Increased Judicial Scrutiny of Deferred Prosecution Agreements

After nearly seven months of consideration, U.S. District Judge John Gleeson's approval of the landmark $1.92 billion deferred prosecution agreement (DPA) between the U.S. Department of Justice, two U.S. Attorney's Offices, and HSBC, regarding anti-money laundering compliance failures and transactions with entities sanctioned by the Office of Foreign Assets Control may be the start of a trend of increased judicial oversight of DPAs.¹ At the hearing to approve the DPA on Dec. 20, 2012—typically pro forma—Gleeson raised a host of concerns about his role, including by what authority and how he was supposed to analyze the agreement.² In his July 1, 2013, order approving the DPA, Gleeson found authority to review the DPA pursuant to the court's inherent supervisory powers. The court found that the government had not chosen to bring the case to trial, enter into a non-prosecution agreement (NPA) (which the court acknowledged carries no judicial oversight) or move to dismiss the case, and instead it had put before the court a DPA that would remain pending for five years.

Moreover, the court noted that the government obtained a significant public relations benefit from the filing of the DPA. Thus, the court reasoned: "[a]s long as the government asks the court to keep this criminal case on its docket, the court retains the authority to ensure that the implementation of the DPA remains within the bounds of lawfulness and respects the integrity of this Court." While Gleeson found it easy to approve the DPA due to the substantial deference owed to the government, the order requires quarterly progress reports from the parties during the pendency of the DPA.