US executives brace for more corporate prosecutions under Biden


A flurry of deals between prosecutors and companies in the final months of the Trump administration suggests executives are bracing for more corporate prosecutions under Joe Biden, after the number fell precipitously during the past four years.

Criminal cases against companies declined from 1,690 during the administration of George W Bush to 1,418 under Barack Obama to about 383 during the four years of the Trump administration, according to a white-collar crime database from the law schools at Duke University and University of Virginia. This figure will grow, however, as the final cases are added to the database, which is up to date only until autumn of last year.

Analysts said that while the Trump administration had launched relatively few high-profile cases against companies, the situation could be about to change now Joe Biden has taken over the presidency. JPMorgan Chase, Ticketmaster and most recently Boeing and Deutsche Bank all settled cases with prosecutors in the Trump administration’s final days.

“A company that settles in the waning days of an administration must think there’s some benefit to not waiting,” said Duke University law professor Brandon Garrett, who oversees the database and is the author of the book Too Big to Jail.

There was likely to be “some rebound” in prosecutions against companies and their executives under the Biden administration, said John Coffee Jr, a Columbia Law School professor and author of Corporate Crime and Punishment.

Mr Biden has chosen federal appeals court judge Merrick Garland as his nominee to lead the justice department as attorney-general.

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Mr Coffee said Mr Garland, a former federal prosecutor, would be likely to make some attempt to implement the Yates memo — a policy document that prioritises prosecuting corporate officers rather than companies — and decrease the use of deferred prosecution agreements, deals such as the ones Boeing, Deutsche Bank and JPMorgan Chase signed that help companies avoid a criminal record.

The number of guilty pleas has fallen while agreements such as Boeing’s to defer prosecution — or not to prosecute at all — have steadily risen in the past two decades under both Republican and Democratic administrations, according to the database.

With so-called “DPAs” and “NPAs”, there is no criminal conviction if a company meets standards laid out by prosecutors. Critics say the trend allows companies to avoid the greater transparency and accountability that come with a plea deal, which is entered into court and overseen by a judge. Companies also avoid a criminal conviction, which means they will not necessarily be bound in future civil litigation to any facts they admit to.

“It is troubling that the most powerful corporations are able to keep matters out of court when individual people are not,” Mr Garrett said.

Trials are relatively rare, with most cases resolved before they reach a judge or jury. Deferred and non-prosecution agreements have increased from about 3 per cent of cases during Mr Bush’s first four years in office to 20 per cent of cases during Mr Trump’s administration. Meanwhile, guilty pleas have declined during the same period, from 86 per cent of cases to 53 per cent.

Bar chart of Donald Trump's Justice Department pursued fewer white-collar cases than previous administrations showing Declining prosecution

DPAs and NPAs came into use following the prosecutions of Enron and Arthur Andersen in 2005/2006 as a way to avoid collateral damage, such as the thousands of lost jobs following Andersen’s post-conviction collapse. They were also intended to ease the burden on assistant US attorneys outnumbered by their corporate adversaries’ legal armies. The justice department saw them as “an important middle ground” between seeking conviction or wholly declining to prosecute.

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As their use has proliferated, critics have questioned to what degree the agreements curb corporate abuses. Boeing’s deal, announced this month has drawn particular ire.

In Boeing’s case, the aerospace manufacturer admitted to misleading aviation regulators certifying the safety of the 737 Max. Two of the jets later crashed, killing 346 people. Under its deferred prosecution agreement, prosecutors agreed to drop the fraud charge in three years if the company paid $2.5bn and complied with certain requirements.

Senator Richard Blumenthal called the settlement “a disgrace” that allowed the company and senior executives “to escape individual accountability by paying a nominal fine”.

“I hope the DoJ can explain its rationale for this weak settlement to the families,” said Peter DeFazio, a Democratic Congressman from Oregon. “Because from where I sit, this attempt to change corporate behaviour is pathetic.”

Boeing’s deal “represents one of the weakest deferred prosecution agreements I’ve seen, and I think all of them are unfortunate”, said Mr Coffee.

Boeing declined to comment.

A provision in Boeing’s DPA absolving senior management of responsibility for misconduct at the company was unusual, both experts say, and there is little in the agreement to indicate how prosecutors reached that conclusion. The agreement states that because no senior executives were involved, no independent monitor is required.

As long as prosecutors eschew plea deals for DPAs and NPAs, which are not overseen by a court, “they will reflect the priorities of the attorney-general and the administration”, Mr Garrett said.

“If people don’t like the fact that corporate prosecution priorities swing back and forth depending on who’s in charge, they should push for legislation . . . or more involvement of judges”, he added.

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