D.C. Circuit Weighs Judicial Role in Deferred Prosecution Pacts

By Chris Bruce

Sept. 11 — A major enforcement case argued before the U.S. Court of Appeals for the District of Columbia Circuit Sept. 11 likely will not end all questions about the durability of deferred prosecution agreements (DPAs) reached between the U.S. government and corporate defendants.

The case involves a DPA between the U.S. government and Fokker Services R.V., a Dutch aerospace company charged with a five-year conspiracy to evade U.S. export laws by shipping aviation equipment and technology to Iran and other nations.

In February, Judge Richard Leon of the U.S. District Court for the District of Columbia refused to approve the DPA under the Speedy Trial Act.

Leon criticized several aspects of the DPA, saying it “does not constitute an appropriate exercise of prosecutorial discretion” and that approval of it “would undermine the public's confidence in the administration of justice and promote disrespect for the law for it 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.”

The government and Fokker Services have appealed, saying Leon exceeded his authority under the statute.

DPAs Carry Risk 

During argument Sept. 11, judges said the real question is not whether judges have a say in whether to approve DPAs, but how much say, and for what reasons.

Although DPAs often receive court approval, nothing is guaranteed, they said.

“There's always some risk that the court is not going to approve of the deal,” Judge Sri Srinivasan told Fokker counsel Edward C. O'Callaghan, a partner with Clifford Chance in New York.

The Speedy Trial Act, which sets tight deadlines for criminal trials, excludes delays when prosecution is deferred by written agreement, “with approval of the court, for the purpose of allowing the defendant to demonstrate his good conduct.”

Leon's order can't stand under the statute, according to a U.S. brief filed in June.

“Nothing in the Speedy Trial Act suggests that Congress altered the established prosecutorial-discretion framework by authorizing district courts to review intrusively the terms of DPAs for excessive leniency toward defendants,” the brief said.

Impact on Bankers 

The case is being watched in part because of its potential to complicate enforcement agreements and settlements with financial services companies and their executives.

Argument came shortly after the Justice Department issued new policies for criminal probes, with the Justice Department's second-ranking official saying prosecutors will pursue individuals as well as corporations.

The Justice Department's recent statements may have sparked a question by Judge Laurence H. Silberman.

Callaghan said Fokker Services will suffer increased harm if the DPA is not approved, and was challenged by Silberman to elaborate on what kind of harm might result.

Perhaps a new focus by a new U.S. Attorney General on prosecution of individuals? Silberman asked to laughter in the courtroom.

Fokker Services faces a pending criminal charge in the district court. According to O'Callaghan, the company has admitted the charges, doing so only because it was able to reach the DPA with prosecutors.

The role of judges is just one aspect of the case, which includes other questions, such as whether the D.C. Circuit has jurisdiction to hear the case at this point, and if so, on what basis.

Judge David B. Sentelle also repeatedly raised questions about whether a finding of appellate jurisdiction in this case might spur a flood of interlocutory appeals in other Speedy Trial Act cases.

Court's Jurisdiction Unclear 

Among other points, it's also not clear whether the government may prosecute Fokker Services if Leon's order stands, or if the D.C. Circuit decides it doesn't have jurisdiction.

Silberman asked Aditya Bamzai, who argued for the government, whether the U.S. has legal power to continue its prosecution.

Bamzai voiced hesitation about answering, telling Silberman there's an outstanding question of whether Leon's order prevents the DPA from taking effect.

Adam G. Unikowsky, a partner with Jenner & Block in Washington, D.C., argued on behalf of David DeBruin, another Jenner & Block partner. The D.C. Circuit tapped DeBruin to present friend of the court arguments in favor of Leon's February order.

Unikowsky said the D.C. Circuit lacks jurisdiction to hear the case. He also said, in answer to a question by Srinivasan, that Congress meant to allow judges to disapprove DPAs because they believe prosecution is needed.

And, he told Silberman, “there is no room” for a rule that says judges can never include questions about leniency in their consideration of DPAs.

To contact the reporter on this story: Chris Bruce in Washington at cbruce@bna.com

To contact the editor responsible for this story: Seth Stern at sstern@bna.com

Judge Leon's February ruling is at http://www.bloomberglaw.com/public/document/United_States_v_Fokker_Servs_BV_79_F_Supp_3d_160_36_ITRD_1666_DDC.