What’s in a DPA? Breaking Down Deferred Prosecution Agreements in Light of New Antitrust Division Policy
The DOJ’s Antitrust Division (“Division”) recently announced a significant policy change — that we covered in depth here — that will afford non-leniency companies the opportunity to seek mitigation credit in a criminal antitrust investigation if the company had in place at the time of misconduct a robust and effective compliance program. In a speech on July 11, 2019,1 Assistant Attorney General Delrahim announced that effective immediately, the Division will now allow its prosecutors to resolve wrongdoing by way of a deferred prosecution agreement (“DPA”) when a company’s compliance program is adequately designed to prevent, detect and remediate criminal wrongdoing by its employees and when the company self-reports the misconduct to the Division. The possibility of avoiding criminal prosecution is good news for companies that lose the race for leniency. But what are DPAs? What do they require? And how might they work at the Division?
First, some background on DPAs and how they operate. When the government agrees to resolve allegations of wrongdoing through a DPA, prosecutors file criminal charges through an information, but “defer” prosecution in exchange for a negotiated agreement with the defendant to comply with certain requirements for a period of time.2 After the company complies with the conditions, the charges are dismissed. Generally, the DOJ announces a DPA via a press release explaining the resolution of allegations of corporate wrongdoing and outlining the specific conduct alleged. The information is filed publicly and often simultaneously with the DPA. DPA terms vary widely regarding what entities are covered, the duration of the agreement, what conduct is covered and released, what constitutes a breach of the agreement, how breaches of the agreement will be remedied, and what, if any, reporting obligations will be required of the company. The agreement may also require a fine and restitution.
While used with some frequency by the DOJ’s Criminal Division and the U.S. Attorneys’ Offices, DPAs were persona non grata at the Antitrust Division until very recently. The first DPA between the Division and any entity was in 2013, when the Division agreed to resolve price-fixing allegations against the Royal Bank of Scotland (“RBS”) through a DPA.3 And recently in May 2019 — covered
here — the Division agreed for only the second time to resolve antitrust allegations against Heritage Pharmaceuticals Inc. (“Heritage”) by way of a DPA.4 These recent cases provide some guidance on the possible structure of future DPAs entered into by the Division.5
Substantial Cooperation and Remediation Requirements
The DPAs for both RBS and Heritage acknowledge the substantial assistance the defendants provided to the Division’s ongoing investigations. Indeed, the DPAs acknowledge each company’s cooperation to date and require additional cooperation until such time as all investigations and prosecutions arising out of the conduct described in the DPA have concluded. Cooperation required by the DPAs includes production of documents, transactional data and other materials, making available knowledgeable company employees for witness interviews, grand jury and trial testimony, and taking additional steps, as requested, to assist the government in its investigation, including recording conversations with co-conspirators and introducing co-conspirators to law enforcement officials.
The DPA for RBS also recognizes that RBS significantly expanded its legal and regulatory compliance programs and took extensive steps to remediate the misconduct, including terminating the individuals principally responsible for the relevant conduct. RBS further agreed to report to the Division, upon its request, regarding its remediation and implementation of any compliance program and internal procedures. While the Heritage DPA does not recognize that any individuals were terminated as part of its Heritage remediation, it does require that certain covered individuals continue their cooperation with the Division’s investigation. Heritage also represented that it had implemented and agreed to continue to implement a robust compliance program designed to prevent and detect criminal antitrust violations.
It remains to be seen whether DPAs secured in reward of robust and effective compliance programs will require compliance revisions, monitoring, and/or reporting. In other words, now that comprehensive compliance efforts may qualify a company for a DPA, will compliance improvements still be required as a condition of the agreement? We do not yet know, and will have to analyze future DPAs — awarded to companies with qualifying corporate compliance programs — to see how the Division structures DPAs awarded for a pre-existing compliance program.
Time Period May Be Uncertain in Practice
Generally, DPAs contain an expiration date — either a date certain or a condition precedent that triggers expiration (such as the completion of all cooperation or other requirements). In the RBS and Heritage DPAs, the Division agreed to terms of two and three years, respectively, with a possible extension of one year if the Division decides that the companies have knowingly violated any provisions of the DPA. In its recent DPA with Heritage, the Division further required Heritage to cooperate with the government in its ongoing investigations and prosecutions of the relevant conduct until both were concluded, whether or not they were concluded within the three-year agreement period. RBS was similarly required to cooperate with the Division’s investigation beyond the length of the two-year agreement. Thus, in practice, a DPA may require years of assistance to the Division during its investigation, regardless of the official expiration term.
On the brighter side, the Division agreed to relatively modest penalties in its two DPAs to date: $150,000 for RBS and $225,000 for Heritage, respectively. The Heritage DPA further recognized that restitution was not appropriate in light of the pending civil cases filed against Heritage. There is no mention of restitution in the RBS DPA.
The new opportunity to resolve criminal antitrust charges through a DPA certainly represent “winds of change” at the Division. At the foremost, this change makes it more important than ever for companies to ensure their antitrust compliance programs are robust and comprehensive. Not only will a company hoping to secure a DPA be required to cooperate fully in any Division investigation, the company also will have to affirmatively demonstrate that its compliance program in effect at the time of the violation was sufficiently robust notwithstanding the misconduct.
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1 Makan Delrahim, Assistant Attorney General, U.S. Dep’t of Justice, Antitrust Division, Winds of Change: A New Model for Incentivizing Antitrust Compliance Programs (July 11, 2019), https://www.justice.gov/opa/speech/assistant-attorney-general-makan-delrahim-delivers-remarks-new-york-university-school-l-0.
2 In his July 11th remarks, AAG Delrahim specifically noted that while DPAs will be available to eligible companies, the Division will continue to disfavor non-prosecution agreements. Non-prosecution agreements are where the government agrees not to file criminal charges in exchange for an agreement to comply with certain requirements for a period of time.
3 Deferred Prosecution Agreement, United States v. Royal Bank of Scotland PLC, No. 3:13-cr-074 (D. Conn. Feb. 5, 2013), available at https://www.justice.gov/atr/case-document/file/509081/download.
4 Deferred Prosecution Agreement, United States v. Heritage Pharmaceuticals Inc., No. 2:19-cr-316 (E.D. Pa. Jun. 27, 2019), ECF No. 14.
5 The Division agreed to two other DPAs that resolved allegations of wrongdoing unrelated to antitrust violations. See Deferred Prosecution Agreement, United States v. Washington Gas Energy Systems, Inc., No. 1:14-cr-228 (D.D.C. Nov. 19, 2014), available at https://www.justice.gov/sites/default/files/opa/press-releases/attachments/2014/11/19/washington_gas_energy_systems_-_deferred_prosecution_agreement.pdf; United States v. Deutsche Bank AG, No. 3:15-cr-61 (D. Conn. Apr. 23, 2015) ECF No. 6) available at https://www.justice.gov/sites/default/files/criminal-fraud/legacy/2015/05/22/2014-04-23-deutsche-bank-deferred-prosecution-agreement.pdf.