June 01, 2014

The End of “Too Big to Jail”?

Warren Belmar

Two years ago, a “Washington Scene” column entitled “Deferred Prosecutions: Too Big to Prosecute?” reported on the increasingly frequent U.S. Department of Justice practice of forgoing criminal trials in cases against corporations. Rather than establishing guilt in complex and not-so-complex cases, the DOJ has favored deferred prosecution agreements (DPAs) and nonprosecution agreements (NPAs) calling for multimillion-dollar payments to the United States, followed by a probation period and dismissal of the criminal charges upon completion of compliance with the nonfinancial terms of the agreement. The driving force behind this practice was, in large part, concern about the collateral damage visited upon corporate defendants as a result of a criminal indictment and conviction. That was the case when the conduct of only a few of the 85,000 employees at Arthur Andersen resulted in the bankruptcy of the firm. And that experience created awareness among prosecutors and financial regulators of the potential for even greater losses in terms of the unemployment and adverse impact on the economy that would flow from the indictment and conviction of a financial institution deemed to be too big to fail.

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