U.S. official defends use of deferred-prosecution deals

NEW YORK, Sept 13 Thu Sep 13, 2012 8:58pm EDT

NEW YORK, Sept 13 (Reuters) - A top U.S. criminal prosecutor said Thursday that deferred prosecution agreements have become a mainstay of the government's white-collar enforcement efforts, creating a "smart and responsible" alternative to criminal indictment.

Lanny Breuer, assistant attorney general for the criminal division at the U.S. Department of Justice, said in remarks to the New York City Bar Association that the increased use of deferred prosecution agreements and non-prosecution agreements over the last decade had a "transformative effect" on corporate compliance across the globe, allowing good companies to rehabilitate while punishing bad actors.

"The result has been, unequivocally, far greater accountability for corporate wrongdoing - and a sea change in corporate compliance efforts," Breuer said. "Companies now know that avoiding the disaster scenario of an indictment does not mean an escape from accountability."

In the agreements, the government agrees to delay or forgo prosecution if a company admits to wrongdoing, cooperate with any ongoing investigations, pay a fine and agree to improve its compliance programs. If the terms are not met, the government can prosecute the case.

Breuer pointed to the non-prosecution agreement entered into in June by Barclays Bank plc, which was accused of manipulating the London Interbank Offered Rate, or LIBOR. Barclays agreed to pay $160 million to U.S. authorities, implemented new compliance measures and agreed to aid investigations against individuals and other financial institutions.

In that case, the non-prosecution agreement allowed prosecutors to recognize Barclay's "extraordinary" cooperation and kept the company from facing the more serious consequences of criminal indictment, Breuer said.

Critics have said that deferred- and non-prosecution agreements allow companies that commit serious crimes to get off easy. Some have also argued that standards for what behavior merits a more favorable agreement versus criminal prosecution are inconsistent.

But Breuer said deferred- and non-prosecution agreements present a more palatable option when large companies are under scrutiny, allowing wrongdoers the chance to reform without causing collateral damage to innocent shareholders and employees.

"When the only tool we had to use in cases of corporate misconduct was a criminal indictment, prosecutors sometimes had to use a sledgehammer to crack a nut," Breuer said. "More often, they just walked away."

Now, "companies know that they are much more likely to face punishment than they were when our choice was limited to indicting or walking away," he added.

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