Practical Considerations Relating to the Conclusion of Corporate DPA-Related Obligations
On May 14, 2024, the U.S. Department of Justice (DOJ) made global headlines when it apprised the U.S. District Court for the Northern District of Texas that it had notified The Boeing Company (Boeing) of its determination that Boeing had breached the deferred prosecution agreement (DPA) executed by the DOJ and Boeing. Approximately 40 months earlier, on January 7, 2021, the DOJ had filed the DPA – which had a term of 36 months – with the Court. This was an agreement resolving Boeing's violations of U.S. law stemming from certain of its non-disclosures and misrepresentations to the Federal Aviation Administration (FAA) in connection with the agency's evaluation of Boeing's 737 MAX aircraft.
The DOJ over the past decade has increasingly relied upon DPAs as a tool to sanction companies (and individuals) for U.S. criminal law violations in lieu of guilty pleas or prosecutions that go to trial. In practice, DPAs work generally as follows: the DOJ prepares and files criminal charges against the company (typically in the form of a criminal information, as opposed to an indictment) but requests that the court defer further action on the matter for a specific period of time (referred to generally as the "term"), at the conclusion of which and if certain conditions are met by the company, the DOJ will move to dismiss the charges. These conditions are set forth in the DPA and typically comprise, for example, a combination of the following: (1) the payment of a monetary penalty (e.g., criminal fine, disgorgement, restitution); (2) ongoing cooperation with the DOJ, including by, as requested by the DOJ, producing information and documents and making employees available for interviews and/or testimony at trials of third parties; (3) not committing any U.S. federal law violations; (4) disclosures of any allegation or evidence of conduct that may constitute a violation of the U.S. laws that were the basis for the DPA; (5) disclosures of any findings by local enforcement authorities or regulators concerning deficiencies in the company's compliance program; (6) submission of reports to the DOJ, on a regular basis (e.g. annual), regarding the company's compliance program, including the implementation of remedial measures; (7) certifications by senior management about the company's compliance with its disclosure obligations; and (8) retention of an independent monitor (by the company) to evaluate and submit a report to the DOJ regarding the company's compliance program.
In several high-profile cases in recent years, the DOJ determined that the company in question violated the DPA during its term and, as a result, undertook remedies afforded to it in the case of a breach. These include, for instance, abrogating the DPA and requiring that the company plead guilty (e.g., Ericsson and UBS), imposing an additional monetary penalty (e.g., Barclays), extending the term of the DPA (e.g., Moneygram and Standard Chartered), and extending the term of the independent monitor (e.g., Deutsche Bank).
Therefore, although noteworthy, it was not unprecedented for the DOJ to have concluded Boeing breached the DPA. Nor was it entirely unexpected given the public reports in the preceding months that the DOJ was evaluating the possibility of such a breach. That the DOJ was assessing whether Boeing had fully complied with the DPA was ongoing even prior to the January 5, 2024 incident involving a 737 MAX aircraft operated by Alaska Airlines where a panel became loose and was ripped off during a flight. Notably, however, another key point of interest in the notification was the fact that the DOJ referred specifically to its rights, pursuant to explicit language in the DPA, to what it called a six-month "evaluation period" following the conclusion of the 36-month term. Specifically, on May 14, 2024, the DOJ wrote as follows to the Court:
Nothing in the notification to Boeing limits the Department's ability to determine, during the remainder of the six-month evaluation period following the end of the term of the DPA, that Boeing breached any other obligations set forth in the DPA, should the facts so warrant. Nor does the government's breach notice to Boeing limit the Department's ability to continue investigating potential misconduct by Boeing either during the remainder of the six-month evaluation period or thereafter.
(Government Letter to the Honorable Reed O'Connor, United States v. The Boeing Company, Case No. 4:21-cr-00005 (May 14, 2024) (Dkt. No. 199).) (Emphasis added).
In particular, the provision in the Boeing DPA referring to this six-month period appears in paragraph 25, which states as follows:
The Fraud Section further agrees that if the Company fully complies with all of its obligations under this Agreement, the Fraud Section will not continue the criminal prosecution against the Company described in Paragraph 1 and, at the conclusion of the Term, this Agreement shall expire. Six months after the Agreement's expiration, the Fraud Section shall seek dismissal with prejudice of the Information filed against the Company described in Paragraph 1 and agree not to file charges in the future against the Company based on the conduct described in this Agreement, the attached Statement of Facts, or the Information. If, however, the Fraud Section determines during this six-month period that the Company breached the Agreement during the Term, as described in Paragraphs 26-30, the Fraud Section's ability to extend the Term, as described in Paragraph 3, or to pursue other remedies, including those described in Paragraphs 26-30, remains in full effect.
(Emphasis added). Of particular interest is that this language is unequivocal regarding the preservation of the DOJ's rights and remedies in the event it determines a DPA breach at any point during the six-month period following the end of the term. Furthermore, although the language does not refer specifically to the DOJ's investigatory powers during these six months, such authority is inherent. This is because the DOJ could conceivably only "determine [that a breach took place during the term] during this six-month period" through additional investigation that takes place after the end of the term.
Based upon a sample review of corporate resolutions dating back to 2013, the DOJ—in particular, the Fraud Section of the Criminal Division—has used the aforementioned provision (paragraph 25 of the Boeing DPA) in the vast majority of DPAs since no later than October 2020. Beginning in mid-2015, and with certain exceptions, the DOJ had already begun affording itself up to six months to move to dismiss the charges following the end of the DPA term as compared to precedents that provided timeframes of 10 or 30 days only. These earlier DPAs did not also, however, contain express language regarding the DOJ's rights and remedies in the event it determined a breach of the agreement during that six-month period. Rather, these earlier DPAs set forth that, in the event the DOJ identified a breach—"regardless of whether [it] become[s] aware of such a breach after the [t]erm is complete"—the company would be "subject to prosecution for any federal criminal violation of which [the DOJ] ha[s] knowledge." As this particular clause appeared in a separate provision from that pertaining to dismissal of the charges and was neither specifically tied to the six-month period nor made clear that all of the DOJ's remedies remained intact (including the ability to extend the term), it arguably afforded the DOJ weaker protections than the phrasing that has been used since Fall 2020.
The more robust language pertaining to the DOJ's rights and remedies during the six months following the end of the DPA term has important ramifications for companies:
First, even assuming a company has fully complied with all of its obligations, it should expect the DOJ to take the full six months to move to dismiss the charges. There were over 35 DPAs in the review sample that included the provision (including those executed as recently as August 2023) and, in nearly all those instances where the DPA term is complete, the DOJ moved to dismiss at or around the expiration of the six-month period. Indeed, over the past several years, at the hearing during which the Court consider entry of the DPA, the Court has typically agreed to deferring both the entirety of the DPA term (e.g., 36 months) plus an additional six months (in view of the aforementioned provision) for Speedy Trial Act purposes and, in certain cases, set status conferences at the conclusion of those 42 months. Accordingly, in connection with any internal and external communications, it is important to make clear that the charges very likely will not be dismissed right at the end of the term (commonly three years) or otherwise not convey specific expectations as to the timing of dismissal.
Second, a company should be prepared to receive potential requests for cooperation from the DOJ during the post-term six-month review period. These requests could range possibly from those relating to disclosures that the company made during the term pursuant to its obligations under the DPA (such as those pertaining to compliance enhancements) or issues about which the DOJ has obtained information from third parties (for example, as a result of separate investigations). A non-U.S. company that must comply with any local blocking, data protection or other statutes limiting the scope of direct deliveries of information and documents to the DOJ (as opposed to having to rely on the mutual legal assistance channel) should evaluate how to navigate such restrictions within the six-month period in order to provide timely responses to any requests for cooperation.
Last, although certain obligations in the typical DPA continue even post-conclusion of the term (e.g., a company may be required to cooperate with the DOJ regarding a related investigation until its completion, which may not take place until after the end of the term), others are squarely temporally limited to the term. However, where the DOJ is actively investigating the company's conduct (with a focus on assessing any potential DPA breaches) during the six-month review period, the company should evaluate whether and to what extent it should, as part of its broader cooperation and transparency with the DOJ, voluntarily make disclosures that were required only during the term.
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