Deferred Prosecution (DPA) and Corporate Integrity Agreements (CIA) have been in widespread use in the U.S. now for nearly two decades. The motivation for adopting such agreements was understandable at the time. They represented a way to leverage limited government resources by procuring effective corporate cooperation in investigations, spared corporate entities and their shareholders from undue collateral damage associated with a corporate prosecution, and they assisted in bringing individual actors who engaged in criminal misconduct to justice, thus furthering the goal of deterrence.

Undoubtedly, there have been cases in which a DPA resolution reflected the right result and helped advance the cause of justice. However, the past two decades of experience with such agreements has also revealed their limitations and exposed serious abuses. The government has been explicit in its demands that corporate cooperation requires that scalps be delivered. The November 2018 Rosenstein Announcement, although it purported to be a modification of this principle, reaffirmed that corporate cooperation credit requires that “every individual who was substantially involved in or responsible for” the criminal conduct be identified by the corporation.

Faced with such pressure, corporations have, in some cases, assumed the role of a second prosecutor and paid billions of fees and costs to obtain the privilege of paying billions in fines. Caught in the crucible of unrelenting prosecutorial pressure, corporations have pled guilty or admitted wrongdoing and suffered irreparable damage to their reputations in situations where wrongdoing likely did not occur and could not have been proven simply to bring the investigation to an end. Many of the costs the corporation sought to avoid are incurred anyway due to strong indemnification laws, dramatically expanded compliance departments, endless investigations and out of control corporate monitors.

Individuals' lives and careers have been ruined as they are unfairly and wrongly implicated in these pleas of expediency, exacted as the cost of moving forward. The fabric of corporate governance has been tattered as employees increasingly mistrust their own management, doubt that they will be given a fair evaluation when the company's interests are at stake, and become reluctant to cooperate in internal investigations. Despite the government's pronounced policy of not requiring waiver of privilege, the conscientious issuance of Upjohn warnings, the potential for extension of Garrity to the private sector, and amendments to the Rules of Evidence that help protect privileged materials notwithstanding their delivery to enforcement officials, at its heart the enforcement world still presses the expectation that cooperation means that the corporation will use its attorneys to ferret out incriminating information and turn it over. The sanctity of the attorney client privilege has been eroded.

Historically, the attorney-client privilege served to allow the client and their trusted counsel to fully and without fear unravel the facts of a matter, and to permit counsel to advise about compliance and right the ship. Today, as internal investigations are routinely delivered to prosecutors to serve as the core of a criminal prosecution, not even the compliance function is permitted to work as it should. The government relies too heavily on an interested corporation and its controlling executives and can be embarrassed when the full facts become known and the case against the individual defendants unravels.

This article argues for a more skeptical and restrained use of such agreements, and for a more restrained deployment of the criminal laws in situations that are better regarded as a regulatory failing. It challenges the assumption that corporations can or should be regarded as “partners” of law enforcement, except in the clearest of circumstances. It advocates for an enlightened theory of corporate cooperation that does not involve or require the deliverance of a putative defendant. Finally, it asserts that in our adversary system of justice, just results are best obtained without the perverse incentives levied by government imposed corporate cooperation policies.

Two recent high-profile examples illustrate the hazards that can infect the DPA process in the United States and abroad: the London Whale cases in the Southern District of New York and the Tesco prosecution pursued by the Serious Fraud Office (SFO) in the UK. Both involved hasty corporate settlements reached with enforcement authorities that implicated individual executives. Norton Rose Fulbright represented the individual defendants in both cases. In the United States, after much publicized, and politicized, proceedings claiming culpability had been established, the claims were exposed to the harsh scrutiny of the adversary process and the government's case collapsed. In the UK, after a DPA deal was struck between the company and the SFO naming three key managers as being manifestly guilty, the judge in the later trial of those same individuals ruled there was not even a case to answer.

There is a better formula for corporate cooperation. It preserves the attorney-client privilege. It empowers corporate compliance efforts. And it gives the government the benefit of the corporation's willing assistance in tasks that would otherwise consume vast amounts of limited enforcement resources. It protects the rights of individual employees. It respects the relative roles of the government and private actors. In the end, it will produce better results for the corporate and government actors.

First, the government must recognize that the corporation is not its partner, nor should it be. Corporate executives answer to shareholders. Lawyers retained by corporations gather facts and advise about legal risks. Both of those roles are important, valuable and time-tested. Titles like “Independent Investigator” blur the roles. There is nothing inconsistent between being a good advocate and assisting the government. Good advocates bring true hard facts to light, help the government refine its theories in a good way, prevent unjust prosecutions and prevent bad mistakes. Credible and constructive advocacy does not mean that the corporation or its counsel must agree with the government.

Second, the government must accept a different, more limited concept of what constitutes cooperation. A corporation can dramatically reduce the cost and time associated with the government's work. It can do so by not taking constrained views of the scope of an information request, by trying to understand what types of corporate data the government should be interested in and providing it, or explaining what it is, without waiting for the government to guess what is there and describe it correctly. Everyone knows the difference between a cooperative party and one that presses every argument, minces every word, and demands compliance with every formality. A cooperative corporation helps the government obtain and understand the mass of information generated in the modern corporation and delivers it in a way that is easily used in getting at the underlying truth.

Aside from cases where a corporation is a true victim and is seeking criminal prosecution as redress, the corporation's legitimate value in the criminal context does not extend to interviewing witnesses and nominating individuals for prosecution. Communications with employees in the context of an internal review by corporate lawyers are and should remain privileged. Despite Upjohn warnings, employees often make not only unguarded, but inaccurate or speculative statements simply because the questioning is premature, rushed, or inartful. The quality and accuracy of statements obtained and then memorialized by internal investigators are often suspect. Judgements about culpability are reserved, in the criminal context, for public officials who presumably operate in the interests of justice. In the civil context, of course, the corporation must form those judgements, take appropriate employment action and implement or improve control systems needed to prevent a recurrence of the conduct at issue. Companies take action in the civil arena for many reasons that are inapplicable in a criminal case including to remedy bad judgement or to punish undue risk-taking.

Those judgements should be formed through a conventional application of fact-gathering and confidential advice, not in an environment where the price of not “naming names” is a corporate criminal prosecution.

Third, the government needs to meaningfully modify its cooperation policy to eliminate the perverse incentives that lead to a rush to judgement and create the need to find a sacrificial lamb who occupies a suitably insulated place in the corporate hierarchy. In the criminal context people's lives are at stake and the corporation's reputation is at stake. Sometimes groups of people do things that, in hindsight, violate a rule. Often the bad decision reflects neglect in governance but not true criminal intent. The truth is that assessing individual culpability in a corporate context is very difficult. In those cases where criminal remedies cannot in good faith be imposed on a person or persons, regulation should be left to the civil world.

In the cases described above, large companies were faced with unrelenting pressure to name names and deliver defendants. The end result of a misguided but very proactive investigation was the legal equivalent of an unguided missile.

Bill Leone is a partner with Norton Rose Fulbright US LLP and is based in the firm's New York office. Neil O'May is a partner based in the firm's London office.