Further, NPAs can be publicized.  Readers will recall that the DOJ Tax Swiss Bank program beat the publicity drums loudly for NPAs.  The Court addressed the differences between DPAs and NPAs as follows:

DPAs, along with their out-of-court analogues, non-prosecution agreements (NPAs), afford a middle-ground option to the prosecution when, for example, it believes that a criminal conviction may be difficult to obtain or may result in unwanted collateral consequences for a defendant or third parties, but also believes that the defendant should not evade accountability altogether. Both DPAs and NPAs generally include an admitted statement of facts, require adherence to “conditions designed . . . to promote compliance with applicable law and to prevent recidivism,”  and remain in effect for a period of one to three years. U.S. Attorney’s Manual § 9-28.1000 (2015). During that period, if the defendant fails to abide by the terms of the agreement, the government can prosecute based on the admitted facts. While prosecutors at one time seldom relied on NPAs and DPAs, their use has grown significantly in recent years.  

DPAs differ from NPAs primarily with regard to the filing of criminal charges. With an NPA, “formal charges are not filed and the agreement is maintained by the parties rather than being filed with a court.” Craig S. Morford, Selection and Use of Monitors in Deferred Prosecution Agreements and Non-Prosecution Agreements with Corporations, at 1 n.2 (Mar. 7, 2008). A DPA, by contrast, “is typically predicated upon the filing of a formal charging document by the government.” Id. 

The United States Attorney Manual provision cited above is here.  (Actually, the quote from the USAM is in 9-28.1100 - Collateral Consequences (discussing alternatives to prosecution; see also 9-28.200 - General Considerations of Corporate Liability.)  USAM 9-28.1100 also provides:\

Under appropriate circumstances, a deferred prosecution or non-prosecution agreement can help restore the integrity of a company's operations and preserve the financial viability of a corporation that has engaged in criminal conduct, while preserving the government's ability to prosecute a recalcitrant corporation that materially breaches the agreement. 

I also recommend to readers the following thoughtful and brief concern about DPAs.  Brandon L. Garrett and Alan B. Morrison, Deferred Prosecutions Need Judicial Oversight (National Law Journal 5/2/16), here.  The authors argue for more judicial oversight of DPAs.  I offer no position on that issue.

By the way, for DOJ Tax enthusiasts, the district court in the case was Judge Richard Leon, see here, who is a Senior Trial Attorney in the Criminal Section of the Tax Division,