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Corporate Crime: Prosecutors Adhered to Guidance in Selecting Monitors for Deferred Prosecution and Non-Prosecution Agreements, but DOJ Could Better Communicate Its Role in Resolving Conflicts

GAO-10-260T Published: Nov 19, 2009. Publicly Released: Nov 19, 2009.
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Recent cases of corporate fraud and mismanagement heighten the Department of Justice's (DOJ) need to appropriately punish and deter corporate crime. Recently, DOJ has made more use of deferred prosecution and non-prosecution agreements (DPAs and NPAs), in which prosecutors may require company reform, among other things, in exchange for deferring prosecution, and may also require companies to hire an independent monitor to oversee compliance. This testimony addresses (1) the extent to which prosecutors adhered to DOJ's monitor selection guidelines, (2) the prior work experience of monitors and companies' opinions of this experience, and (3) the extent to which companies raised concerns about their monitors, and whether DOJ had defined its role in resolving these concerns. Among other steps, GAO reviewed DOJ guidance and examined the 152 agreements negotiated from 1993 (when the first 2 were signed) through September 2009. GAO also interviewed DOJ officials, obtained information on the prior work experience of monitors who had been selected, and interviewed representatives from 13 companies with agreements that required monitors. These results, while not generalizable, provide insights into monitor selection and oversight.


Recommendations for Executive Action

Agency Affected Recommendation Status
Office of the Attorney General To provide clarity regarding DOJ's role in resolving disputes between companies and monitors, the Attorney General should direct all litigating components and U.S. Attorneys Offices to explain in each corporate DPA or NPA what role DOJ could play in resolving such disputes, given the facts and circumstances of the case.
Closed – Implemented
We found that over half of the representatives of the companies with whom we spoke or from whom we obtained written responses (where the companies had entered into deferred prosecution agreements (DPA) or non-prosecution agreements (NPA) with the Department of Justice (DOJ) that required monitors) raised concerns about the monitor's cost, scope, and amount of work completed. Because monitors are one mechanism that DOJ uses to ensure that companies are reforming and meeting the goals of DPAs and NPAs, DOJ has an interest in monitors performing their duties properly. We also found that some companies were unclear as to the extent DOJ could be involved in resolving such disputes and DOJ had not clearly communicated to companies its role in resolving such concerns. While one of the DOJ litigating divisions and one U.S. Attorney's Office had made efforts to articulate in the DPAs and NPAs what role they could play in resolving monitor issues, other DOJ litigation divisions and U.S. Attorney's Offices had not done so. We recommended that the Attorney General direct all litigating components and U.S. Attorneys Offices to explain in each corporate DPA or NPA what role DOJ could play in resolving such disputes, given the facts and circumstances of the case. In response, on May 25, 2010, DOJ issued an internal memorandum to all DOJ components and U.S. Attorneys in which it (1) incorporated into existing Department guidance for drafting DPAs and NPAs the principle that these agreements should explain DOJ's role in resolving disputes that may arise between the monitor and the corporation, (2) laid out considerations prosecutors should keep in mind when applying the principle, and (3) suggested specific language for provisions that might appropriately be included in DPAs and NPAs. The issuance of the memorandum is consistent with our recommendation.

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