DoJ Power to Cut Deals With Corporate Lawbreakers Affirmed

  • Appeals court gives judges scant latitude on deal approvals
  • Trial judge found Fokker settlement on sanctions too lenient

The U.S. Justice Department retained its clout in striking deals with companies accused of criminal wrongdoing as an influential federal appeals panel ruled that judges have virtually no role in approving such settlements.

The federal appeals court in Washington on Tuesday reversed a judge’s rejection of a $21 million accord between the Justice Department and a unit of Fokker Technologies Holding BV that resolved a violation of U.S. economic sanctions against Iran, Sudan and Myanmar.

The immediate effect of the appeals court ruling may be to embolden prosecutors and corporate defendants to negotiate more and go to trial less.

“The fundamental point is that those determinations are for the Executive -- not the courts -- to make,” U.S. Circuit Judge Sri Srinivasan wrote for the unanimous three judge panel. The Justice Department is part of the executive branch of the federal government, headed by the president.

The panel said it took no position on U.S. District Judge Richard Leon’s concerns about the government’s handling of the case.

Rather, looking at the powers granted to the executive branch by Congress, the appeals judges said, “numerous decisions of the Supreme Court and this court made clear that courts generally lack authority to second-guess the prosecution’s constitutionally rooted exercise of charging discretion.”

The case related to conduct that occurred more than five years ago, Chris Fox, a spokesman for Fokker Service’s parent company GKN Plc, said in an e-mailed statement.

“The company looks forward to when the issue is close,” Fox said.

Aircraft Parts

Fokker Services had sold aircraft navigation parts and components to Iran, Sudan and Myanmar in violation of American law. Resolution of the charges against the Dutch company required it to disgorge all the money it said it made from the illegal shipments The accord didn’t impose any independent monitoring of whether Fokker was now obeying the law.

Leon rejected that deal as too lenient and “grossly disproportionate to the gravity of Fokker Services’ conduct in a post-9/11 world.”

Calling his action unprecedented, prosecutors appealed, as did Fokker. They argued that he’d exceeded his authority to accept or reject such agreements and that taking the power to make such deals away from prosecutors would inhibit corporate defendants’ willingness to cooperate.

Defending Leon’s determination, Adam Unikowsky, an attorney in the Washington office of Chicago-based Jenner & Block LLP, argued last year that depriving a judge of power to reject such deals risked turning the court into little more than a rubber stamp.

Credit Agricole

The appellate ruling comes five months after Credit Agricole SA agreed to pay U.S. regulators $787 million and enter into a deferred prosecution agreement after conceding it had processed more than $32 billion in payments for Iranian, Sudanese, Myanmar and Cuban entities. A Schlumberger Ltd. unit in last year pleaded guilty to illegally trading with Iran and Sudan, paying a $232 million penalty.

In September, the Justice Department had said it planned to increasingly hold people accountable for crimes committed by the businesses for which they work. New York Judge Jed Rakoff and other members of the federal judiciary had previously criticized prosecutors’ willingness to let companies resolve criminal allegations by paying large sums of money without having to admit individual or corporate wrongdoing.

Srinivasan and circuit judges David Sentelle and Laurence Silberman heard argument on Sept. 11. Sentelle and Silberman were appointees of Republican President Ronald Reagan. Srinivasan was named to the court by President Barack Obama.

Unikowsky on Tuesday declined to comment on the appeals court’s decision. The Justice Department didn’t immediately reply to e-mailed requests for comment.

The case is U.S. v. Fokker Services BV, 15-3016 and 15-3017, U.S. Circuit Court of Appeals, District of Columbia (Washington).

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