A US court of appeals on 5 April 2016 set aside a US federal judge’s decision to reject a settlement between the Department of Justice and Fokker Services BV. The court of appeals stated that the district court in question had exceeded its authority, as outlined under the Speedy Trial Act, to reject a Deferred Prosecution Agreement. The lower court has been ordered to rehear the case and to review the DPA in line with the court of appeals’ ruling.
As reported previously in In context, the DOJ and Fokker, a Dutch aerospace firm, entered into an 18-month DPA in June 2014. During the term of the DPA, Fokker would continue cooperating with federal authorities and implementing a substantial compliance programme. Fokker agreed to a USD 21 million global settlement for alleged violations of US restrictions on the export and re-export of aircraft parts, technology and services to Iran and Sudan.
Fokker’s own internal investigation indicated that, between 2005 and 2010, Fokker indirectly exported or re-exported aircraft components to Iranian or Sudanese customers without having the required licences. Fokker self-disclosed, cooperated with the authorities and accepted responsibility for its conduct, involving over 1,150 alleged violations of US sanctions.
As also previously reported in In Context, on 5 February 2015 a US federal judge (district court) refused to approve the settlement between the US government and Fokker on grounds of disproportionality; in short, the settlement was too lenient. Despite Fokker’s self-reporting of its conduct and extensive cooperation, the judge ruled that the DPA was disproportionate to the gravity of Fokker’s conduct. The judge indicated that he would be open to consider a modified version.
On 5 April 2016, the United States court of appeals for the District of Columbia vacated the US federal judge’s decision, ruling that the lower court had exceeded its authority by rejecting the settlement. In the opinion of the court of appeals, the Speedy Trials Act merely grants judges the right to reject DPAs if they grant undue delays. The court of appeals stated that the decision of the federal judge had to be vacated, given the destabilising effects it could have on the ability of prosecutors to enter into future settlement agreements.
Previously in In Context we raised the question: will judicial scrutiny of DPAs become a new trend? After this decision on appeal in the Fokker case, the answers seems to be “no.”
Two years ago a court of appeals also reversed a district court decision in a similar matter. In 2014, the US District Court for the second circuit vacated a decision by a federal judge to refuse to approve a SEC settlement with Citigroup over alleged securities fraud. The US District Court for the second circuit concluded that the government enforcement agency was the party authorised to make such judgments, not the trial court.