To Prosecute or Not to Prosecute: Deferred Prosecution Agreements & the Reshaping of Power

“The record of dysfunction that prevailed for many years was astonishing. Today HSBC is paying a heavy price for its conduct,” proclaimed Assistant Attorney General Breuer for the Criminal Division of the U.S. Department of Justice (DOJ) [1]. The “conduct” that Assistant Attorney General Breuer was referring to was HSBC Bank USA’s failure to implement sufficient anti-money laundering controls. From 2006 to 2010, over $881 million, fueled by the international drug trade, would enter the American financial system through HSBC banks [2]. Yet, the “heavy price” that Breuer promised did not involve the prosecution or sentencing of top officials. There was not even a trial. Rather, the DOJ sought to defer prosecution. Instead of pursuing criminal penalties, the DOJ allowed HSBC to demonstrate compliance by entering into a Deferred Prosecution Agreement (DPA) with the firm. The agreement included terms such as replacing the firm’s top leadership executives, retaining an independent compliance monitor, and forfeiting $1.256 billion [3].  In entering a DPA with HSBC, the DOJ registered another entry in its evolving strategy to combat corruption.

As a contractual agreement, DPAs enable prosecutors to defer the defendant’s prosecution for a period of time under the condition that they fulfill a set of agreed-upon conditions. These remediation measures can include the admission of guilt, establishment of victim funds, replacement of top leadership positions, and waiving of the 6th amendment right to a speedy trial [4]. If the defendant completes the agreed-upon measures within the specified time frame, the charges are dropped. If not, their charges can be brought to the trial stage [5]. While DPAs can be made with individuals and corporations, for the latter, the benefits are particularly attractive. Unlike a plea deal, which attributes criminal conviction, DPAs enable firms to avoid the collateral consequences of being found guilty in court, the penalties of which can include the inability to pursue government contracts and a significant loss in firm value [6].  

Consequently, DPAs have fundamentally altered the nature of corporate accountability by prioritizing contractual compromise over drawn-out litigation [7]. Through employing DPAs, the DOJ has not merely altered the outcomes for offenders, but also the justice system itself. The DOJ’s increasing usage of DPAs to respond to corporate misconduct risks shifting overwhelming amounts of discretionary power towards the executive with minimal judicial oversight. This asymmetric division of power between government branches poses a potential hazard to the justice system by limiting safeguards aimed at preserving transparency, victim rights, and accountability.  Ultimately, the disquieting concentration of discretionary power in the executive to dictate corporate compliance is highlighted by the evolution of DPAs from a tool for non-violent offenders to a mechanism for corporate compliance, minimal judicial counterbalancing mechanisms, and tension with victim remediation in corporate cases. 

While DPAs were initially intended to be made with individual offenders, the DOJ’s use of them to respond to corporate misconduct has increased its discretionary power by establishing an ability to asymmetrically bargain in high-stakes cases. Pursuant to the 1974 Speedy Trial Act, a trial must commence within 70 days from the date of indictment. However, the legislation allowed for a “period of delay” for “the purposes of allowing the defendant to demonstrate his good conduct” [8]. In doing so, Congress included an exception that would allow for DPAs. Yet, upon considering a proposed DPA between the DOJ and Saena Tech Corp for the latter’s acceptance of bribery payments, Judge Sullivan wrote that “the current use of [DPAs] for corporations rather than individual defendants strays from Congress’s intent when it created an exclusion from the speedy trial calculation” [9]. As Sullivan was arguing in dicta, his remark did not prevent DPAs from being made with corporations. Yet, his interpretation is consistent with the initial use of DPAs during the 20th century, where the DOJ primarily employed them against non-violent, low-level offenders to mitigate the harmful effects of a conviction [10]. Evidently, the limited use of DPAs in cases involving juveniles and minor offenses affirms how DPAs were reserved for individual defendants. Indeed, Congress’s specific word choice when writing “his” good conduct as opposed to “its” or “their” good conduct in the Speedy Trial Act [11] suggests that deferred prosecution was primarily intended to be employed against individuals rather than corporations.  

However, the DOJ’s use of DPAs largely shifted to involve corporations following the 2002 indictment of Arthur Andersen [12]. The DOJ’s decision to prosecute the accounting firm for obstruction of justice resulted in a significant decline in its market value and client base, alongside 28,000 layoffs [13]. As Arthur Andersen’s attorney stated, “[the firm] was dead by the time of trial” [14]. Recognizing that large-scale corporate prosecution can inflict collateral damage on innocent third parties, the DOJ sought to expand the practice of issuing corporate DPAs just a year later. Issued in 2003 by then Deputy Attorney General Thompson, the Thompson Memo emphasized the element of “corporate compliance” and willingness to “replace management” and “pay restitution” when evaluating whether to prosecute a corporation [15]. Hence, by making compliance a determinant of prosecution, the Thompson Memo arguably developed a route for prosecutors to delay prosecution, specifically with corporations. Subsequently, from 2002 to 2003, the number of corporate DPAs per year increased from 2 to 6, reaching just short of 30 a decade later, in 2013 [16]. 

The shift from making DPAs with individuals to corporations points to growing executive power given its ability to dictate the terms of compliance in increasingly high-stakes cases. Unlike when prosecutors decide on the terms of agreement with an individual defendant, where the offense is non-violent and typically minimal, when entering a DPA with a corporation, the stakes are significantly raised. As the HSBC example underscores, millions of dollars, the integrity of entire financial systems, and trust in institutions can be on the line [17]. As the severity of the misconduct is greater, so is the importance of the actor that determines the punishment. Consequently, as prosecutors dictate the conditions of DPAs with corporations where more is at stake, significant discretionary power is conferred onto the executive. Thus, the DOJ’s evolution of DPA usage from individual to corporate offenders demonstrates how DPAs are augmenting the executive’s role in shaping justice. 

Beyond the expansion of the initial practice of making DPAs with individuals, it is the limited role that courts play in overseeing the terms of a DPA that further risks conferring significant amounts of discretionary power onto prosecutors. Hence, while the executive’s ability to asymmetrically bargain in high-stakes cases may not alone be problematic, it presents as hazardous to the division of power within the justice system as it is coupled with minimal judicial checks. Unlike when DPAs were solely made with individual offenders who were often non-violent, judicial oversight is now also thin in cases where the stakes for obtaining justice for victims and preventing future misconduct are significantly higher. 

According to the Speedy Trial Act, “any period of delay during which prosecution is deferred” requires “approval of the court” [18].  While one might assume that this confers on judges an important role in authorizing or rejecting DPAs, court decisions suggest that judicial oversight remains thin as opposed to thorough. This is best illustrated by the DOJ’s efforts to enter a DPA with Fokker Services due to the latter’s violation of the International Emergency Economic Powers Act by exporting aircraft parts to Iran, Sudan, and Myanmar [19]. In response to a request for authorization of a DPA between the DOJ and Fokker Services, Judge Leon for the District Court for the District of Columbia denied the motion. In pointing out shortcomings, including the fact that the imposed fine did not exceed Fokker’s illicit revenue, Judge Leon held that the DPA was “an inappropriate exercise of prosecutorial discretion” and that the prosecution had acted “anemically” [20]. While this ruling suggests the judiciary can act as a powerful safeguard against the executive, the subsequent appellate case undermines this notion. 

In United States v. Fokker Servs. B.V., The DC Circuit Court held that “the [district] court overstepped its authority,” noting that the “judiciary is not to second-guess the Executive’s determinations” over “which charges to bring” [21]. As Circuit Judge Srinivasan wrote, “the approval of the court” clause in the Speedy Trial Act is “no ground” to confer authority in district courts to "scrutinize the prosecution’s discretionary charging decisions” [22].  The DC Circuit Court’s decision to overrule the District Court and allow the DPA to proceed highlights the asymmetric discretionary power between the judiciary and the executive, as the former possesses a limited role in second-guessing the latter’s decision. 

Seeing as DPAs enable the government to secure sanctions without incurring any fees towards litigation against large corporations, it could be reasoned that the Circuit Court’s decision was logical given the executive’s authority to select which cases to prosecute, allocate its finite resources, and determine its policy priorities [23]. Yet, while Judge Srinivasan affirmed the executive’s primacy in determining charges, it can be argued that the conditions of a DPA represent more of a penalty than a charge, as they impose obligations on the defendant. This is important because it is the judiciary that possesses oversight over charges. For example, in a plea bargain, judges have the authority to accept or reject the agreement, thus enabling them to assess the adequacy of the punishment [24]. Despite the conditions of a DPA displaying more similarities to a penalty as opposed to a charge, its treatment as the latter hazardously confers great decision-making authority onto the DOJ. Hence, while the executive typically possesses authority over its allocation of resources and selection of cases to prosecute [25], its discretion over DPAs vastly augments this power, given that the conditions of a DPA extend far beyond a simple charge. This further reinforces how the executive, through resorting to DPAs, has increased its own discretionary power, given the thin judicial oversight and limited ability of courts to reject a DPA based on disagreements with remediation measures. 

Evidently, the DC Circuit Court’s decision in United States v. Fokker Servs. B.V. points to an altered justice system where counterbalancing checks between branches of government concerning the use of DPAs remain minimal. Yet, there are possible contradictions in the ruling. As Circuit Judge Srinivasan held in the decision, the approval of the court is to “assure the DPA in fact is geared to enabling the defendant to demonstrate compliance with the law” [26].  However, Judge Leon's decision to deny the DPA was motivated, at least partially, by his concerns that the conditions did not allow Fokker to demonstrate good conduct [27]. Thus, the appellate court created a paradox. It affirmed that judges could deny a DPA that does not enable the offender to demonstrate compliance, yet it struck down Justice Leon for doing just that. This ultimately suggests that in practice, the executive faces limited judicial oversight over its use of DPAs. 

The possible consequences of the executive’s increased discretionary power in cases of corporate malpractice are evidenced in instances where accountability, in particular for victims, remains limited. The 2004 Crime Victims’ Rights Act (CVRA) establishes crime victims as those “directly and proximately harmed by federal offenses”, granting them certain privileges such as “the reasonable right to confer with the attorney for the Government in the case” and to be “informed in a timely manner” of any DPA [28]. However, the potential for a DPA to conflict with these rights is highlighted by the agreement struck between the DOJ and Boeing following the airline company’s deception over the 737 MAX’s control system that led to 2 fatal crashes and 346 fatalities [29]. In negotiating the terms of the DPA with Boeing, the DOJ failed to confer with family members, with some viewing the DPA’s terms as an insufficient response to the gravity of the crashes [30]. Consequently, family members of crash victims would move for the DPA to be set aside because the DOJ’s failure to confer with them, inform them of the DPA in a timely manner, and treat them with “fairness” was in violation of the CVRA [31]. 

However, the limited ability of courts to practically enforce these rights and amend the DPA demonstrates how the implications of minimal judicial oversight can culminate in weakened transparency and accountability for victims. In United States v. Boeing Co., the Court found that the DOJ had violated the CVRA by denying the families’ right to confer before  reaching an agreement with Boeing due to the legal error of not considering the families of crash victims as included in the CVRA’s distinction of “crime victims” [32]. Yet, the Court also held it lacked the authority to substantially revise or modify the terms of the DPA, demonstrating how thin judicial checks can contribute to violations of victim rights [33]. While it is important to highlight how not all DPAs have treated victims in the same way as Boeing, with many securing monetary compensations for victims, the fact that such rights can be undermined illustrates the danger of the potential for DPAs to limit transparency with victims. This is significant when considering the broader picture; DPAs are, in part, employed with the very purpose of securing justice for victims. Evidently, the limited capacity for courts to modify a DPA to better include the perspective of victims in instances where the DOJ has failed to confer with them illustrates how minimal judicial oversight can enable significant executive discretion to culminate in compromised accountability. 

While it is clear that the shift of DPAs from individual to corporate offenders and minimal judicial oversight carries potential risks to the justice system, it is critical to remember that DPAs have secured victim funds and prevented costly litigation. Hence, they will likely continue to play a role in combating crime and encouraging compliance. However, it is evident that greater judicial oversight is needed to ensure victim rights are adequately enforced and that remediation measures are sufficient in creating compliance with the law. Indeed, the DOJ cannot risk transforming one singular tool into a crutch. The 1997 U.S. The Attorney's Manual stated that the key purpose of DPAs is to divert criminal activity away from traditional processing to “[save] prosecutive and judicial resources for concentration on major cases” [34]. If the DOJ’s increasing usage of DPAs to respond to corporate misconduct reaches a point of reliance, it risks creating a paradox; DPAs become used in the very cases they were designed to free up resources for. 

Ultimately, as DPAs continue to alter the nature of power between branches of government, they potentially point to a broader systematic failure within the justice system. The DOJ's apprehension – and perhaps inability – to prosecute big firms illustrates how finite time and resources have acted as constraints that prevent larger restitution in the case of criminal conviction. Evidently, as DPAs continue to be made with corporations, the need for stronger judicial safeguards, protection of victim rights, and deliberate use rather than reliance remains critical. After all, it is the fate of victims, employees, shareholders, consumers, and society that is at stake. 

Edited by Jack McCormick

Sources:

[1] U.S Department of Justice, Office of Public Affairs. HSBC Holdings Plc. and HSBC Bank USA N.A. Admit to Anti-Money Laundering and Sanctions Violations, Forfeit $1.256 Billion in Deferred Prosecution Agreement, (2012): https://www.justice.gov/archives/opa/pr/hsbc-holdings-plc-and-hsbc-bank-usa-na-admit-anti-money-laundering-and-sanctions-violations.
[2] Mary Miller, “More than Just a Potted Plant: A Court’s Authority to Review Deferred Prosecution Agreements under the Speedy Trial Act and under Its Inherent Supervisory Power,” Michigan Law Review, no. 115.1 (2016): 145–46, https://doi.org/10.36644/mlr.115.1.more.

[3] Deferred Prosecution Agreement, United States v. HSBC Bank USA, N.A., Cr. No. 12-763 (E.D.N.Y. Dec. 11, 2012): https://www.sec.gov/Archives/edgar/data/83246/000119312512499980/d453978dex101.htm

[4] Wulf Kaal and Timothy Lacine, “The Effect of Deferred and Non-Prosecution Agreements on Corporate Governance - Evidence from 1993-2013,” SSRN Electronic Journal 70, no. 1 (2014): 69, 86, https://www.jstor.org/stable/43665690.

[5] Andrea Amulic, “Humanizing the Corporation While Dehumanizing the Individual: The Misuse of Deferred-Prosecution Agreements in the United States,” Michigan Law Review, no. 116.1 (2017): 124, https://doi.org/10.36644/mlr.116.1.humanizing.

[6] Benjamin M. Greenblum, “What Happens to a Prosecution Deferred? Judicial Oversight of Corporate Deferred Prosecution Agreements.” Columbia Law Review 105, no. 6 (2005): 1869. http://www.jstor.org.scpo.idm.oclc.org/stable/4099504.

[7] Wulf and Lacine, “The Effect of Deferred and Non-Prosecution Agreements on Corporate Governance - Evidence from 1993-2013,” 71.

[8] U.S. Department of Justice, “Speedy Trial Act of 1974,” Criminal Resource Manual 626 (1974): https://www.justice.gov/archives/jm/criminal-resource-manual-628-speedy-trial-act-1974.

[9] United States v. Saena Tech Corp., 140 F. Supp. 3d 60 (D.D.C. 2015).

[10] Amulic, “Humanizing the Corporation While Dehumanizing the Individual: The Misuse of Deferred-Prosecution Agreements in the United States,” 125.

[11] U.S. Department of Justice, “Speedy Trial Act of 1974,” Criminal Resource Manual 626 (1974): https://www.justice.gov/archives/jm/criminal-resource-manual-628-speedy-trial-act-1974.
[12] U.S Department of Justice Conference Center, Deputy Attorney General Transcript, Arthur Andersen Indictment Thursday, March 14, 2002, (2002): https://www.justice.gov/archive/dag/speeches/2002/031402newsconferncearthurandersen.htm.

[13] Wulf and Lacine, “The Effect of Deferred and Non-Prosecution Agreements on Corporate Governance - Evidence from 1993-2013,” 70.

[14] Wiggin and Dana LLP, “Lawyer for a lost cause: He shouted, he pouted, he defended Arthur Andersen - and he nearly won”, (2003): https://www.wiggin.com/news/lawyer-for-a-lost-cause-he-shouted-he-pouted-he-defended-arthur-andersen-and-he-nearly-won/.

[15] Larry D. Thompson, Principles of Federal Prosecution of Business Organizations, (2003): https://files.skadden.com/sites/default/files/ckeditorfiles/Thompson-Memorandum.pdf.

[16] Wulf and Lacine, “The Effect of Deferred and Non-Prosecution Agreements on Corporate Governance - Evidence from 1993-2013,” 85.

[17] U.S Department of Justice, Office of Public Affairs. HSBC Holdings Plc. and HSBC Bank USA N.A. Admit to Anti-Money Laundering and Sanctions Violations, Forfeit $1.256 Billion in Deferred Prosecution Agreement, (2012): https://www.justice.gov/archives/opa/pr/hsbc-holdings-plc-and-hsbc-bank-usa-na-admit-anti-money-laundering-and-sanctions-violations.

[18] U.S. Department of Justice, “Speedy Trial Act of 1974,” Criminal Resource Manual 626 (1974): https://www.justice.gov/archives/jm/criminal-resource-manual-628-speedy-trial-act-1974.

[19] United States v. Fokker Services, B.V., 79 F. Supp. 3d 160 (D.D.C. 2015)

[20] United States v. Fokker Services, B.V., 79 F. Supp. 3d 167 (D.D.C. 2015)

[21] United States v. Fokker Services, B.V., 818 F.3d 733 (D.C. Cir. 2016)

[22] United States v. Fokker Services, B.V., 818 F.3d 733 (D.C. Cir. 2016)

[23] Wayte v. United States, 470 U.S. 598, 607 (1985).

[24] Miller, “More than Just a Potted Plant: A Court’s Authority to Review Deferred Prosecution Agreements under the Speedy Trial Act and under Its Inherent Supervisory Power,” 165.

[25] U.S. Department of Justice, Office of the Attorney General, “Memorandum for All Federal Prosecutors”, General Department Policies Regarding Charging, Pleas, and Sentencing, (2022): https://www.justice.gov/archives/ag/file/1265326/dl.

[26] United States v. Fokker Services, B.V., 818 F.3d 733 (D.C. Cir. 2016)

[27]  “Criminal Law — Separation of Powers — D.C. Circuit Holds That Courts May Not Reject Deferred Prosecution Agreements Based on the Inadequacy of Charging Decisions or Agreement Conditions,” Harvard Law Review 130, no. 3 (2017): 1052–53, https://doi.org/https://www.jstor.org/stable/44865613.

[28] Crime Victims’ Rights Act, 18 U.S.C. § 3771 (2018).

[29] Deferred Prosecution Agreement, United States v. The Boeing Company, No. 4:21-cr-00005-O (N.D. Tex. Jan. 7, 2021), https://www.justice.gov/criminal/criminal-vns/file/1482911/dl.

[30]  Elkan Abramowitz and Jonathan Sack, “Up in the Air: Boeing’s Deferred Prosecution Saga Continues”, New York Law Journal, (2025): https://static.maglaw.com/docs/Abramowitz%20Sack%20NYLJ%201.9.25.pdf.

[31] United States v. Boeing Co., Second Memorandum Opinion & Order, No. 4:21-cr-00005-O, (N.D. Tex. Oct. 21, 2022), https://www.justice.gov/criminal/media/1329401/dl.

[32] United States v. Boeing Co., 655 F. Supp. 3d 519, 534 (N.D. Tex. Feb. 9, 2023)

[33] United States v. Boeing Co., 655 F. Supp. 3d 519, 534 (N.D. Tex. Feb. 9, 2023)

[34]  U.S. Attorneys' Manual § 9-22.010 (1997).