The DoJ’s corporate “diversion” program is supposed to change bad corporate culture, but really, it enables repeat offenders

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When a corporation is investigated for malfeasance — cheating or hurting customers or workers, say — the DoJ sometimes allows it to enter in a deferred prosecution agreement (DPAs) or a non-prosecution agreement (NPAs): the company admits wrongdoing, pays a fine, and promises not to do it again; after 2-3 years of good conduct, the charges are dropped.

The DoJ’s theory is that this is a cost-effective, efficient way to reform bad corporate culture, but Public Citizen’s in-depth investigation reveal that corporations view these agreements as just part of the cost of doing (dirty) business, and that, far from reforming their ways, the large multinationals that enter into these agreements simply reoffend — again, and again, and again.

Meanwhile, the DoJ has all but given up on actual prosecutions for corporate wrongdoing, especially when it comes to the very largest multinations, who make the up a disproportionate amount of reoffenders, like Jpmorgan, Deutsche Bank, Pfizer, HSBC, and Standard Chartered Bank. The companies that make the largest political campaign contributions are also the most likely to received these DPAs or NPAs.

Things went from bad to worse under Obama, and then from worse to much, much worse under Trump, with the creation of rules that limit the ability of other agencies or jurisdictions to punish corporations once they settle with the DoJ.

When corporations do reoffend are are punished by the DoJ for it, the terms of those punishments are a secret, as are the related proceedings.

Meanwhile, corporate wrongdoing is on the rise, both in frequency and scale, with a rogues’ gallery of corporations from Boeing to Johnson & Johnson to Goldman Sachs currently under criminal investigation by the DoJ, which will get to decide whether to go to court, or just offer a get-out-of-jail card in the form of a DPA or NPA.

Short of the DOJ ceasing corporate DPAs and NPAs and reorienting itself toward aggressive investigations of corporate crime, there are incremental policy solutions that can begin to turn the tide:

* The DOJ should stop entering DPAs and NPAs with repeat offenders.

* Congress could pass laws requiring greater transparency around prosecutors’ decisions to enter DPAs and NPAs so that the public could know what specific collateral consequences were considered when weighing the decision not to prosecute.

* If the potential of a prosecution to threaten the financial or economic stability of the U.S. or another country was a factor a prosecutor considered, then the public should know – and regulators should move to break up the entity which has been too big to be subject to proper law enforcement.

* Transparency should also be increased around how the DOJ evaluates the compliance measures prosecutors often require of corporations that enter DPAs and NPAs. Reports by monitors appointed to oversee strengthened compliance should be made public, as should any other Justice Department reports tracking the performance of DPAs and NPAs.

* Additionally, these agreements could be treated more like guilty pleas alongside additional enforcement reforms, including making executives criminally liable and subject to jail time when corporations violate the law.

The ultimate fix, nevertheless, is the simplest: ending the DOJ’s practice of entering deferred and non-prosecution agreements with corporations once and for all.

Soft on Corporate Crime [Rick Claypool/Public Citizen]

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