Consistency in Non-prosecution and Deferred
Prosecution Agreements: A Lesson from the World of
Federal Sentencing
One of the major objectives of the Sentencing Reform Act
was consistency in sentencing. Like cases should be
treated alike; dissimilar cases should not be treated alike;
and, all other things being equal, the more aggravated an
offense or offender characteristic, the greater the punish-
ment should be. The U.S. Department of Justice (DOJ)
has long touted these objectives in supporting enforce-
ment of the Federal Sentencing Guidelines. But when it
comes to treatment of companies for which prosecution is
deferred or declined altogether, the DOJ has failed to pro-
mote this same goal of consistency. Those running for
elective office this year should make consistency in such
dispositions part of their criminal justice agenda.
Following the wave of corporate fraud scandals earlier
this decade, corporate criminal responsibility leaped to the
forefront of public and political attention. Congress passed
the Sarbanes-Oxley Act, and President Bush established
the Corporate Fraud Task Force at the DOJ to investigate
and prosecute significant financial crimes by individuals
and businesses. When accounting giant Arthur Andersen
refused to cooperate by admitting to obstruction in con-
nection with Enron’s collapse, the DOJ obtained an
indictment and convicted the company at trial. The fallout
from the Arthur Andersen conviction was catastrophic,
putting one of the nation’s “Big 5” accounting firms out of
business and ending the jobs of tens of thousands of
employees, the vast majority of whom had nothing to do
with the prosecuted conduct.
Since the harsh consequences of the Arthur Andersen
conviction, federal prosecutors have stepped up pursuit of
a new strategy of “pretrial diversion agreements” aimed at
punishing and deterring corporations without causing
them to collapse.1 This approach has forced government
leaders to confront a new set of issues. Without internal or
external standards for the use of such agreements, the
result has been seemingly arbitrary outcomes that lack
both fairness and predictability. Commentators have
argued that the current practice grants individual prosecu-
tors far too much unguided power to secure any
concessions they wish from corporations that often will
strive mightily to avoid the risk of a conviction and the
resulting damage to reputation and, in some instances,
significant legal restrictions on the ability to conduct oper-
Federal Sentencing Reporter, Vol. 20, No. 5, pp. 331–333, ISSN 1053-9867 electronic ISSN 1533-8363
©2008 Vera Institute of Justice. All rights reserved. Please direct requests for permission to photocopy
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F E D E R A L S E N T E N C I N G R E P O RT E R • V O L . 2 0 , N O. 5 • J U N E 2 0 0 8
ations.2 Such concerns have only been addressed at the
margins by recent DOJ guidelines,3 while the frequency of
DAVID
such corporate pretrial diversion agreements increases.4
DEBOLD
Thus, although the focus has shifted since the early part of
the decade from the nature and extent of corporate crimi- Of Counsel,
nal conduct to the tools used by prosecutors in response to Gibson, Dunn &
such conduct, criminal enforcement of corporate wrong- Crutcher LLP,
doing remains at the forefront of issues that our elected Washington, D.C.
officials must address.
Federal prosecutors have three basic options when
they investigate a corporation for criminal misconduct. KYLE C.
They can (1) file an indictment and pursue a prosecution, BARRY
ending in a guilty plea or a trial, (2) decline to prosecute Associate, Gibson,
altogether, or (3) negotiate a pretrial diversion agreement Dunn & Crutcher
that essentially places the corporation into a probationary LLP, Washington,
period during which it must comply with the agreement D.C.
or face prosecution. Although the provisions of diversion
agreements vary widely, they come in two general forms:
a deferred prosecution agreement (DPA) generally
involves the concurrent filing of an information or indict-
ment in federal court along with a motion to hold the
charges in abeyance during the deferred period, whereas
a non-prosecution agreement (NPA) typically does not
entail the filing of any criminal charges before the com-
pany is placed on a similar probationary period. But while
the DOJ has issued guidelines, such as the Thompson
Memo,5 that provide standards for prosecutors to con-
sider when deciding whether to seek indictment of a
corporation, there are no DOJ guidelines for when DPAs
or NPAs should be sought or the circumstances under
which they should include particular terms. This lack of
uniformity results in an environment of distrust and
unpredictability that often discourages the very types of
cooperation and corporate reforms that such agreements
seek to promote.
Consider the cases of Bristol Myers Squibb and Shell
Oil, whose dispositions were announced only two weeks
apart. Both companies underwent DOJ investigations for
securities fraud. Shell’s public filings overstated its oil
and gas reserves by about 23 percent. Following an
inquiry, the DOJ declined to prosecute altogether. Bristol
Myers engaged in “channel stuffing”—shipping more
product to distributors than they needed—which inflated
331
 their revenues and earnings in their public filings.
Despite similar conduct, Bristol Myers became counter-
party to a DPA mandating a $300 million fine, a two-year
monitoring program, and numerous other serious con-
cessions.6 Although there may be non–publicly disclosed
factors in these two cases that account for such disparate
treatment, the absence of DOJ guidance to ensure that
like cases are treated alike means that the result cannot
be attributed to the application of consistent enforcement
policies across the DOJ’s criminal enforcement compo-
nents and each of the ninety-three U.S. Attorney’s
Offices. The mere appearance of inconsistent treatment
is reason alone for concern.
Just as important as establishing when DPAs or NPAs
are appropriate is identifying the terms such agreements
ought to include and under what circumstances. Currently,
there is no effort to promote consistency in the contents of
such agreements. DPAs and NPAs typically involve a mon-
etary penalty, some admission of wrongdoing, certain
business reforms, and an obligation to cooperate fully. But
even the nature of these terms can vary tremendously, and
lack of oversight has led to odd results. In the Bristol Myers
case discussed above, the DPA negotiated by the U.S. Attor-
ney for the District of New Jersey, Christopher Christie,
required Bristol Myers to endow a chair at the Seton Hall
School of Law—Christie’s alma mater.7 In other instances,
the distinction between an NPA (which usually is struck
without the government ever filing criminal charges) and a
DPA (which usually follows or is accompanied by the filing
of criminal charges and requires judicial approval) is diffi-
cult to discern.8
I. The Problem with the Lack of Consistency
Consistent use of DPAs and NPAs is important for at least
two reasons. As an initial matter, consistency promotes
fundamental fairness in the criminal justice system. Just
as is true with the sentencing of individual defendants, the
fate of corporate defendants should not—as it may have
done for Bristol Myers—depend on the part of the country
in which venue could be established for its conduct, or
which prosecutor is in charge of the investigation. The
DOJ has recognized this important principle and has con-
sequently provided centralized guidance for prosecutors to
decide which charges to bring against individuals and
what sentence to pursue.9 Fairness demands no less when
the government is deciding whether to pursue a corporate
pretrial diversion agreement and what terms such an
agreement will include.
Second, as made clear by the collapse of Arthur Ander-
sen, when public corporations face criminal liability the
interests of many innocent shareholders and employees
are at stake. Companies confronted with a DOJ investiga-
tion need to make decisions that protect these interests,
and doing so requires an ability to predict how various
decisions—such as implementing certain business
reforms or waiving certain privileges—will affect the com-
pany’s fate. Indeed, corporations will be more likely to
332 FEDERAL SENTENCING REPORTER • V O L . 2 0 , N O. 5
cooperate with government investigations, and to help
root out those individuals responsible for criminal wrong-
doing, if they can fairly predict the consequences of
conduct being investigated by the government and weigh
those consequences against the risks and benefits that
accompany cooperation.
II. Recent Legislative Response
Candidates seeking legislative office this November
should be mindful that Congress has recently taken
interest in the use of DPAs as an instrument of enforce-
ment. The House Judiciary Committee held hearings
earlier this year, and reform legislation was introduced
in January. The proposed legislation, HR 5806, would
require (1) the attorney general to issue guidelines for all
DPAs and NPAs, (2) judicial oversight of such agree-
ments including the determination of when an
agreement has been breached and indictment is appro-
priate, and (3) an independent monitor for every DPA,
with restrictions on the payments monitors can receive,
and required qualifications.10
III. What Else Can Be Done?
The next administration, regardless of party, should
address the problem of inconsistent and arbitrary pretrial
diversion agreements. The executive has sole authority to
bring criminal charges; thus there are inherent constitu-
tional limitations to legislation that mandates judicial
oversight of the criminal charging process or that directs
the executive to institute certain reforms.
The best avenue for truly meaningful reform is the
adoption of policies within the DOJ. For example, the DOJ
should routinely allow for judicial review of both the terms
of individual diversion agreements and the determination
of whether an agreement has been breached.11 Indeed, the
DOJ has already agreed to this type of judicial oversight in
several instances.12
The new attorney general should implement guidance
for when DPAs or NPAs are appropriate. We have already
seen the DOJ implement centralized policies governing
the use of corporate monitors and the waiver of privilege
as part of a DPA, and the next step is to ensure such uni-
formity with the decision to offer the agreement itself.
There are a number of ways in which the DOJ could
implement such reform, including the creation of a com-
mission or task force modeled after the U.S. Sentencing
Commission, which would be charged with creating
guidelines to ensure consistency.13
IV. Conclusion
The inconsistent use of NPAs and DPAs, and even the
appearance of such inconsistency, is a valid concern, espe-
cially for the employees and shareholders of corporations
whose fate can vary widely based on the person making
the prosecutorial decisions. The executive’s role is obvi-
ous, but particularly with increased attention in Congress,
those running for the House and Senate need to appreci-
• JUNE 2008

ate the importance of consistent and fair treatment for all
potential defendants, especially as NPAs and DPAs con-
tinue to be popular tools for resolving criminal
investigations of corporations.
Notes
1 F. Joseph Warin & Andrew S. Boutros, Deferred Prosecution
Agreements: A View from the Trenches and a Proposal for
Reform, 93 VA. L. REV. IN BRIEF 121 (2007) at 121.
2 Erik Paulsen, Imposing Limits on Prosecutorial Discretion in
Corporate Prosecution Agreements, 82 N.Y.U. L. REV. 1434
(2007); Peter Spivack & Sujit Raman, Regulating the New
Regulators: Current Trends in Deferred Prosecution Agreements,
45 AM. CRIM. L. REV. 159 (2008); F. Joseph Warin & Peter
Jaffe, The Deferred-Prosecution Jigsaw Puzzle: A Modest Pro-
posal for Reform, ANDREWS LIT. REP: WHITE COLLAR CRIME (2005);
Benjamin M. Greenblum, What Happens to Prosecution
Deferred? Judicial Oversight of Corporate Deferred Prosecution
Agreements, Note, 105 COLUM. L. REV. 1863, 1865 (2005).
3
In May 2008 the DOJ implemented new policies preventing
the government from requiring “restitution” payments to
charities or other third parties not affected by the alleged
wrongdoing; on March 7, 2008, the DOJ released the “Mor-
ford Memo,” which centralized the selection of corporate
monitors and requires certain qualifications; and in 2006 the
DOJ, through the “McNulty Memo,” placed limits on the use
of privilege waivers in corporate investigations and central-
ized the approval process for waiver requests. Finally, on July
9, 2008, Deputy Attorney General Mark Filip announced that
the Department would be making further revisions to its poli-
cies governing the prosecution of business organizations,
including those policies related to privilege waivers, advance-
ment of legal fees by corporations to their employees, the
use of joint defense agreements, and corporate decisions
whether to discipline culpable employees. Letter from Deputy
Attorney General Mark Filip to the Senate Judiciary Commit-
tee (July 9, 2009), available at http://online.wsj.com/public/
resources/documents/mcnulty070908.pdf.
FEDERAL SENTENCING REPORTER
4
Spivack and Raman, supra note 2, at 162 (noting that 2007
was a year that “witnessed a 70% increase in the number of
executed DPAs”).
5 Memorandum from Larry D. Thompson, Deputy Att’y Gen., to
Heads of Dep’t Components, U.S. Att’ys (Jan. 20, 2003),
available at http://www.usdoj.gov/dag/cftf/corporate_
guidelines.htm (last visited July 8, 2008).
6 Warin and Boutros, supra note 1, at 122-23.
7
Id. at 124.
8 Warin and Jaffe, supra note 2, at 3 (comparing an NPA with
Symbol Technologies, Inc., in which Symbol was forced to
agree to a three-year probationary period, admit to violations
of federal law, adopt extensive corporate reforms, and pay
$139 million in civil penalties, with a DPA in which American
Electric Power, Inc., had only a fifteen-month probationary
period, paid only $30 million in civil penalties, and never had
criminal charges filed against it).
9
DOJ policy requires prosecutors to accept pleas to the most
serious readily provable offense, and judges have a statutory
mandate to consider Federal Sentencing Guidelines and sev-
eral other factors, including the need to avoid unwarranted
disparity. See 18 U.S.C. § 3553(a); John Ashcroft, U.S. Dep’t
of Justice, Department Policy Concerning Charging Criminal
Offenses, Disposition of Charges and Sentencing (“Charge
Bargaining Memorandum”) (Sept. 22, 2003).
10
See Edward F. Malone & Justin C. Steffen, The Future of
Deferred-Prosecution Agreements: Congress Tries a Little Over-
sight, 3 WHITE COLLAR CRIME REPORT 328 (2008).
11
DOJ acquiescence on this issue is critical because whether or
not a pretrial diversion agreement has been breached is oth-
erwise not a justiciable issue. See, e.g., Stolt-Nielsen, S.A. v.
U.S., 442 F.3d 177 (3rd Cir. 2006) (holding that the District
Court did not have authority to enjoin the DOJ from filing an
indictment after DOJ determined that defendant breached
agreement under antitrust amnesty program).
12
See Pretrial Diversion Agreement, United States v. BDO Sie-
man LLP, No. 3:02-cr-30040 (S.D. Ill. Apr. 12, 2002); Pretrial
Agreement, United States v. Sears Automotive Marketing Svcs.,
Inc., No. 3:01-cr-30184 (S.D. Ill. Dec. 27, 2001).
13
Warin and Boutros, supra note 1, at 127-28.
• V O L . 2 0 , N O. 5 • JUNE 2008 333
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