Thursday, June 25, 2009

Deferred prosecution agreements: It's time for more transparency

Deferred prosecution agreements: It's time for more transparency
Posted by Bill Pascrell Jr. and Rep. Frank Pallone
June 25, 2009

Today the House Judiciary Committee will exercise its investigative responsibility in a hearing designed to shed light on a secretive legal process that has created a dangerous system of double justice in America.

Since The Star-Ledger reported in 2007 on how U.S. Attorneys were using an old legal procedure to settle criminal cases involving corporations, skepticism has arisen concerning why so little is known about these "deferred prosecution agreements." Questions regarding who is benefitting from deferred prosecutions have become common and there is a sense of doubt over whether justice is being equally administered.

No legal authority seems able to answer why prosecutions are deferred for some offenders, but not others. We don't know what standards are in place to determine the level of punishment for corporate criminals. And there is no accountability or fee structure for whatever company is selected by a U.S. Attorney to monitor corporations in their attempt to avoid prosecution.

To better understand the process, we turned to experts in the legal community and our colleagues on the House Judiciary Committee. Last year, former Attorney General John Ashcroft appeared before the committee to share information about a $52 million no-bid contract his firm was awarded to monitor a company that had defrauded Medicare. As he failed to enlighten Congress on how his firm was awarded such a lucrative deal, we requested that the Government Accountability Office investigate. Findings from the GAO's report will be revealed at today's hearing.

Though much remains to be learned about deferred prosecutions, there is some information that we do know. They were created in 1974. The intent was to allow government attorneys to defer prosecutions so small-scale drug offenders could seek therapy or rehabilitation. The role of deferred prosecution was dramatically reinvented by 2002 to meet the rapid increase in federal cases against corporate offenders. Their use has proliferated, rising from an estimated two a year before 2003 to as many as thirty-five in 2007.

Under the system, prosecution is deferred in exchange for the offender's cooperation in minimizing a potentially harmful impact on honest employees, shareholders, consumers or other innocent bystanders. We can support the principle of compromising to avoid an Enron scenario that hurts the livelihood of thousands, but we demand standards and so should Congress.

The corporate pretrial agreement process has turned into a mockery of our legal system. It has become an avenue for U.S. Attorneys to curry political favor and an out for the wealthiest criminals in our society to escape unscathed from far-reaching and despicable crimes.

Medicare fraud is the first example that comes to mind. Securities fraud is another.

In 2004, the world's largest insurer, AIG, accepted responsibility for violating securities laws. In exchange for deferring prosecution, AIG cut a deal with the Justice Department to pay a hefty fine and accept the supervision of an independent monitor. Five years later it has become clear the agreement did very little to end the shenanigans at AIG, which continued with business as usual until it brought America's economy and the worldwide market to its knees.

Our concern over the lack of transparency for such an undefined component of America's judicial infrastructure does not come without a proposed fix. In April we introduced a comprehensive reform proposal called the Accountability in Deferred Prosecution Act. It would regulate the deferred prosecution process, limiting a U.S. Attorney's unyielding power to determine when to use a deferred prosecution and how to set its terms, including the selection of a monitor. It would require that monitors be selected by district court judges from a pool of pre-qualified firms that are qualified in the respective field.

We look forward to discussing the legislation with the Judiciary Committee at today's hearing and advancing a reform effort that has the potential to end the back room deals being cut between U.S. Attorneys, connected lawyers and wealthy corporate criminals.

Deferring a prosecution should not be mistaken for deferring justice. With a new Justice Department in place, Congress has a unique opportunity to exercise its oversight responsibility and bring common sense reform to a growing pattern of double justice and government secrecy.

Rep. Bill Pascrell Jr. (D-8th District) and Rep. Frank Pallone (D-6th District) are members of the U.S. House of Representatives from New Jersey.

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