When judged against the collapse of a company like Enron’s accounting firm Arthur Andersen, a deferred prosecution agreement (DPA) can seem particularly appealing to a corporation facing criminal misconduct charges. Such agreements are instruments used by the government in which criminal charges against a corporation are dropped, so long as the corporation complies with the terms of the agreement, including admitting unlawful conduct, reforming its policies, allowing government monitoring for an allocated period of time and paying a fine. But before assuming that a DPA is the optimal solution for saving your corporation from destruction, you should first carefully consider the risks.
Although DPAs existed before the financial crisis, the Department of Justice (DOJ) did not make them an official alternative until 2008. Since then, DPAs have become increasingly popular. In 2010, the Securities and Exchange Commission (SEC) approved the use of DPAs and entered into its first DPA in May 2011 with Tenaris S.A.
Glass Half Empty
While entering into a DPA might be the right decision in certain instances, a corporation must be fully aware of the risks involved. DPAs are often one-sided and call for more than just cooperation from the corporation. It is not unusual for corporations negotiating a deferred prosecution agreement to find themselves forced to waive the attorney-client privilege, restructure their business, turn over work attorney product, pay hefty fines and carry out an array of other stipulations required by the prosecutor or enforcement division of a regulating agency. The mere threat of an indictment is often enough to cause a company to give serious consideration to a DPA.