Crimes, deals and fines: A guide to deferred prosecution agreements

Deferred prosecution agreements are relatively new in Canada. Not so in some jurisdictions.

Hundreds of companies have entered such agreements over the past two-plus decades. In 2018 alone, they included Brazilian oil giant Petrobras, the publisher of the National Enquirer, and French bank Société Générale. Companies typically admit to wrongdoing and pay fines – sometimes to the tune of billions. In doing so, they avoid criminal prosecution that, in some cases, could irreparably harm their businesses.

Back in Canada, DPAs have been thrust into the spotlight as part of the ongoing SNC-Lavalin Inc. affair. Here’s a guide to these agreements, including the crimes they cover, their prevalence in other countries and how Canada started its own regime.

What is a deferred prosecution agreement?

DPA regimes differ by jurisdiction, but generally speaking, they allow a prosecutor and organization to strike an agreement that suspends prosecution into alleged economic crimes. As part of the deal, the organization must comply with certain conditions. If the accused fulfills the terms, charges are withdrawn; if not, charges can be rekindled and prosecution pursued.

What’s the upside to a DPA?

Law firm Osler Hoskin & Harcourt succinctly laid out the advantages in a blog post last year:

“DPA regimes help to encourage the voluntary disclosure of misconduct by corporations for criminal activities that may otherwise have remained unknown to regulators, while simultaneously denouncing wrongdoing by holding organizations accountable for their actions. By entering into a DPA, a company can avoid criminal conviction while abiding by strict undertakings that make the organization a better corporate citizen.”

Moreover, corporate crimes can be costly and time-consuming to prosecute, let alone prove. DPAs can offer a more efficient resolution for all parties, plus offer the accused a path for rehabilitation that helps ensure its viability.

What are the downsides?

In a discussion paper, the Canadian government noted the “chief argument” against DPAs is that they may not prevent misconduct. “Some argue that DPAs have become ‘a cost of doing business,’ allowing corporations to buy their way out of trouble by paying a financial penalty and passing the costs on to the consumer,” the paper continued.

When did Canada implement a DPA?

During the fall of 2017, the federal government held a public consultation on enhancing its enforcement of corporate wrongdoing. This included seeking input on a possible DPA regime. “The majority of participants [in the consultation] supported having a Canadian DPA regime,” a summary report read.

In February, 2018, Ottawa said in its federal budget that DPA legislation was on the way. The following month, amendments to Canada’s Criminal Code regarding DPAs were included near the end of Bill C-74, a 500-plus page omnibus budget bill. DPAs are known as “remediation agreements” in the legislation.

The bill received Royal Assent in June, and the amendments took effect in September.

Were there critics of the DPA regime?

There were. After the budget bill was released, some Members of Parliament on the House of Commons’ finance committee spoke up, including Liberal MP Greg Fergus, according to a Canadian Press report. He raised concerns that implicated companies could receive “a little slap on the wrist.”

What are key elements of Canadian agreements?

Under the Criminal Code, there are “mandatory contents” of remediation agreements, including:

• a statement of facts related to the alleged crime;
• an admission of responsibility by the company;
• reparations to victims, where appropriate;
• and a financial penalty, along with several other conditions.

It’s worth noting that a company’s admission of responsibility cannot be used as evidence against the company in any related criminal or civil proceedings.

What crimes are covered by DPAs?

The types of offences covered by DPAs differ by country, but white-collar crimes tend to be the focus. In Canada, such offences include bribery, fraud and money laundering.

The RCMP laid corruption and fraud charges against SNC-Lavalin and two subsidiaries in 2015 over alleged criminal acts related to its operations in Libya. Between 2001 and 2011, SNC-Lavalin is alleged to have paid nearly $47.7-million in bribes to Libyan officials, and committed fraud of roughly $130-million related to construction projects in the country.

Canada’s new DPA regime covers both offences.

A remediation agreement cannot be pursued in cases where the alleged crime involves bodily harm or death, or where it benefited a criminal organization or terrorist group. Likewise, it is not available for offences under the Competition Act, which aims to curb anti-competitive behaviour.

Where else are DPAs in effect?

DPA regimes are found in several jurisdictions, notably the U.S. and Britain.

The U.S. has used DPAs since the 1990s. The agreements “do not have to be published and the role of the courts is fairly limited,” the Canadian government said in a discussion paper.

That said, U.S. DPAs are not entirely obscured. Law firm Gibson Dunn & Crutcher collects information on these agreements, giving a sense of their size and scope. Its data show at least 507 deals have been entered into between 2000 and 2018. Excluding 2015, when there was a spike of agreements from a Department of Justice program on Swiss banks, there has been an annual average of at least 25 agreements since 2000.

The U.S. data include non-prosecution agreements, or NPAs, which are similar to DPAs, but bypass the court system, thereby giving more discretion to prosecutors.

At least US$65.9-billion has been recovered through corporate DPAs and NPAs since 2000, according to the firm’s data.

Which companies are signing DPAs?

The U.S. regime does not strictly focus on American companies.

One recent case is that of Petróleo Brasileiro SA (Petrobras), Brazil’s state-controlled oil giant. The DOJ and Petrobras entered into an NPA in September of last year, related to allegations that its executives facilitated bribes to politicians and sought to conceal the payments, part of the “Car Wash” corruption probe. The company also reached settlements with the U.S. Securities and Exchange Commission and Brazilian authorities, and paid US$853.2-million in penalties.

Other companies that entered DPAs or NPAs in 2018 include Rite Aid Corp., Société Générale and U.S. Bancorp.