With increasing frequency, federal prosecutors are using deferred prosecution agreements (“DPAs”) and non-prosecution agreements (“NPAs”) to resolve criminal investigations against corporations. Many DPAs and NPAs require the appointment of an independent corporate monitor to oversee and report on the corporations’ compliance with the terms of those agreements. In response to the controversy surrounding the selection by the U.S. Attorney for New Jersey of former Attorney General John Ashcroft as a corporate monitor (from which Ashcroft’s firm stands to gain as much as $52 million in fees), the Department of Justice (“DOJ”) recently issued guidance to federal prosecutors regarding the selection and use of monitors. The guidelines address conflicts of interest, communications between the monitor and the government, and other issues important to corporations that may be required to implement DPAs and NPAs that provide for the appointment of a corporate monitor.
According to the guidelines, which were issued on March 7, 2008 by acting Deputy Attorney General Craig Morford, an individual prosecutor may no longer unilaterally select the corporate monitor. Monitor candidates must now be considered by an ad hoc committee within the U.S. Attorney’s Office or the DOJ component handling the criminal case, and the selection of a monitor must now be approved by the Deputy Attorney General. Also, the monitor must not have any relationship with a corporation that would cause a reasonable person to question the monitor’s independence, and the corporation must agree that it will not employ the monitor for at least one year after the monitorship is terminated.
In the event the monitor finds previously undisclosed or new misconduct, the DPA or NPA should specify what kinds of matters the monitor must report, leaving the reporting of other kinds of matters to the discretion of the monitor. It should also address the duration and scope of the monitorship, and should permit extensions or reductions of the monitor’s term, as circumstances warrant. Significantly, the agreement should make it clear that the corporation’s failure to adopt a recommendation made by the monitor within a reasonable period of time will be reported to the government and considered in evaluating whether the corporation has fulfilled its obligations under the agreement. A corporation’s failure to fulfill such obligations could result in the filing of formal criminal charges (where there was an NPA in place) or the resumption of the deferred prosecution (where there was a DPA in place).
The guidelines do not address when prosecutors should use a DPA or NPA to resolve a criminal case. Nor do they address when, in the context of a negotiated DPA or NPA, the appointment of a monitor is appropriate. They do, however, provide companies with a better idea of what to expect when negotiating agreements that include the appointment of a corporate monitor.