In recent years, the Department of Justice has come to rely on Deferred Prosecution Agreements (DPAs) to resolve many high-profile investigations of corporate wrongdoing. Under DPAs, criminal charges are filed in district court, and prosecution is deferred pending a corporate defendant’s fulfillment of remedial obligations, including payments to the government.

A recent decision of District Judge Richard J. Leon in Washington, D.C. may have a significant impact on this now common feature of white-collar practice. On February 5, 2015, Judge Leon rejected a DPA urged by the Justice Department and counsel for Fokker Services, B.V. (“Fokker”). This decision comes after several other courts rejected or raised serious questions about the terms of such agreements, as I discussed in a prior blog, “A Plant Grows in Brooklyn: EDNY Judge Scrutinizes Deferred Prosecution Deal,” and in a New York Law Journal article, “Courts Push Back Against Government Deals With Companies.” The judicial scrutiny of DPAs may be reaching a point where the government begins to rethink their merits, as suggested in recent comments by Assistant Attorney General Leslie Caldwell at the ABA White Collar Conference.

The DPA between the Justice Department and Fokker shows just how hard it is becoming to end some investigations. Judge Leon’sopinion arose from the government’s investigation and prosecution of Fokker for conspiring to violate and evade U.S. export laws by selling aircraft systems to Iran, Sudan and Burma. After flouting U.S. export laws for five years, Fokker voluntarily disclosed its conduct to U.S. authorities in 2010 and began cooperating with government investigators.

The DPA submitted for court approval provided that the government would dismiss the charges against Fokker after 18 months if Fokker paid $10.5 million in fines to the Department of Justice (and an additional $10.5 million to other government agencies); continued to cooperate with the government’s investigation; implemented new compliance programs and policies; and complied with U.S. export laws. The Factual Statement filed along with the DPA stated, among other things, that Fokker’s misconduct was orchestrated at the highest levels of the company.

Judge Leon recognized the government’s authority to decide not to prosecute and acknowledged that the court would have “no role here if the Government had chosen not to charge Fokker Services with any criminal conduct” and proceed by way of a non-prosecution agreement (NPA) – an agreement not to prosecute a target of investigation that, like a DPA, often has remedial requirements but is not filed in court. But, once the government charged Fokker, “[t]he parties are, in essence, requesting the Court to lend its judicial imprimatur to their DPA” and “it is [the] Court’s duty to consider carefully whether that approval should be given.”

The DPA was found to be “grossly disproportionate” to Fokker’s conduct: “to see a defendant prosecuted so anemically for engaging in such egregious conduct for such a sustained period of time and for the benefit of one of our country’s worst enemies” would “undermine the public’s confidence in the administration of justice and promote disrespect for the law.” The court faulted the deal because Fokker’s fine is not “a penny more than the $21 million in revenue it collected from its illegal transaction;” no individuals were being prosecuted and some directly involved employees are being permitted to remain employed at Fokker; and the DPA did not require an independent monitor, or reports by Fokker to the Court or the government. Judge Leon questioned “how a company with such a long track record of deceit and illegal behavior ever convinced the Department of Justice to agree to that!” but noted that he remains open to considering a modified DPA in the future.

Judge Leon sought to qualify his holding by noting that the court’s supervisory powers should be exercised “sparingly” when a defendant “is not seeking redress for any impropriety it has identified.” But, in the court’s view, the public has an interest in the integrity of judicial proceedings, which would be “compromised by giving the Court’s stamp of approval to either overly-lenient prosecutorial action, or overly-zealous prosecutorial conduct.”

The rejection of the Fokker DPA follows other instances of heightened judicial scrutiny of DPAs. In United States v. HSBC Bank USA, N.A., Judge John Gleeson in the Eastern District of New York held that a district court has the authority “to approve or reject [a] DPA pursuant to its supervisory power.” The Fokker opinion cited that decision and similarly rejected the government’s argument that the law does not “authorize the Court to approve or deny” deferred prosecution agreements and “only permits a court to approve parties’ agreement to exclude time from the computation of the speedy-trial clock.”

The Fokker decision, like the HSBC decision, is a reminder that judicial acceptance of DPAs is becoming far from certain. The government has appealed Judge Leon’s decision, so the scope of judicial review of DPAs may be clarified. In the meantime, the Justice Department may just decide that the benefits of DPAs no longer justify the uncertainty and potential awkwardness of a judge telling the government that it is being too lenient to corporations.