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Regulatory: Antitrust Division modifies “carve out” policy for corporate plea agreements

Updated policy could help prevent more employees from reputational harm

There are significant differences among the various divisions of the Department of Justice (DOJ) in how they deal with corporations on criminal or potentially criminal matters, including the way they treat voluntary disclosures, their willingness to enter into non-prosecution or deferred prosecution agreements, and their policies and practices in entering into plea agreements. To some extent, these disparities are not surprising given the differences in the nature of the criminal activities that the various divisions handle. This is certainly true of the Antitrust Division, whose Corporate Leniency Policy, promising amnesty under predefined conditions to the first company to report criminal antitrust activity, has no counterpart in any other component of the DOJ. However, other disparities do not appear to be justified. One of these, the Antitrust Division’s “carve out” policy, has finally been modified to bring it in line with the policies of the rest of the Justice Department.

Corporate plea agreements entered into with the Antitrust Division often contain a non-prosecution provision which protects the company’s employees from criminal liability related to the antitrust activity at issue. However, the Antitrust Division may also exclude or “carve out” certain individuals from this protective provision, based on its belief that these individuals may be criminally culpable and could be targeted in the future for their particular involvement. Previously, the names of all the individuals being carved out from the company’s plea agreement protections were listed in the publicly available version of the document. This oft-criticized practice was contrary to the stated position of every other unit within the DOJ, all of which follow policies against the public naming of uncharged third parties.

In April of this year, the Antitrust Division announced two key changes to its “carve out” policy for individuals employed by corporations entering criminal antitrust plea agreements. These changes were announced in a written statement from Assistant Attorney General Bill Baer. First, the division will no longer publicly release the names of individual employees who have been “carved out” of the non-prosecution protection in the company’s plea agreement. Instead, the names of carved out individuals will be listed only in an appendix to the plea agreement, and that appendix will be filed with the court under seal. This long-sought change creates a uniform policy within the DOJ, and will help prevent carved out employees from experiencing serious reputational harm until and unless the government has sufficient evidence to charge them.

Second, the Antitrust Division will carve out only employees whom it has reason to believe were involved in criminal wrongdoing and who are potential targets of the investigation. Previously, the division would also carve out from non-prosecution protection individual employees who refused to cooperate with the investigation or those with potentially relevant information who could not be located. Although the division will “continue to demand the full cooperation of anyone who seeks to benefit from the non-prosecution protection of a corporate plea agreement,” it “will no longer carve out employees for reasons unrelated to culpability.” Employees often refuse to cooperate or cannot easily be located for numerous reasons, many of which have nothing to do with covering up culpable behavior. This policy change will remove the cloud of doubt and negative stigma that presently plagues these employees, as the division will now carve out only those it believes are culpable or those still under investigation. Going forward, the policy change removes any uncertainty about the meaning of being carved out of the plea agreement—any employee in that unenviable position will know that he is being targeted for prosecution or further investigation.

These policy changes were announced one day after the Antitrust Division released the 2013 edition of its annual newsletter.   According to the newsletter, the Antitrust Division’s 2012 fiscal year provided record-high numbers for criminal fines ($1.14 billion) and the percentage of individual defendants sentenced to prison time (78  percent). The division also announced that the average prison sentence over the past three years has risen to 25 months, up significantly from the 1990s average of eight months and the 2000s average of 20 months. Both changes to the division’s carve out practice are positive news for corporate employees, especially in the present era of heightened criminal antitrust enforcement.

Contributing Author

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Ronald A. Sarachan

Ronald A. Sarachan is a partner in Drinker Biddle & Reath's Commercial Litigation Practice Group and co-chair of the White Collar/Internal Investigations Team. He focuses...

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Contributing Author

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Nicholas S. Feltham

Nicholas S. Feltham is an associate in Drinker Biddle & Reath's Commercial Litigation Practice Group, and is a member of the firm’s e-discovery team. Mr....

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