Too Big to Jail?

If a company is charged with violating criminal laws, just as with people charged with crimes, there can be a plea bargain agreement. When it comes to people, normally a defendant will plead guilty to a lesser charge, or have some charges dropped, avoid a trial and accept a lesser sentence. When it comes to businesses, one way a plea bargain can happen is through a deferred-prosecution agreement. It’s essentially an agreement by a business to clean up its act and obey the law in exchange for not having to go to trial. One reason prosecutors are reluctant to criminally prosecute a business is because it could result in the business collapsing, which is what happened with Arthur Anderson in 2002. But the effectiveness of these agreements is being called into question, according to a recent NPR article.

A top Justice Department official, Assistant Attorney General Leslie Caldwell, gave a stern warning to banks and other corporations that repeatedly commit crimes last month. She warned deferred-prosecution agreements could be ended. The 2001 USA Patriot Act tightened anti-money laundering laws to try to stop terrorist financing. The Justice Department entered into non-prosecution agreements and deferred-prosecution agreements with financial institutions facing anti-money laundering violations that allowed criminal activity to flourish, according to Reuters.

Such agreements have been made with HSBC Holdings Plc, Standard Chartered Plc, JPMorgan Chase & Co and Commerzbank AG. Caldwell didn’t name names but she said she expected agreement to come to an end in cases where repeat offenders continue to break the law. UBS and Barclays are being investigated for allegedly manipulating currency rates while they were operating under a deferred prosecution agreement for manipulating interest rates.

A new book looks at the issue of how to punish a business for breaking the law. Brandon Garrett of the University of Virginia law school has written Too Big to Jail. During his research he found that than 300 agreements have been made concerning criminal prosecutions of businesses in the past decade, many of them large, publicly traded companies. These agreements are often vague and rely on the company to police itself without any outside supervision, because,

  • Outsiders aren’t always well-equipped to police big, complex companies,
  • It may be more sensible to rely on an internal compliance department if the wrongdoing was isolated to a few rogue employees, and
  • White collar crimes can be difficult to prove.

In recent years a few federal judges have stated these agreements need to include more independent oversight. Federal officials acknowledge companies can push back against compliance efforts and deferred prosecution agreements don’t prevent some companies from becoming repeat offenders.

If you have any questions about your business, its practices and criminal law, contact our office. We can talk about what’s going on with your company, which laws may come into play and how your business can protect its interests because prosecutors may not see you or your business as too big to jail.