38 repeat offender corporations
received a DPA or NPA and were then subject to subsequent criminal enforcement actions
Corporations keep committing crimes, and the U.S. Department of Justice keeps refusing to prosecute them.
Instead of holding big corporations accountable when they violate the law, federal law enforcement officials go out of their way to avoid indicting them.
Instead of prioritizing protecting the victims of corporate crime, the Justice Department protects corporate profits and property.
Instead of prosecuting corporations, prosecutors make deals with them.
The deals prosecutors make to protect corporations from prosecution are called deferred prosecution agreements (DPAs) and non-prosecution agreements (NPAs). Prosecutors and corporate defense attorneys negotiate these deals behind closed doors to keep corporations out of the criminal justice system.
Under these agreements, the corporations pay a fine, agree to reforms and promise not to commit any more crimes. Sometimes they are supervised by a DOJ-approved monitor.
Usually after two or three years, as long as the corporation does not violate the agreement, the DOJ drops any charges it may have filed.
Corporations that enter DPAs and NPAs (also known as pre-trial diversions) technically have not been found guilty – but they’re not innocent, either. They almost always admit and accept responsibility for their wrongdoing, but they are protected from the full consequences off criminal prosecution – consequences that, if criminal corporations faced them, would serve as powerful punitive deterrents to corporate crime.
The rationale for DPAs and NPAs is that they will better facilitate corporate compliance with the law, and a shift in corporate culture, than prosecution would.
But the empirical evidence strongly contradicts this theory. In short, the DOJ’s deals with large corporate offenders do not work.
Most corporations that have faced multiple criminal enforcement actions, yet avoided prosecution, are large multinationals.
Most of these have avoided prosecution more than once.
Contrary to the DOJ’s theory of corporate rehabilitation, DPAs and NPAs do not prevent corporate recidivism.
This history of large corporations repeatedly avoiding prosecution shows if the DOJ wants to deter corporate crime, a different approach is needed.
received a DPA or NPA and were then subject to subsequent criminal enforcement actions
received at least one additional DPA or NPA after already having received a prior DPA or NPA
have pleaded guilty to subsequent crimes
but were not held publicly accountable for the breach
in fiscal year 2018, the lowest since the courts started keeping track, down from a peak of 296 in 2000
Note: The following is an abbreviated version of the report. For the full 135-page report, including detailed appendices describing each corporation’s violation and federal criminal enforcement action, download the PDF version.
The Justice Department manual for business prosecutions instructs prosecutors to consider using deferred and non-prosecution agreements in circumstances when they see potential for a corporation’s conviction to result in “disproportionate harm to shareholders, pension holders, employees, and others not proven personally culpable.” When a corporation is prosecuted, it can be subject to monetary penalties, strict oversight and reputational damage and banned from conducting business with federal and state governments.
Whether for corporations or for individuals, the Justice Department considers prosecution when it has enough evidence to prove “beyond a reasonable doubt” that the accused corporation or individual violated U.S. criminal law. Absent such evidence, the department can decline to prosecute. In practical terms, prosecution traditionally leads either to a trial conviction if the defendant is found guilty (or acquittal if not guilty) or, more often, a plea agreement, which must be approved by a judge. For felony and misdemeanor offenses, federal sentencing guidelines for organizations attempt to ensure consistent application of the law.
Before 2003, the Justice Department reached fewer than five deferred or non-prosecution agreements with corporations per year. In the first decade following the turn of the millennium, these numbers rose to double digits by 2005 and to more than 40 in 2007 and 2010 (see Chart 1).
In 2015, the use of such agreements hit a peak of 101 due to non-prosecution agreements being the Justice Department’s method for resolving allegations of tax-related criminal wrongdoing by Swiss banks, 75 of which entered NPAs with the DOJ in that year under the department’s Swiss bank program. (Under the program, Swiss banks that met certain requirements, including advising the department that they had reason to believe that they had committed tax-related criminal offenses in connection with undeclared U.S.-related accounts, were permitted to enter into non-prosecution agreements.)
As a result of the Swiss Bank Program, there was an extraordinary number of NPAs reported during President Barack Obama’s seventh year in office. The DOJ entered into three more of these Swiss Bank Program NPAs in 2016 and another three in 2018 for a total of 81 NPAs with these Swiss banks. In exchange for avoiding prosecution, the Swiss banks were required to provide the DOJ and the IRS with detailed information, including information about accounts held by U.S. citizens, to bring their institutions into compliance with U.S. law and to pay penalties.
A concerning trend accompanying the upsurge in DPAs and NPAs is the simultaneous decline in federal corporate prosecutions. According to the U.S. Sentencing Commission’s official annual reports on the federal criminal cases, the number of convicted corporations peaked in fiscal year 2000, when 296 corporations pleaded guilty or were convicted. The commission’s most recent report, released in June 2019, shows that in fiscal year 2018, corporate prosecutions plummeted to 99 and notes this is “the lowest number of organizational defendants reported since the Commission began reporting this information in 1996” (see Chart 2).
During the first six months of 2019, the DOJ has already entered into 21 DPAs and NPAs with corporate offenders. This means the department is on track to match earlier peak years of 2007 and 2010, when the number of corporate pre-trial agreements exceeded 40 for the year overall.
A March 2019 article in the American Criminal Law Review by Duke University Professor Brandon Garrett describes the decline in corporate prosecutions, comparing the last 18 months of the Obama administration with the first 18 months of the Trump administration. (See also Public Citizen’s report on the steep drop in corporate enforcement under Trump). Garrett observes that while a fair number of small cases continue to be pursued, larger cases against public companies have fallen, as have the penalties in such cases when they are pursued.
Trump’s DOJ has announced several policies that will reduce corporate penalties, such as the anti-“piling on” policy that limits how much a single corporate violation can trigger penalties from multiple agencies or jurisdictions. The most recently announced of these policies comes from the DOJ’s antitrust division, and is likely to increase the replacement of corporate prosecutions with deferred prosecution agreements. Under the new policy, corporations that violate antitrust laws, such as participating in criminal cartel or price-fixing conspiracies, will receive a DPA if they had a strong antitrust compliance program in place. This raises the obvious question of how strong the corporation’s internal systems to prevent antitrust violations could have been if it was possible for a criminal violation to occur.
This wave of gentle corporate enforcement policies and the decline of federal corporate crime enforcement stands in stark contrast to the DOJ’s approach to non-corporate defendants – i.e., actual humans. Federal prosecutors rarely enter deals like this with noncorporate humans. According to the latest official statistics, federal courts entered pre-trial diversion agreements in less than 1% of cases over the past year. Between 1996 and 2005, corporate pre-trial diversion were offered at a comparable amount, averaging about 2% of corporate resolutions per year. But between 2006 and 2018, the pre-trial diversion numbers increased so nearly one-in-five (18%) corporations that were the subject of criminal enforcement actions by the DOJ received a deferred or non-prosecution agreement. Over the same time frame, the proportion of non-corporate pre-trial diversions decreased from nearly 3% in 2003 to 0.6% in 2018.
The stakes in preventing – or failing to prevent – corporate crime are high. The outcomes of future criminal enforcement actions against corporate violators will have tremendous consequences, not only for the corporations’ executives, employees and shareholders, but for members of the public who are the victims of corporate crime. The Department of Justice reportedly recently has launched a number of criminal investigations of corporations. If the DOJ finds that any of the corporations it is investigating did in fact violate the law, the DOJ’s choice of enforcement action – prosecution, deferred prosecution agreement or non-prosecution agreement – will show whether the department is serious about deterring corporate crime. Prioritizing victims of corporate crime means holding corporations accountable for their misdeeds, not protecting them from the legal consequences of their own unlawful misconduct.
Major corporations that are reportedly currently under criminal investigation by the DOJ include:
If the DOJ finds that any of these any of these corporations committed crimes, it will be telling which, if any, of them are prosecuted and which the DOJ opts to protect with a DPA or NPA.
The rapid growth in the number of deferred and non-prosecution agreements in the mid-2000s is the outgrowth of decisions made under the Clinton administration. Mary Jo White, in 1994 the U.S. Attorney for the Southern District of New York, credits herself with entering the first deferred prosecution agreement with a major corporation, Prudential Securities, a subsidiary of insurance giant Prudential Financial. White, who would later become the Obama administration’s chair of the U.S. Securities and Exchange Commission, cited “crippling collateral consequences to thousands of innocent employees” as a main reason the corporation was offered a three-year DPA. White joined the white collar defense firm Debevoise and Plimpton after her time as a U.S. Attorney, and she rejoined the firm after serving as SEC chair.
In 1999, then-deputy attorney general Eric Holder issued a memo outlining U.S. government’s policies for criminal charges against corporations, which specifically indicated that DOJ attorneys should consider “collateral consequences” when bringing charges. The “Holder Doctrine,” as it came to be known, directed federal prosecutors to consider potential adverse effects on a corporation’s shareholders and employees when deciding whether to bring charges against a corporation.
The Bush administration further solidified the use of pre-trial diversion for corporations. In 2003, Deputy Attorney General Larry Thompson released what came to be known as the Thompson memo, which instructs federal prosecutors to consider several factors when considering prosecuting a corporation. The factors included collateral consequences, the nature of the offense, harms to the public, pervasiveness of wrongdoing within the corporation, any history of similar conduct, timely and voluntary disclosures of wrongdoing by the corporation, the corporation’s compliance program, the adequacy of prosecuting individuals responsible for the corporation’s malfeasance, and the adequacy of civil or regulatory enforcement actions. The Thompson memo only mentions pre-trial diversion once, but it is nonetheless seen as a decisive moment for the accelerated use of deferred and non-prosecution agreements.
Potential collateral consequences, it is worth noting, are not a factor the DOJ weighs when considering whether to prosecute an individual. All that is asked of prosecutors in the Justice Manual is that they “be alert to the possibility that a conviction […] may, in some cases, result in collateral consequences for the defendant, such as disbarment” – a consequence, it should be noted, that applies almost exclusively to white collar criminals.
But collateral consequences for non-privileged offenders are not trivial. On the contrary, they can be devastating on both an individual and societal scale. The thousands of child separations and detentions that characterized the Trump administration’s brutal “zero tolerance” immigration enforcement policies are, after all, a collateral consequence of the DOJ’s immigration prosecutions.
Disenfranchisement is another significant collateral consequence that convicted felons face. Felons lose their right to vote while incarcerated in 48 states, and in 12 of these states the felon’s voting rights can be denied indefinitely.
Corporations cannot vote, but the U.S. Supreme Court’s ruling in Citizens United v. Federal Election Commission means corporations can spend as much as they want to influence elections. Among the top corporate political spenders are corporate wrongdoers that have been the subject of multiple criminal enforcement actions, including Las Vegas Sands, JPMorgan Chase, UBS, Chevron and Pfizer. (See Table 1 below.)
|Corporation||Total Contributions||To Dems & Liberals||To Repubs & Conservs||% to Dems & Liberals||% to Repubs & Conservs|
|Las Vegas Sands||$176,200,504||$67,336||$176,134,787||0%||100%|
Among the Center for Responsive Politics’ list of top organizational political spenders, which includes corporations, labor unions and nonprofit organizations, Las Vegas Sands, whose CEO is billionaire Republican donor Sheldon Adelson, is the third largest spender.
Contrary to claims that deferred and non-prosecution agreements foster compliance and prevent recidivism, corporations that enter into these agreements with the government are often repeat offenders that commit serious violations after their initial DPA or NPA. Public Citizen reviewed the Duke University/University of Virginia Corporate Prosecution Registry, the most comprehensive resource documenting criminal enforcement against corporations publicly available, and found that 38 corporations that entered into DPAs or NPAs with the government went on to face subsequent federal criminal enforcement actions, including DPAs, NPAs and plea agreements.
|Parent Corporation||NPAs||DPAs||Pleas||Other||Total||DPAs & NPAs only||Forbes Global Ranking (2019 unless otherwise specified)|
|ARTHUR ANDERSEN||0||1||0||1 (overturned trial conviction)||2||1||n/a (an LLP, not public)|
|CREDIT AGRICOLE (and CREDIT LYONNAIS)||2||2||1||0||5||4||104|
|HELMERICH & PAYNE||1||0||1||0||2||1||1644*|
|LAS VEGAS SANDS||2||0||0||0||2||2||491|
|LOUIS BERGER GROUP||0||2||0||0||2||2||n/a (privately held)|
|ROYAL BANK OF SCOTLAND||1||1||2||0||4||2||185|
|SMITH & NEPHEW||0||2||0||0||2||2||1377|
|STANDARD CHARTERED||1||4||0||5 (DPA extensions)||10||5||357|
|ZIMMERBIOMET||0||4||1||1 (DPA extension)||6||4||1027|
The U.S. Sentencing Commission, an agency within the judiciary branch with the purpose of reducing sentencing disparities and promoting transparency and proportionality in sentencing, produces nonbinding guidelines for judges to consider before sentencing criminals. The guidelines instruct judges to hand down harsher penalties to repeat offenders, including corporate offenders. The guidelines provide judges a great deal of discretion in considering the autonomy of distinct “lines of business.” In his book Too Big To Jail, Brandon Garrett questions whether prosecutors, when negotiating NPAs and DPAs, take these guidelines seriously. This report’s finding that 63% of the 38 repeat offender corporations (24 out of 38) have received at least one additional DPA or NPA after already having received a prior DPA or NPA suggests prosecutors are in many instances ignoring this guidance.
If a corporation violates its DPA or NPA, it is up to federal prosecutors to hold the accused corporation accountable. Despite occasional instances of high-profile media speculation that a corporation may have breached its deal with prosecutors, little information is available about corporations facing consequences for violating such an agreement.
Allegations of “extortion and blackmail” by Amazon CEO Jeff Bezos against AMI, the parent company of the National Enquirer, recently reignited interest in the issue of breached pre-trial diversion agreements. AMI entered a non-prosecution agreement in September 2018 over allegations the company facilitated a 2016 hush-money payment to Karen McDougal, a former Playboy model who allegedly had an affair with Donald Trump. According to the NPA, if AMI violates the agreement, the company could face prosecution for both offenses: the hush money payments and the blackmail Bezos alleges. Federal prosecutors reportedly investigated, fueling speculation that AMI could be prosecuted.
But the DOJ seldom holds corporations accountable for breaching NPAs and DPAs, and it almost never prosecutes them. Public Citizen identified only seven instances when a corporation was punished for violating a NPA or DPA. In four of these cases, the pre-trial diversion agreement was extended and in three the company was prosecuted.
In 2015, UBS, the largest Swiss bank, was reportedly under investigation for allegedly breaching the non-prosecution agreement it entered with the DOJ. The non-prosecution agreement was related to allegations the bank had manipulated interest rates. One month later, the Department of Justice announced UBS would be prosecuted for its breach. “The department has declared UBS in breach of the agreement and UBS has agreed to plead guilty to a one-count felony charge of wire fraud in connection with a scheme to manipulate LIBOR and other benchmark interest rates,” stated the press release. Interestingly, the guilty plea and breach were announced five months after term of UBS’s NPA had expired.
Similarly, in 2016, when HSBC was bound by the five-year deferred prosecution agreement it had entered with the DOJ in 2012, Bloomberg News reported prosecutors were considering criminal charges against the London-based megabank over allegations of illegal foreign exchange trading. Bloomberg reporters Greg Farrell and Keri Geiger wrote, “If the Justice Department determines that the bank broke U.S. law after it entered into the agreement, it could invoke a section of the deal that says HSBC could be held responsible for the conduct it admitted to in 2012. Such a cascade of events could lead to a conviction in the  laundering and sanctions case, threatening the bank’s ability to move beyond its legal troubles.”
However, unlike UBS, the criminal charges against HSBC never appeared – until five weeks after the term of the 2012 agreement expired. Then the DOJ announced HSBC would enter its second consecutive DPA, with a term of three years, to resolve charges of exchange rate manipulation.
In another instance of an apparently consequence-free breach of an agreement, pharmaceutical corporation Bristol Meyers Squib (BMS) closed a two-year DPA even as the company entered a plea agreement for a subsequent crime in 2007. A report by the corporate monitor the DOJ appointed to oversee BMS’ internal reforms noted that then-U.S. Attorney for the District of New Jersey Chris Christie “determined that BMS’ plea agreement and the conduct to which it relates constituted a violation of the Deferred Prosecution Agreement.” Nevertheless, according to the monitor, Christie asserted that BMS had “cured that breach” by firing executives who were allegedly implicated in the wrongdoing and undergoing internal reforms. Four days before the pharmaceutical giant was released from the DPA it entered in 2005 over securities fraud charges, BMS pleaded guilty to making false statements to the government relating to a secret deal to keep a generic drug (Plavix) off the market. The corporate defense attorney sitting opposite Christie and negotiating both BMS’ DPA and plea agreement was none other than former U.S. Attorney for the Southern District of New York and future SEC Chair Mary Jo White.
In fact, UBS is one of only seven corporations that have faced consequences for breaching their deferred or non-prosecution agreements, according to publicly available records. The other corporations that have faced consequences for violating these agreements are Moneygram, Wright Medical Group, Biomet, Standard Chartered Bank, UBS, Barclays and Aibel Group (see Table 3). The Justice Department’s methods for holding corporations accountable for these breaches appear to be inconsistent. When Biomet breached its 2012 DPA, the DOJ negotiated a new three-year DPA on the corporation. For Standard Chartered, the DOJ extended the DPA it entered in 2012 for sanctions violations no less than five times, then negotiated a new DPA in 2019 to resolve further violations not addressed in the earlier agreement. In two cases (Moneygram and Wright Medical Group), DOJ extended the DPA’s terms. In only three cases (UBS, Barclays and Aibel Group) did breaches lead to prosecutions.
|Corporation (Subsidiary)||NPA or DPA||Date Breach Noted / Agreement Extended||Original Agreement Date||Consequences|
|Moneygram (MoneyGram International Inc.)||DPA||11/8/2018||11/9/2012||DPA extended 30 months, $125 million penalty, further strengthened compliance required.|
|Wright Medical Group (Wright Medical Technology)||DPA||9/15/2011||10/1/2010||DPA extended 12 months.|
|Zimmer Biomet Holdings (Biomet)||DPA||3/13/2015, 1/12/2017||3/26/2012||DPA extended 12 months, then subsequently enters new 3-year DPA with corporate monitor and pays $17.4 million penalty.|
|Standard Chartered Bank (SCB New York)||DPA||Dec. 2014, Nov. 2017, July 2018, Dec. 2018, April 1, 2019, April 9, 2019||12/10/2012||2014 DPA extension was for 3 years and required appointment of corporate monitor; the 2017 extension was for 9 months; the July 2018 extension was for 5 months; and the December 2018 extension was for 3 months. The monitor's term also was extended until the ten-day extension in April 2019, which no longer required a monitor. After the ten-day extension, the DOJ announced the bank had agreed to enter a new 2-year DPA.|
|UBS||NPA||5/20/2015||12/19/2012||PROSECUTION: UBS agreed to plead guilty to a one-count felony charge of wire fraud in connection with a scheme to manipulate LIBOR and other benchmark interest rates. UBS has also agreed to pay a criminal penalty of $203 million and entered a three-year corporate probation.|
|Barclays||NPA||5/20/2015||6/26/2012||PROSECUTION: Barclays agreed to plead guilty to a one-count felony charge of conspiring to fix prices and rig bids for U.S. dollars and euros exchanged in the FX spot market in the United States and elsewhere. Barclays agreed to pay a fine of $650 million plus an additional $60 million criminal penalty based on its violation of the NPA and entered a three-year corporate probation.|
|Aibel Group||DPA||11/21/2008||2/6/2007||PROSECUTION: Aibel pleaded guilty to FCPA violations and agreed to pay a $4.2 million criminal fine. Its 2007 DPA was dismissed, and the company was placed on probation for two years.|
Among the many downsides to deferred and non-prosecution agreements is the lack of transparency regarding breaches. A corporation that pleads guilty to a crime and is put on probation must, if accused of violating its probation, argue its case publicly before a judge, who can impose severe penalties for the violation. In contrast, if there are instances of corporations persuading prosecutors against imposing consequences for breaching a deferred or non-prosecution agreement, there is no way for the public to know.
As commonly understood, the penalty of violating a DPA is supposed to be prosecution for the charges filed; the penalty for violating a NPA is supposed to be for the charges to be filed. Both can lead to prosecution. This is a view the Justice Department advances in its own press releases, when describing the consequences of breaching a pre-trial diversion agreement. For example, in the 2015 DOJ press release announcing that five banks were entering guilty pleas for interest rate manipulation, two of which were found to be in breach of such agreements, then-Assistant Attorney General Leslie Caldwell said:
[W]e will enforce the agreements that we enter into with corporations. If appropriate and proportional to the misconduct and the company’s track record, we will tear up an NPA or a DPA and prosecute the offending company.
In this light, the DOJ’s practice of entering new pre-trial diversion agreement or plea agreement with some corporations while the corporation is still bound by a previous DPA or NPA raises an important question: Why did DOJ not enforce the terms of the original agreement?
In a dozen cases – about a third of the repeat offender corporations (12 out of 38) – the DOJ brought subsequent federal criminal enforcement action against a repeat offender before the term of a previous NPA or DPA had ended (see Table 4 below). Particularly worrisome from a corporate accountability perspective are examples of corporations that were permitted to enter multiple successive DPAs and/or NPAs, the most egregious of which may be HSBC. However, even in instances when an NPA or DPA is followed by tougher enforcement such as a guilty plea, the DOJ’s refusal to hold corporations to their earlier agreements represents a remarkable degree of lenience.
|Corporation||Enforcement Types||Enforcement Dates||Time Remaining Under Previous DPA or NPA||Details|
|Standard Chartered Bank (Switzerland) SA||DPA then NPA||2/6/2012 (amended and extended through 2021), 11/12/2015||4 years||Less than one year after the first time DOJ extended the DPA that Standard Chartered entered in 2012 over sanctions charges, a Swiss Standard Chartered subsidiary entered a four-year NPA in 2015 to resolve tax violation allegations as part of the DOJ's Swiss Bank Program. Standard Chartered’s 2012 DPA was amended in April 2019 and extended to 2021.|
|Credit Agricole||DPA then NPA||10/20/2015, 12/8/2015||2 years and 10 months||In 2015, just two months after French bank Credit Agricole entered into two three-year DPAs, one with DOJ and one with the Manhattan District Attorney's Office, to resolve sanctions violation charges, the bank’s Swiss subsidiary received a four-year NPA as part of the DOJ's Swiss Bank Program.|
|Societe Generale||Two NPAs, then a DPA, then a DPA||5/28/2015, 6/9/2015, 6/4/2018, 11/19/2018||1 year; 2 years and 6 months||Two separate Societe Generale subsidiaries entered four-year NPAs within months of each other in 2013 to resolve alleged tax violations as part of the DOJ's Swiss Bank Program. With about a year left on both NPAs, the parent bank entered a three-year DPA in 2018 and a separate subsidiary pleaded guilty to foreign bribery charges. About six months later, Societe Generale was permitted to enter another three-year DPA over charges of violating sanctions. At the time, the bank still had about half a year left its earlier NPAs and two-and-a-half years left on the DPA it entered earlier in 2018.|
|Deutsche Bank||DPA then NPA||4/23/2015, 11/24/2015||2 years and 3 months||In 2015, just seven months after Deutsche Bank entered a three-year DPA with DOJ to resolve antitrust, wire fraud and price-fixing charges, the bank's Swiss subsidiary entered a four-year NPA with DOJ as part of its Swiss Bank Program.|
|BNP Paribas||NPA then guilty plea||11/19/2015, 1/26/2018||1 year and 10 months||One year and ten months before the end of the four-year NPA entered in 2015 to resolve alleged tax violations as part of the DOJ's Swiss Bank Program, BNP Paribas pleaded guilty to price fixing violations in 2018.|
|AIG||A DPA and a NPA, then another NPA||11/30/2004, 2/7/2006||10 months||With ten months to go on a two-year DPA and a two-year NPA over securities fraud charges, AIG in 2006 was given another NPA to resolve additional securities fraud charges.|
|Transocean||DPA then guilty plea||11/4/2010, 2/14/2013||9 months||With about nine months left on a three-year DPA that a Transocean subsidiary entered in 2010 to resolve criminal foreign bribery charges, Transocean pleaded guilty to a charge of violating the Clean Water Act in 2013.|
|JPMorgan Chase||DPA then guilty plea||1/7/2014, 5/19/2015||7 months||With about seven months left on a two-year DPA JPMorgan Chase entered in 2014 to resolve charges of Bank Secrecy Act violations related to the Bernie Madoff fraud scheme, JPMorgan Chase pleaded guilty in 2015 to a felony violation of the Sherman Antitrust Act.|
|Pfizer (and Pharmacia & Upjohn, a Pfizer subsidiary)||DPA and NPA, then guilty plea||4/2/2007, 10/16/2009||5 months||With about five months left on a three-year DPA for Pfizer subsidiary Pharmacia & Upjohn and a three-year NPA for parent company Pfizer, which both entered in 2007 over kickback-paying charges, Pharmacia & Upjohn pleaded guilty to misbranding a pharmaceutical (Bextra) in 2009.|
|UBS (UBS Securities Japan Co. Ltd.)||NPA then NPA and guilty plea||5/4/2011, 12/19/2012||5 months||With about five months left on a two-year NPA that UBS entered in 2011 for allegedly rigging bids in municipal bond investments, parent company UBS in 2012 agreed to enter another two-year NPA and a subsidiary pleaded guilty for engaging in an interest rate manipulation conspiracy.|
|Barclays Bank||DPA then NPA||8/18/2010, 6/26/2012||6 weeks||With about six weeks before the end of the term of its 2010 DPA over charges of making illegal transactions on behalf of sanctioned nations, Barclays entered a NPA in 2012 to resolve fraud allegations (manipulating LIBOR interest rates).|
|Bristol-Myers Squibb||DPA then guilty plea||6/15/2005, 6/11/2007||4 days||Four days before the two-year anniversary of the pharmaceutical giant entering a two-year DPA in 2005 over securities fraud charges, BMS pleaded guilty in 2007 to making false statements to the government relating to a secret deal to keep a generic drug (Plavix) off the market.|
A quarter of the repeat offender corporations (9 out of 38) had some kind of criminal enforcement against them within one year and six months of release from their previous NPA or DPA (see Table 5 below).
Because DOJ criminal investigations into corporate wrongdoing can take years, it seems implausible that the department was unaware of the wrongdoing underlying the enforcement actions in all the cases that were completed within two years of the corporations’ release from their NPAs or DPAs. Particularly worrisome are instances when the subsequent DOJ enforcement followed the conclusion of a NPA or DPA’s term by weeks (HSBC) or months (Marubeni, RBS, JPMorgan Chase, UBS, Wachovia). Prosecutors have a great deal of discretion determining when charges are filed and enforcement actions are announced.
Given the DOJ’s long-term reluctance to prosecute corporations, it is not difficult to imagine that the timing the criminal enforcement action is to be made public is subject to negotiation. Furthermore, if the timing is negotiable, then corporate counsel will try to negotiate the best possible deal for their client, including timing the announcement of the enforcement so that it does not violate the terms of the NPA or DPA by which their client is currently bound. In this way, it may be possible for prosecutors and corporate counsel to game the timing of announcements in order to avoid triggering the consequences of a breached NPA or DPA – consequences which can include prosecution, which the department has made clear it is prepared go to great lengths to avoid.
|Corporation||Enforcement Type||Enforcement Dates||Time Passed Since Expiration of Previous DPA or NPA||Details|
|HSBC||DPA then DPA||12/11/2012, 1/18/2018||5 weeks||Five weeks after HSBC was released from the five-year DPA it entered in 2012 over charges of extensive anti-money laundering and sanctions violations, HSBC entered a three-year DPA in 2018 to resolve charges of exchange rate manipulation.|
|Marubeni||DPA then guilty plea||1/17/2012, 5/15/2014||2 months||Two months after Marubeni was released from a two-year DPA it entered in 2012 over charges of engaging in foreign bribery in Nigeria, Marubeni pleaded guilty in 2014 to engaging in foreign bribery in Indonesia.|
|Royal Bank of Scotland (RBS)||DPA then guilty plea then NPA||2/6/2013, 5/20/2015, 1/10/2017||3 months and 2 weeks, 1 year and 8 months||About three and a half months after the end of a two-year DPA that RBS entered in 2013 to resolve charges of fraud (manipulating LIBOR interest rates), RBS pleaded guilty in 2015 to a criminal violation of the Sherman Antitrust Act. One year and 8 months later, an RBS subsidiary received an NPA in 2017 over alleged financial fraud.|
|JPMorgan Chase||NPA then DPA then NPA||7/7/2011, 1/7/2014, 11/17/2016||6 months, 10 months||Six months after being released from a two-year NPA that JPMorgan Chase entered in 2011 over allegations of rigging bids and manipulating the bidding process for municipal bond investments, JPMorgan Chase entered a two-year DPA in 2014 to resolve Bank Secrecy Act charges related to the Bernie Madoff fraud scheme. Then, about ten months after being released from that DPA, JPMorgan Chase's Hong Kong-based subsidiary entered a three-year NPA to resolve allegations of corruptly awarding jobs to friends and relatives of Chinese government officials.|
|UBS||DPA then NPA||2/18/2009, 5/4/2011||8 months||About eight months after the end of the term of a 1.5-year DPA that UBS entered in 2009 over tax fraud charges, UBS entered a two-year NPA in 2011 over allegations of rigging bids in municipal investments.|
|Wachovia||DPA then NPA||3/17/2010, 12/8/2011||9 months||About nine months after the end of the term of a one-year DPA that Wachovia entered in 2010 over charges of anti-money laundering failures, Wachovia Bank entered a one-year NPA in 2011 over alleged bid rigging in municipal investments.|
|Alcatel-Lucent||NPA then DPA||11/14/2007, 12/27/2010||1 year and 1 month||About one year after the end of a two-year NPA that an Alcatel-Lucent subsidiary entered in 2007 over alleged foreign corruption, parent company Alcatel-Lucent entered a three-year DPA to resolve foreign corruption charges.|
|Las Vegas Sands||NPA then NPA||8/27/2013, 1/17/2017||1 year and 5 months||About one year and five months after the end of a two-year NPA that Las Vegas Sands entered in 2013 to resolve alleged Bank Secrecy Act compliance failures, Las Vegas Sands in 2017 entered a new NPA with a three-year term to resolve foreign corruption allegations.|
|Noble||NPA then guilty plea||11/4/2010, 12/8/2014||1 year and 6 months||About one and a half years after the end of a three-year NPA that Noble entered in 2010 to resolve alleged foreign corruption violations, Noble pleaded guilty in 2014 to environmental and maritime crimes that it committed in 2012 (while still bound by the 2010 NPA).|
If a goal of prosecution agreements is to change the culture of corporations that engage in criminal activities, this goal is decidedly not met when the culture of the company still permits lawbreaking. Moreover, although most agreements state that companies that violate the law during the term of their agreements may be prosecuted, the DOJ has only moved forward with such a prosecution three times (Aibel Group, Barclays and UBS in Table 3 above), according to publicly available records.
When companies face new federal investigations and reach new settlements with federal officials within just a few years after the terms of their prosecution agreements have expired, it is worth questioning whether pre-trial diversion effectively deters crime.
As the examples below indicate, pre-trial diversion agreements appear to offer few incentives for corporations to avoid recidivism. Instead, large corporations routinely reoffend, and are rewarded with either further deferred or non-prosecution agreements. As the Wayne State University law professor Peter Henning wrote in 2015, in examining several cases involving global financial firms:
Yet even as penalty after penalty is paid by big banks in various cases, it seems as though the same cast of corporate characters keeps reappearing.
It makes you wonder whether the global banks are acting like teenagers who find it easier to beg forgiveness than actually change their behavior.
Most repeat offender corporations – 63 percent, or 24 out of 38 – have received at least one additional DPA or NPA after already having received a prior DPA or NPA. All are or were large corporations – 36 of the 38 repeat offender corporations are on (or have appeared on) the Forbes Global 2000 list of the world’s largest publicly traded corporations. (The two exceptions are Arthur Andersen and Louis Berger Group, both sizable entities but neither of which have been publicly traded.) Most of the repeat offender corporations (24 out of 38) appear in the top 500 of the 2019 list. (See Appendix B in the PDF version of this report.) Out of the 2019 Fortune 500, 40 corporations have received at least one NPA or DPA; nine among the repeat offenders. (See Appendix C in the PDF version). Out of the 2019 Global Fortune 500, 44 have received at least one NPA or DPA; 26 are among repeat offenders.
In 2012, the DOJ declined to prosecute HSBC – a London-based global megabank that violated anti-money laundering laws and U.S. sanctions – and instead entered a five-year DPA with the bank. Then-Attorney General Eric Holder admitted the bank’s size was a factor in the DOJ’s decision not to prosecute. The bank was, essentially, “too big to jail.”
The sanctions violations HSBC was charged with making were serious. Starting in the 1990s, HSBC allowed about $660 million in illegal transactions with nations that were subject to US sanctions, including Iran, Cuba, Sudan, Libya and Burma. Through various means, the transactions were concealed from the corporation’s US subsidiary and other US financial institutions. Despite repeated protests by the bank’s compliance officer starting in 2001, HSBC continued to allow the concealed transactions.
HSBC’s anti-money laundering violations were equally serious. Between 2006 and 2010, HSBC’s US subsidiary understaffed its anti-money laundering compliance efforts and did not implement a compliance program capable of preventing money laundering through HSBC Mexico. HSBC Mexico’s own, separate weak anti-money laundering efforts had made the bank the preferred institution for drug cartels and money launderers. Ultimately, HSBC’s US subsidiary failed to adequately monitor over $200 trillion in wire transfers, including $670 billion in wire transfers and more than $9.4 billion in purchases of US cash from HSBC Mexico.
HSBC Holdings, the HSBC parent company, admitted that it violated the Trading With the Enemy Act and the International Emergency Economic Powers Act and the bank’s US subsidiary admitted to violating the Bank Secrecy Act.
The DOJ’s 2012 DPA stated that if during the term of the agreement the corporation was found to have “committed any crime under U.S. federal law,” the corporation “shall be subject to prosecution for any criminal violation of which the Department has knowledge” – that is, both the charges filed in the 2012 DPA plus any new charges.
But that’s not what happened. The DOJ reportedly was investigating alleged illegal foreign exchange trading at HSBC in 2016, but the results of that investigation were not announced until January of 2018 – conveniently just five weeks after the term of HSBC’s earlier DPA had expired and the DOJ’s 2012 charges against the bank were dismissed. The investigation’s result: the DOJ made a new three-year DPA with HSBC and filed charges of criminal foreign exchange rate manipulation against the bank.
In 2010, the DOJ entered a NPA with Deutsche Bank over the Frankfurt-based multinational engaging in tax shelter fraud. Between 1996 and 2002, Deutsche Bank helped more than 2,100 wealthy American clients fraudulently claim an estimated $29.3 billion in tax benefits, allowing them to evade an estimated $5.9 billion in taxes. The German bank admitted it had engaged in criminal wrongdoing. The NPA had a term of one to two years, depending on the DOJ-appointed monitor’s assessment of the bank’s compliance improvements.
In April 2015, the DOJ entered a three-year DPA with Deutsche Bank over wire fraud and antitrust charges. The bank’s London subsidiary pleaded guilty to wire fraud. The violations occurred between 2003 and 2011 – meaning they occurred while Deutsche Bank was bound by its promise in the 2010 NPA to “commit no crimes whatsoever.”
According to DOJ charging documents, Deutsche Bank’s derivatives traders secretly manipulated the values of currencies, including the U.S. Dollar, Yen, Swiss Franc and Pound Sterling, on the London InterBank Offered Rate (LIBOR) and Euro Interbank Offered Rate (EURIBOR), resulting in fraudulent transactions.
In November 2015 – only seven months after entering its DPA – the Deutsche Bank’s Swiss subsidiary entered a four-year NPA with DOJ as part of its Swiss Bank Program.
At least between 2008 and 2013 – a time frame which also overlaps with the bank’s earlier NPA over tax shelter fraud – the subsidiary maintained over 1,000 U.S.-related accounts with a collective value of $7.65 billion. The bank helped U.S. taxpayers evade U.S. tax liabilities and helped these U.S. taxpayers access and spend their undeclared funds, which were held in offshore tax shelter countries including Liechtenstein, Liberia, Panama and the British Virgin Islands.
The term of this latest NPA, in which the subsidiary promises to “commit no U.S. federal offenses” is set to expire in November 2019. In June 2019 the New York Times reported Deutsche Bank is under criminal investigation by the DOJ over alleged anti-money laundering failures, including whistleblower allegations about suspicious transactions by White House adviser and President Donald Trump’s son-in-law Jared Kushner.
In 2005, multinational pharmaceutical corporation Bristol-Myers Squibb entered a two-year DPA with the DOJ to resolve charges of deceiving investors. According to the DPA, the corporation had engaged in “channel stuffing,” meaning that it used financial incentives to spur wholesalers to buy its products in excess of prescription demands so that the company could report higher sales and earnings. To incentivize wholesalers, BMS used pre-price increase buy-ins, which allowed wholesalers to make purchases prior to imminent price increases by BMS; extended datings of invoices, which extend the due date for wholesaler payment beyond the standard 30 days; early payment discounts; and future file purchases, which allowed wholesalers to buy at earlier, lower prices after the effective date of a price increase. As a result, wholesalers accumulated excess inventory of BMS products, which adversely effected subsequent sales.
In June 2007 – just four days before the two-year anniversary of the company entering its two-year DPA – BMS pleaded guilty to deceiving the government about a secret deal it made with another company to keep a generic drug (Plavix) off the market. The DPA was officially terminated at the end of the month.
A report by the corporate monitor the DOJ appointed to oversee the corporation’s internal reforms noted that then-U.S. Attorney Chris Christie had determined the government deception was a violation of its DPA. Nevertheless, according to the monitor, Christie asserted that BMS had “cured that breach” by firing executives who were allegedly implicated in the wrongdoing and by undergoing internal reforms.
The corporate defense attorney sitting opposite Christie and negotiating both BMS’s DPA and plea agreement was former U.S. Attorney and future SEC chair Mary Jo White, who has since returned to private defense practice at the white collar defense firm Debevoise and Plimpton.
The largest bank in the United States is another serial recipient of DOJ lenience. In 2011, the bank entered a two-year NPA with the DOJ for illegally manipulating the bidding process for contracts associated with municipal investments.
Three years later, the DOJ allowed the bank to enter a two-year DPA in 2014 to resolve two felony charges related to the infamous Bernie Madoff fraud scheme. Under the terms of the agreement, if JPMorgan Chase was found to have “committed any crime under the federal laws of the United States subsequent to the execution of this Agreement,” the bank “shall, in the Office’s sole discretion, thereafter be subject to prosecution for any federal criminal violation” – like HSBC, both the charges filed in the DPA plus any new charges.
Again, that’s not what happened. One year later, with about seven months left on its DPA, JPMorgan Chase in 2015 pleaded guilty to a one-count felony charge of conspiring with other global megabanks to manipulate exchange rates, a violation of the Sherman Antitrust Act. The bank was placed on probation for three years. Despite the parent-level felony guilty plea, no public information shows the bank facing consequences for this apparent violation of its 2014 DPA. The plea agreement contained a provision forbidding JPMorgan Chase from committing any further federal crimes and threatens to terminate the agreement and prosecute the bank if the agreement is breached.
Then, about ten months after the bank was released from the 2014 DPA and while it was still on probation, JPMorgan Chase’s Hong Kong-based subsidiary entered a three-year NPA in 2016 to resolve allegations of corruptly awarding jobs to friends and relatives of Chinese government officials. That NPA, the third pretrial diversion agreement the bank received in less than 10 years, is set to expire in November 2019.
Zimmer and Biomet (itself a spinoff from Bristol-Myers Squibb) merged in 2015. But in 2007, Zimmer and Biomet were separate medical device corporations and the DOJ charged both, along with three other medical device corporations, with using improper payments to induce surgeons to use the corporations’ hip and knee joint replacements. Both corporations entered 18-month DPAs with the DOJ.
In 2012, the DOJ allowed Biomet to resolve another charge relating to improper payments with a DPA, this time with a term of three years. According to DOJ, the corporation made more than $1.5 million in payments to employees of state health care providers in Argentina, Brazil and China to secure business with hospitals. The DPA states that Biomet shall be subject to prosecution if the corporation is found to have “committed any felony under federal law” subsequent to signing the agreement or if the corporation at any time provided the DOJ with “deliberately false, incomplete or misleading information.”
In 2015, three months before announcing the completion of its merger with Zimmer, Biomet announced in a filing with the Securities and Exchange Commission that, following the revelation of “certain alleged improprieties regarding its operations in Brazil and Mexico,” the DOJ had extended its DPA by one year.
In 2017, the DOJ announced that Biomet had violated its 2012 DPA by continuing to engage in foreign bribery in Brazil and Mexico and by failing to adopt appropriate internal anticorruption policies. The DOJ prosecuted an indirect subsidiary of the corporation and, as part of a new three-year DPA, filed charges against Zimmer Biomet for violating the Foreign Corrupt Practices Act. The DPA is set to expire in January 2020.
Two separate Societe Generale subsidiaries entered four-year NPAs within months of each other in 2015 to resolve alleged tax violations as part of the DOJ’s Swiss Bank Program. This program offers lenience to Swiss banks that make required disclosures about individual tax avoiders and bring their institutions into compliance with U.S. tax law. Both NPAs note that the subsidiaries “shall thereafter be subject to prosecution” if the entities are found to have committed any U.S. federal crimes during the terms of their agreements.
In 2018, with about a year left on both NPAs, the parent bank entered a three-year DPA to resolve charges of fraud and foreign bribery while a subsidiary pleaded guilty to foreign bribery charges. The bribery charges stemmed from corrupt payments the bank made to Libyan officials under Muamar Al Gaddafi, while the fraud charge stemmed from schemes to manipulate currency interest rates.
About six months later, Societe Generale was permitted to enter yet another three-year DPA, this time over charges of violating US sanctions against Cuba and Cuban businesses. The bank’s actions resulted in the processing of nearly $13 billion in transactions that should have been blocked. At the time, the bank still had about six months left on its two earlier NPAs and two years and six months left on its earlier 2018 DPA. The bank’s 2018 DPAs are set to expire in 2021.
In 2013, international casino and resort development corporation Las Vegas Sands entered a two-year NPA after allegedly failing to comply with the Bank Secrecy Act. The casino allegedly helped its largest “all-cash, up-front” gambler transfer money in ways that would avoid government scrutiny. The gambler was allegedly using the casino to launder money earned from illegal drug trafficking activities.
About one year and five months after the term of that NPA, Las Vegas Sands in 2017 entered a second NPA with a three-year term to resolve foreign corruption allegations. The corporation “knowingly and willfully failed” to ensure payments to a consultant totaling $5.8 million ostensibly to promote the business in China and Macao were being made for legitimate business purposes.
According to the NPA, “certain senior Sands executives knew that over $700,000” paid to the consultant “had simply disappeared.” Among the tasks Las Vegas Sands sought to have the consultant complete was the purchase of a professional basketball team in China. Under the Chinese league’s rules, as a gaming company, Las Vegas Sands was forbidden from directly owning a team. The consultant was to use the corporation’s money to purchase the team and act as the team owner while the corporation would appear only as the team’s “sponsor.” An employee who raised concerns about potential legal violations was fired.
The second NPA is set to expire in January 2020.
As an approach to reforming corporations that violate the law, deferred and non-prosecution agreements have failed. These agreements were intended to reform corporate criminals into responsible corporate citizens, but instead, they have had the opposite effect and enabled further wrongdoing. Faced with a timid Department of Justice that makes plain its reluctance to prosecute major corporations when they violate the law, corporate counsel are taking full advantage of the opportunity the department provides to help their clients avoid prosecution.
The American public, meanwhile, is suffering. Corporations pollute our air and water, make and push harmful and addictive opioid drugs, engage in financial rip-offs and sell and share reams of our personal information. The DOJ’s unwillingness, even under a supposedly “law and order” administration, to prosecute large corporations that violate the law has sent the unmistakable message to the most powerful multinationals that lawbreaking, when profitable, may well be worth the risk.
Current DOJ policies and procedures have the approach exactly backwards. Pre-trial diversion agreements are actually more appropriate for individuals than they are for corporations. People can commit crimes for all sorts of reasons – they commit acts that can be impulsive, irrational or self-destructive. They can be addicted to illegal substances or turn to crime as a way to survive when employment options are limited.
Corporations, on the other hand, are fundamentally rational, mechanical creations whose actions typically are the product of deliberate decisions. Prosecution and serious penalties have even more power to discipline corporations than they do people, because unlike individuals, a corporation has only one motive and one purpose: to turn a profit.
Punishment that poses a serious threat to a corporate profits by restricting a company’s activities can deter corporate crime more effectively than negotiated agreements that are premised on protecting a corporate violator’s profitability, as DPAs and NPAs do. When corporate criminals actually face the credible threat of corporate prosecution, the public interest is advanced through the deterrence of corporate crime. No executive order or legislation is required. All that is needed is the Department of Justice’s will to make it so. The DOJ has all the authority it needs to end its use of DPAs and NPAs. It is time that it does.
Some of the potential reluctance to make this change stems from claims by corporations that stronger enforcement will trigger catastrophic collateral consequences. These consequences fall into two distinct categories: consequences for those within the corporation (employees and shareholders) and for those outside of the corporation (customers, other businesses and countries). Consequences for those outside of the corporation can in theory vary widely depending on the corporation’s size and systemic significance. For the first group, the risk is far less than many have argued. Gabriel Markoff’s legal research has persuasively debunked the myth of the “Andersen effect,” the belief that to indict a corporation is to put it out of business regardless of its guilt or innocence, by demonstrating that corporate prosecutions almost never lead to business failures.
Current DOJ policy is not only unfair to individuals – it’s also unfair to smaller businesses that do face a credible threat of prosecution. Since 1996, there have been more than 4,300 corporate prosecutions – more than five times the number of NPAs and DPAs combined. The key difference between corporations that are convicted and corporations that negotiate pre-trial diversion agreements is that these agreements are overwhelmingly concentrated among the largest firms. This is an outcome of how the DOJ has applied the Holder Doctrine and Thompson Memo’s directive to consider potential adverse effects on a corporation’s shareholders and employees when deciding whether to bring charges against a corporation. By this logic, the larger the business, the greater the consequences. No wonder the corporate repeat offenders that received DPAs or NPAs are almost exclusively large corporations listed among the Fortune 500 or Global Fortune 500 lists. If the principle of equal justice before the law has meaning, there is no principled or legal reason why bigger corporations should get a better deal than smaller businesses.
Nevertheless, there may be rare instances when prosecuting a corporation puts it out of business. Employees may lose their jobs, shareholders may lose money, and the reputational damage to a prosecuted corporation may offer an opportunity for a competitor to exploit an opening in the accused corporation’s market. Those who are affected by these consequences may call them unfair.
The truth is, over the course of the normal churn of business activity, employees lose jobs and shareholders lose money all the time. Bad business decisions harm businesses, and it should not be a surprise that the committing crimes, either through willful wrongdoing or negligence, constitute bad business decisions that, despite potential short-term gains, can ultimately be harmful to the business enterprise. To the degree that employees are victims and not perpetrators of corporate crime, they may deserve compensation. But shareholders who profit from ill-gotten-gains rightfully lose when a corporation they invested in violated the law, just the way the values of stocks rise and fall for any number of reasons over which shareholders have little or no control. (And shareholders, it is worth noting, do in fact have the power to strengthen corporate governance and hold executives accountable to help deter wrongdoing. The prospect of disgorgement and penalties hurting stock prices is an incentive for shareholders to insist on compliance.)
As for the second group of collateral consequences – those posed by a corporation’s size and structural significance – structural remedies should play a major role. Explaining the reasoning behind not prosecuting some corporate violators, former DOJ criminal division head Lanny Breuer has asserted protecting the health of an industry and markets is a significant factor to be considered. But this reasoning begs the question, are industries and markets truly well-served when the federal government protects certain large corporations from the consequences of violating the law while other businesses are refused these protections? On the contrary, if a firm’s size protects it from prosecution, then it has a significant and unfair advantage over similar but smaller firms that would face tougher consequences for similar violations.
Instead of protecting such corporations from prosecution, the DOJ should take steps to remove the size advantage of any corporation that has grown so large as to be effectively too big to jail. A corporation’s plea agreement or separate civil settlement can effectively initiate the breakup of a supposedly too-big-to-jail corporation by requiring it to spin off lines of business through forced divestitures. The forced breakup of a criminal corporation would have to ensure culpable segments of the enterprise are not permitted to escape prosecution the way the DOJ today sometimes allows a corporation to sacrifice a hollowed-out subsidiary that pleads guilty while protecting the core enterprise from the enforcement. In some cases, such as in pharmaceuticals, the government may have to prevent disruptions in the corporation’s supply chain even as the corporation itself is prosecuted, for example by requiring patent holders to provide licenses to generic competitors in exchange for reasonable royalty payments
A tougher, fairer approach to corporate crime will require more resources. A more aggressive, adversarial and hands-on approach to corporate crime enforcement would require a substantial increase in law enforcement resources dedicated to complex investigations and prosecutions of sprawling multinationals.
Short of the DOJ ceasing corporate DPAs and NPAs and reorienting itself toward aggressive investigations of corporate crime, there are incremental policy solutions that can begin to turn the tide: