New Report: The Continued Rise of Deferred Prosecution Agreements

U.S. Government collected $5.1 billion in penalties, used unprecedented tactics in 2014

NEW YORK, NY – Deferred and non-prosecution agreements—settlements that allow businesses to avoid prosecution for alleged crimes by paying hefty fines and agreeing to changes in business practices—have emerged as commonplace in the last decade. Federal prosecutors entered into 30 such agreements with companies in 2014, collecting $5.1 billion in fines and penalties.

The Manhattan Institute’s James R. Copland and Isaac Gorodetski have criticized the proliferation of such agreements as a “shadow regulatory state” that transfers enormous power over industry to prosecutors. Beyond imposing fines and requiring that companies correct the alleged violations, these agreements enable government lawyers to require companies to implement major changes to business practices, without transparency or oversight.

In a new report, Copland and Gorodetski examine the government’s use of deferred and non-prosecution agreements in 2014 in comparison with previous years. In addition, they analyze several key agreements and discuss their implications, including:

• The Department of Justice employing such agreements to impose “strict liability” on corporations, even for companies that self-report conduct by employees who went to extraordinary lengths to hide their activities from their employer
• The Department of Justice extending such agreements past their agreed-upon terms and altering provisions during the term of an agreement
• The Securities and Exchange Commission using such agreements to settle cases with individuals—an unprecedented extension of a practice designed to handle allegations of business wrongdoing

The report concludes with a discussion of policy options going forward, with a special focus on legislation introduced in Congress by Rep. Bill Pascrell, Jr. (D-N.J.), the Accountability in Deferred Prosecution Act.

Click here to read the full report.

James R. Copland is the director of the Manhattan Institute’s Center for Legal Policy, which seeks to develop and communicate thoughtful ideas on how to improve the civil and criminal justice system. He also oversees the Institute’s corporate-governance website, ProxyMonitor.org. 

Isaac Gorodetski is the deputy director of the Manhattan Institute’s Center for Legal Policy and the project manager for the Trial Lawyers, Inc. series of publications.