Prosecuting corporate crime is expensive, time-consuming, often multijurisdictional and extremely complex — not to mention that corporate wrongdoers very fiercely and resourcefully defend against allegations that could tarnish their reputation, investor confidence or their financial well-being. Maybe most troubling of all, because criminal liability attaches to a culprit organization rather than to the individuals responsible, prosecution often harms innocent stakeholders like shareholders, employees and customers, rather than individual wrongdoers. How, then, do we address elusive, sophisticated, resourceful corporate crime? It is time for Canada to introduce the increasingly popular deferred prosecution agreement (DPA).
A DPA is a voluntary agreement between the prosecution and a corporate accused. It suspends prosecution for a period during which the corporate accused must comply with terms and conditions like fines, corporate governance reform, personnel changes, the appointment of independent monitors, cooperation with law enforcement and more. If the corporate accused complies, charges against it are withdrawn; if it does not comply, the prosecution may continue, now armed with evidence obtained throughout the failed DPA.
DPAs are appropriately punishing, probationary and rehabilitating, yet they evade the permanently tainting optics of criminal conviction that any corporate accused would dread. As a result, it is conceivable that offering DPAs as an alternative to criminal prosecution will encourage cooperation and even self-reporting by corporate wrongdoers. DPAs may also improve compliance by mandating corporate governance reform, personnel changes and independent monitoring. These and other reforms take aim at institutional oversights and help to tightly contain legal fallout from harming innocent stakeholders like shareholders, employees and customers. Lastly and practically speaking, entering a DPA spares a corporate accused from often incredibly expensive, lengthy litigation. By these measures and more, DPAs are business-first, business-friendly alternatives to criminal prosecution.
Make no mistake, however: DPAs are just as much a victory for prosecutors. Much as in other diversion regimes (and there are, justifiably, many), the justice system entrusts and empowers prosecutors to exercise careful discretion in deciding whether a DPA is appropriate and what it should include. This requires getting a handle on mitigating and aggravating factors like the seriousness of the offence, resulting collateral damage, the accused’s criminal history and more. Although DPAs are admittedly inappropriate at times, they are generally a highly versatile and flexible tool for prosecutors confronting wrongdoing of almost all sorts, allowing for deterrence, punishment and remediation as lenient, harsh or creative as circumstance dictates.
What about the concern that DPAs may not deter wrongdoing after all, and might instead simply become a cost of doing business? Not only can DPAs deter and punish wrongdoers through the imposition of fines, victim restitution, operational restrictions and more, they also legally mandate remediation; that is, they require the corporate accused to make institutional changes that remedy, redress and prevent wrongdoing moving forward. Take HSBC’s highly publicized DPA, for example. The bank entered a DPA with the US Justice Department in 2012 relating to allegations that it failed to identify large-scale money laundering involving drug cartels and sanctioned nations. In addition to fines exceeding $1.9 billion, HSBC has spent billions more overhauling its compliance programs; it removed several key executives and implanted an independent monitor within the organization. When it completed its DPA, the charges against HSBC were withdrawn — a criminal fairy tale of a bank punished, victims righted and a wrongdoer forever changed.
DPAs have a rare appeal to the corporate accused and prosecutors alike; they underscore the importance of criminal diversion in our overworked and underresourced justice system; and they effectively and flexibly tackle corporate wrongdoing. For these reasons and others outside the scope of this short article, DPAs are growing in popularity across the Western world, and it is time for Canada to follow the trend.
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