DPAs and NPAs Are on the Rise

What Does This Mean for You?

The Department of Justice (DOJ) has increasingly been using pretrial diversion programs, which often take the form of deferred prosecution agreements (DPAs) and non-prosecution agreements (NPAs), as a tool to hold corporations accountable for wrongdoing.

with co-author Briannon Irwin

The Department of Justice (DOJ) has increasingly been using pretrial diversion programs, which often take the form of deferred prosecution agreements (DPAs) and non-prosecution agreements (NPAs), as a tool to hold corporations accountable for wrongdoing.

Although the DOJ’s new focus on individual accountability for corporate wrongdoing, set forth in the September 2015 Yates Memorandum, caused some to question whether the use of pretrial diversion programs would continue, DPAs and NPAs aren’t going anywhere. According to a recent report by the Manhattan Institute, the federal government entered into 35 pretrial diversion programs in 2016, the largest number since 2012. Of those agreements, 14 (40 percent) were DPAs, which follow the filing of criminal charges against a corporation; the remaining 21 were NPAs, which are executed prior to a filing. More than one-third of these agreements were predicated on violations of the federal Foreign Corrupt Practices Act (FCPA), which imposes penalties on those who bribe foreign officials, up from only 15 percent in 2015. Payouts under these agreements reached $4.6 billion in 2016, for a total of over $35 billion in payments since 2010.

Most significant, 2016 marked the first year that a majority of DPA and NPA agreements required the placement of a corporate monitor, an objective third party tasked with overseeing the company’s adherence to the agreement and reporting misconduct to the federal government. From a policy standpoint, this should be cause for concern for companies and individuals; many worry that the increased use of corporate monitors will permit the government to have “deep levels of ongoing oversight over the internal operations of major businesses — oversight not necessarily limited to policing the asserted conduct underlying the rationale for these agreements.”

At the same time, corporations often agree to DPAs and NPAs despite the fact that legitimate defenses could be raised in court because a criminal conviction may result in serious economic and reputational harm, as well as job losses for thousands of employees if the company were to be convicted in a criminal proceeding. For life sciences companies that do business with the federal government, consequences of a criminal conviction are especially severe — penalties may include exclusion from government-run health care programs and debarment from government contracting.

In addition to levying large penalties and mandating the appointment of monitors under DPAs and NPAs, the DOJ under the Obama administration often required companies to donate significant sums of money to third parties that were not involved in the lawsuits, such as the National Urban League and the National Council of La Raza, raising questions as to whether it was proper for the DOJ to dictate to which charitable organizations a company should donate. This practice was recently ended when Attorney General Jeff Sessions released his June 5, 2017 Memorandum on the Prohibition on Settlement Payments to Third Parties, stating that “any settlement funds should go first to the victims and then to the American people — not to bankroll third-party special interest groups or the political friends of whoever is in power.”

While companies should applaud the Sessions Memorandum as the first step in limiting the wide discretion of the DOJ to dictate terms under pretrial diversion programs, the proliferation of DPAs and NPAs in 2016 demonstrated that corporations will continue to be stuck between the proverbial rock and a hard place when charged with corporate wrongdoing: either agree to the DOJ’s terms or risk financial and reputational ruin in litigation. To avoid this Sophie’s Choice, life sciences companies should continue to implement and improve robust compliance programs and policies, especially those that address FCPA-related risks. Corporations should also place renewed focus on employee training and auditing and monitoring programs to ensure that all activities comply with relevant laws, regulations and industry guidance documents.

Berkeley Research Group, LLC (BRG) professionals have significant experience acting as monitors for the FTC, European Commission and foreign bodies, as well as playing the role of an independent review organization in connection with consent decrees imposed by the Security and Exchange Commission, Department of Justice, Office of the Inspector General, Serious Fraud Office, and other international fraud offices. BRG professionals also stand ready to advise life science companies regarding the implementation of effective compliance programs, as well as anti-bribery and anti-corruption policies and procedures.

For further information, please contact Edward J. Buthusiem at [email protected] or a member of the BRG Corporate Compliance and Risk Management team.

The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions, position or policy of Berkeley Research Group, LLC or its other employees and affiliates.