According to a new study released yesterday by Corporate Crime Reporter, federal and state prosecutors are increasingly offering major corporations deals known as deferred prosecution or non-prosecution agreements. Under such agreements, prosecutors agree not to prosecute corporations and in exchange for cooperation against culpable executives, implementation of corporate monitors, and fines.
Corporate Crime Reporter’s report found 34 such agreements over the past few years with 17 deferred prosecution agreements and 17 non-prosecution agreements with major corporations including Adelphia, Monsanto, Shell, WorldCom/MCI, and others. The change in prosecution is a result of a new policy implemented by the Department of Justice in 2003 with major corporations committing serious crimes no longer being convicted and sentenced. Consequently, no corporation caught committing securities or accounting fraud has been convicted since Arthur Andersen in June of 2002. Moreover, prosecutors have made twice as many non-prosecution and deferred prosecution agreements with major American corporations in the last four years than in the previous 10 years. According to the U.S. Attorney’s manual, such agreements should only be used in a limited number of cases, such as minor drug and juvenile delinquency cases, in order to “save prosecutive and judicial resources for concentration on major cases.”
Among the 34 cases profiled by Corporate Crime Reporter, many received the aforementioned arguments despite substantial evidence of wrongdoing. The cases include:
Adelphia Communications
Adelphia received a non-prosecution agreement in May 2005, despite engaging in one of the most extensive financial frauds ever. Federal officials alleged that from 1998 through March 2002, Adelphia — the nation's sixth largest cable-television company — systematically and fraudulently excluded billions of dollars in liabilities from its consolidated financial statements by hiding them on the books of off-balance sheet affiliates. It also allegedly inflated earnings to meet Wall Street's expectations, falsified operations statistics, and concealed blatant self-dealing by the family that founded and controlled Adelphia, the Rigas Family.
While the founder of the company, John Rigas and his son Timothy were both sentenced to 15 to 20 years in prison, the company continues to operate and will in fact assume ownership of some assets forfeited by the Rigas family.
MCI
In September of this year, federal officials decided not to file criminal charges against MCI, the successor to WorldCom, for perpetrating one of the nation’s largest financial frauds. The US Attorney in New York decided not to prosecute MCI for the $11 billion fraud because the company reported the fraudulent accounting and since then has cooperated with the government in pursuing cases against individual executives. Prosecutors have said that prosecuting the company would have brought a “severe and unintended economic impact upon thousands of innocent MCI employees.”
Monsanto
In January of 2005, Monsanto was charged with violating the Foreign Corrupt Practices Act (FCPA) in connection with a 2002 payment to a senior Indonesian Ministry of Environment official. The $50,000 payment was marked as “consultant fees” in the company’s books. Instead of pursuing the company, the government entered a deferred prosecution agreement and fined the company $1 million dollars.
