In Defense of Deferred Prosecution Agreements
What bothers me isn’t that fraud is not nice. Or that fraud is mean. For fifteen thousand years, fraud and short sighted thinking have never, ever worked. Not once. Eventually you get caught, things go south. When the hell did we forget all that?1
Following the financial crisis of 2008, law makers along with the public and media sought to hold corporations and their leadership accountable for the wide spread conduct that triggered the market crash. 2 The government responded with new legislation to make bringing charges for corporate crime easier 3 and increased investigations into corporate wrongdoing. 4 However, despite the increase in enforcement, federal prosecutors remain hesitant to bring indictments due to the potential for collateral consequences. Specifically, prosecutors are concerned that an indictment could cause the corporation to fail.5
The concern of collateral consequences is perhaps most apparent in the 2003 conviction and subsequent collapse of the major accounting firm Arthur Andersen for its role in obstructing the investigation into Enron’s widespread accounting fraud.6 Following Arthur Andersen’s collapse, 28,000 people innocent of wrongdoing lost their jobs. 7 This led to public outcry of prosecutorial overreaching, which in turn led the Department of Justice (“DOJ”) to rethink how it deals with corporate crime instead of only indicting or declining to bring charges.8 This refocus left room for a new policy that could stop corporate wrongdoing while avoiding the “Andersen Effect.”9
