New Database Examines How the United States Prosecutes Corporate Crime

Fines for companies have risen over the last 25 years, but the number of prosecutions has remained roughly the same, according to information compiled by a University of Virginia law professor and his research team.
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Enron building.

Enron building.

In 2002, a federal court found the accounting firm Arthur Andersen guilty of obstructing justice. (Employees had been instructed to shred documents related to one of its clients, Enron, then under investigation by the Securities and Exchange Commission.) In 2005, the Supreme Court, in a 9–0 decision, overturned the conviction due to poor jury instructions. But by then, the damage had already been done.

The company that began 90 years earlier, and claimed an annual revenue of $9.3 billion with 85,000 worldwide employees, was essentially gone.

For some, this was justice. For others, the narrative—of a long-standing business shuttered over a conviction later overturned—was a bad look for a supposedly pro-business country. Following the initial ruling, the Department of Justice issued a memo titled "Principles of Federal Prosecution of Business Organizations" that revised how prosecutors went after corporate crime.

"It didn't say, give the company out-of-court deals, but that's what happened," says Brandon Garrett, professor of law at the University of Virginia, and author of Too Big to Jail: How Prosecutors Compromise With Corporations. "The idea was, we don't want to destroy companies, we need to think of more flexible and lenient tools to use."

Two such tools were the deferred prosecution agreement (DPA) and the non-prosecution agreement (NPA), arrangements that forced companies to pay fines—and, occasionally, admit wrongdoing or go on probation—but allowed them to avoid being seen as "guilty" in the eyes of the law. This last part is important because, even if the penalties issued in the DPA or NPA are exactly the same as those attached to a guilty verdict, the agreements don't kickstart the same series of hoops a company found guilty in court must jump through to remain in business.

"There are all kinds of concerns about how these agreements are designed," Garrett says. "If these deals are lenient, companies may not be learning their lesson, so you start to see [businesses] getting prosecuted one, two, three times in a space of that many years. It sends a message that the fines aren't being taken seriously."

This method of prosecution has also allowed specifics about fines and probation terms to escape media scrutiny. If there is an extended trial, reporters are sent to court to deliver daily updates. But if there's only a press release about an agreement, it's likely to be buried on a back page and forgotten about by the next day. And while information about the agreements is technically public, the only way to obtain it was through the lengthy process of requests under the Freedom of Information Act.

Until now.

For the past decade, Garrett—along with Jon Ashley, the business and empirical research librarian at UVA, and nearly two dozen research assistants—has been compiling information about every corporate case in the United States since 1992. On March 31st, the Corporate Prosecution Registry, an online repository of "comprehensive and up-to-date information on federal organizational prosecutions in the United States," was finally launched.

"If these deals are lenient, companies may not be learning their lesson."

As a tool, it's a way for the public—as well as prosecutors, defense lawyers, judges, and policymakers—to stay informed. But the research has also provided a tremendous amount of insight into corporate prosecution trends over the past 25 years.

For example, while the amount of fines has steadily risen due to the seriousness of the crimes (say, the 2010 British Petroleum oil spill, which resulted in the oil company being fined $4 billion), the total number of prosecutions has remained roughly the same year after year. Were DPAs and NPAs incentivizing companies to commit fewer crimes or more serious ones?

In 2015, then-Deputy Attorney General Sally Yates issued a memo advising prosecutors to not only spend more time developing guilty pleas, but also prosecuting more individuals instead of focusing on businesses. As the Yates memo reasons, prosecuting individuals is important for several reasons:

[I]t deters future illegal activity; it incentivizes changes in corporate behavior; it ensures that the proper parties are held responsible for their actions; and it promotes the public's confidence in our justice system.

But this was the mindset in the waning years of the Obama administration. It's still hard to predict how corporate crime will be dealt with under the Trump administration.

In April, Attorney General Jeff Sessions said his Department of Justice would strictly enforce all laws, including those "regarding corporate misconduct, fraud, foreign corruption and other types of white-collar crime." But that wasn't enough for Hui Chen, a Department of Justice lawyer who resigned in June because, she said, "trying to hold companies to standards that our current administration is not living up to was creating a cognitive dissonance that I could not overcome."

"I thought good changes were slowly being made over the last three or four years," Garrett says. "But I really have no idea where things are going now."

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