Deferred Prosecution Agreement or DPA A New Way Out For Corporate Criminals

Dec 26, 2019 By Matthew Friedberg

Legislative Proclamation

The Criminal Code was amended in 2018 to introduce “Remediation Agreements” as the new regime dealing with commercial crimes.  These agreements are internationally known as a Deferred Prosecution Agreement (DPA) and are common practice in the United States and the United Kingdom.

Found in Part XXII.1 of the Canadian Criminal Code, “Remediation Agreement” provisions give the Crown discretion to defer prosecuting corporations that have been charged with fraud, bribery and/or corruption.  In essence, the Crown can come to a resolution with the corporation as an alternative measure to prosecuting them.

The Crown essentially orders compliance with the law by mandating corporate policy changes, administering fines and implementing enforcement mechanisms that prevent future related offences. Under this regime charges are laid, and then stayed until the agreement is satisfied, at which point the Crown withdraws the charges.  If the corporation breaches the agreement the Crown brings an application to terminate the agreement and continue its prosecution.

The Criminal Code sets out the conditions that need to be met before prosecutors can enter into a remediation agreement with a corporation:

  • The prosecutor is of the opinion that there is a reasonable prospect of conviction;
  • The prosecutor is of the opinion that the offence did not result in serious bodily harm or death, or injury to national security, and was not committed for a criminal organization/terrorist group;
  • The prosecutor is of the opinion that the agreement is in the public interest and appropriate in the circumstances;
  • The Attorney General has consented to the negotiation of the agreement.

 

The nature and gravity of the offence are also considered however the prosecutor cannot consider things like national economic interests as stated in the Corruption of Foreign Public Officials Act.

SNC-Lavalin

The SNC-Lavalin prosecution brought a great deal of media attention to DPAs in Canada.  This case involved the Prime Minister of Canada, Justin Trudeau, lobbying for SNC-Lavalin to receive a DPA rather than being criminally prosecuted.    The corporation was facing charges under the Criminal Code in relation to its business dealings in Libya.  The federal Public Prosecution Service of Canada refused to offer a DPA on the basis that SNC-Lavlin did not meet the conditions under Part XXII.1.

The Parliament of Canada’s Ethics Commissioner, Mario Dion, found that the Prime Minister improperly influenced the Attorney General to intervene in an on-going criminal case involving SNC-Lavalin.  The Trudeau government has maintained that there was no undue pressure, but rather, SNC-Lavalin was offered a DPA for public policy reasons: saving jobs, and to prevent negative consequences on innocent employees and stakeholders.

Proponents & Critics of the New DPA Regime in Canada

Proponents of the DPA regime maintain that it gives prosecutors better tools to tackle commercial crimes.  For example, a DPA can help prevent innocent third parties such as employees, shareholders, and pensioners who did not participate in the crimes being punished for the actions of a few bad apples.

John Dillon, Senior Vice President of the Business Council of Canada, commented on DPA in his remarks to the Standing Senate Committee on Legal and Constitutional Affairs regarding Bill C-74 and stated:

  • “We believe the use of remediation agreements will offer an important additional tool to Crown prosecutors and strengthen their ability to deal with cases of corporate wrongdoing…The other clear advantage of the use of remediation agreements, or DPAs, as they are sometimes known, is that it puts the focus on the true wrongdoers, often a single or small number of rogue employees acting in their own self-interest, and better protects the innocent.”

Critics of DPAs caution that this new regime is a fundamental departure from the way we handle the Criminal Code in Canada.  Liberal MP Greg Fergus told the committee that he was concerned the change appeared to be designed to give those accused of white-collar crimes "a little slap on the wrist” he added:  

  • "It seems we're letting those with the means have an easier time of it than those who don't have the means."  

The Follies of the American DPA Experience

DPAs have been around in the United States for over twenty years.  These agreements are administered in the federal system by the Department of Justice (DOJ) on criminal prosecutions.

Critics of the well-established DPA system in the United States claim that these agreements are negotiated behind closed doors with no public oversight.  Another critical issue that has been raised with the American DPA system is the lack of judicial review involved in the agreement making process. In United States v. Fokker Services B.V. the U.S. Court of Appeals for the DC Circuit circumscribed the court’s role in the DPA process by holding that the Court cannot reject a DPA due to disagreement with its substantive terms. In essence; a court cannot reject a DPA merely because it believes the agreement is too lenient.

In Fokker the Court endorsed the authority of prosecutors to resolve criminal cases with discretion, leaving many critics unsatisfied with the level of judicial review and supervision over the Justice Department’s DPA negotiations.

This level of prosecutorial discretion is unique compared to the plea bargaining system in the criminal setting, where a court can reject an agreement if it finds that the bargain is too lenient, or not in the public interest.

Anti-corruption groups in the U.S; such as Public Citizen have published reports: “Use of Deferred and Non-Prosecution Agreements in the Age of Too Big To Jail” warning the public about the DOJ’s increasing reliance on deferred prosecution agreements with large financial firms, and the lack of accountability for these corporate criminals.

One of the cases discussed in this report involves HSBC, one of the world’s largest financial institutions. In December 2012 HSBC admitted to criminal activity by violating the Bank Secrecy Act, the International Emergency Economic Powers Act and the Trading with the Enemy Act.  The bank’s violations permitted drug cartels to launder hundreds of millions of dollars of narcotic proceeds through HBSC subsidiaries and to facilitate hundreds of millions of dollars in transactions on behalf of customers in countries that are sanctioned by the United States.

The DOJ chose not to move forward with an indictment, and instead elected to enter into a deferred prosecution agreement (DPA) with the bank.  Under the terms of the DPA, the government chose not to prosecute HSBC for its actions in exchange for HSBC acknowledging wrongdoing, paying $1.9 billion in fines, and agreeing to remedy its compliance programs. The Public Citizen report stated this about the agreement: “While a $1.9 billion fine may appear punitive on its face, it only amounts to roughly 9 percent of HSBC’s reported $20.6 billion in pre-tax profit in 2012”.

At the press conference announcing the settlement, then-Assistant Attorney General Lanny Breuer explained his reasoning for entering the DPA instead of indicting the company:

  • “Our goal here is not to bring HSBC down, it’s not to cause a systemic effect on the economy, it’s not for people to lose thousands of jobs.”

Conclusion

Canada must be cautious of its new DPA regime as it may evolve into a way for corporations to buy their way out of prosecution.  Close attention must be paid to the increasing criticism regarding the United States’ DPA model.  To hold corporations accountable for their actions a successful DPA regime must include public oversight and opportunities for judicial review.  These types of deals should be used on rare occasions and should not become a common way to resolve investigations.  They should be subject to court approval in a public hearing. Companies that are granted DPAs should be given fines and penalties of significant deterrent value.  Guilty executives and decision-makers should be targeted rather than provided immunity, with the aim of lessening the impact on innocent parties.