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Preliminary Observations on DOJ’s Use and Oversight of Deferred Prosecution and Non-Prosecution Agreements, GAO, 2009

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June 25, 2009

Accountability Integrity Reliability

Highlights of GAO-09-636T, a testimony to
the Subcommittee on Commercial and
Administrative Law, Committee on the
Judiciary, House of Representatives

Preliminary Observations on DOJ’s Use and
Oversight of Deferred Prosecution and NonProsecution Agreements

Why GAO Did This Study

What GAO Found

Recent cases of corporate fraud
and mismanagement heighten the
Department of Justice’s (DOJ) need
to appropriately punish and deter
corporate crime. Recently, DOJ has
made more use of deferred
prosecution and non-prosecution
agreements (DPAs and NPAs), in
which prosecutors may require
company reform, among other
things, in exchange for deferring
prosecution, and may also require
companies to hire an independent
monitor to oversee compliance.
This testimony provides
preliminary observations on
(1) factors DOJ considers when
deciding whether to enter into a
DPA or NPA and setting the terms
of the agreements, (2) methods
DOJ uses to oversee companies’
compliance, (3) processes by
which monitors are selected, and
(4) companies’ perspectives
regarding the costs and role of the
monitor. It also includes the results
of GAO’s recently completed work
on DOJ’s efforts to document the
monitor selection process
(discussed in objective 3). GAO
reviewed DOJ guidance and 57 of
the 140 agreements negotiated
from 1993 (when the first 2 were
signed) through May 2009; and
interviewed DOJ officials, officials
from 17 companies, and 6
monitors. While not generalizable,
these results provide insight into
decisions about DPAs and NPAs.

Prosecutors in all 13 DOJ offices with whom GAO spoke said that they based
their decision on whether to enter into a DPA or NPA on DOJ’s principles for
prosecuting business organizations, particularly those related to the
company’s willingness to cooperate, collateral consequences to innocent
parties, and remedial measures taken by the company. However, prosecutors
differed in their willingness to use DPAs or NPAs. In addition, prosecutors’
varying perceptions of what constitutes a DPA or NPA has led to
inconsistencies in how the agreements are labeled. In March 2008, DOJ issued
guidance defining DPAs and NPAs, but this guidance is not consistently
followed, in part because not all DOJ offices view it as mandatory. DOJ plans
to determine the need to take additional steps to require consistency in the
use of the labels DPA and NPA. While DOJ and companies generally
negotiated the terms of DPAs and NPAs—such as monetary payments and
compliance requirements—DOJ also considered other factors in its decisions,
such as monetary gains to the company as a result of the criminal misconduct.

What GAO Recommends
GAO recommends that the Deputy
Attorney General adopt internal
procedures to document both the
process used and reasons for
monitor selection decisions. DOJ
agreed with our recommendation.

To ensure that companies were complying with the terms of the DPAs and
NPAs, DOJ employed several oversight mechanisms, including the use of
independent monitors, coordination with regulatory agencies, and other
means. Of the 57 agreements GAO reviewed, 26 required the company to hire,
at its own expense, an independent monitor. In the remaining agreements,
DOJ relied, among other things, on reports from regulatory agencies or from
monitors hired by companies under separate agreements with these agencies,
and company certifications of compliance.
For the DPAs and NPAs GAO reviewed, even though DOJ was not a party to
the contracts between companies and monitors, DOJ typically selected the
monitor, and its decisions were generally made collaboratively among DOJ
and company officials. Monitor candidates were typically identified through
DOJ or company officials’ personal knowledge or recommendations from
colleagues and associates. In March 2008, DOJ issued guidance stating that for
monitor selection to be collaborative and merit-based, committees should
consider the candidates and the selection must be approved by the Deputy
Attorney General. However, because DOJ does not require documentation of
the process used or the reasons for particular monitor selection decisions, it
will be difficult for DOJ to validate whether its monitor selection guidancewhich, in part, is intended to instill public confidence-is adhered to.
Some company officials GAO spoke with reported that they had little leverage
to address concerns about the amount and scope of the monitors’ work and,
therefore, would like DOJ to assist them. GAO in its ongoing work will assess
this and other issues about the use and oversight of DPAs and NPAs.

View GAO-09-636T or key components.
For more information, contact Eileen Larence
at (202) 512-8777 or

United States Government Accountability Office