How Corporate Lawbreakers Get a Leg Up at the Justice Department

Nick Schwellenbach is a senior investigator at the Project On Government Oversight (POGO). This post is based on his POGO publication.

The Project On Government Oversight (POGO) revealed in August that top political appointees at the Justice Department’s headquarters in Washington, DC, overruled career federal prosecutors who sought to bring a felony charge against biotech giant Monsanto for illegally spraying a highly toxic pesticide in Hawaii. This happened after attorneys for Monsanto, including a former head of the department’s criminal division, appealed for a review. When such appeals—which happen behind closed doors—are successful, they have played a part in what is widely seen as the Justice Department’s lenient approach to corporate crime.

As POGO wrote, this wasn’t the only case where appeals from corporate defense attorneys to department headquarters—often referred to as Main Justice—played a role in overruling or delaying prosecutors’ decisions.

Senators have sent at least two letters to the department in recent months regarding other cases where Main Justice has overruled its attorneys’ decisions after such appeals. Paul Pelletier, a former career prosecutor who spent 27 years with the Justice Department, told POGO that while it’s common for corporate defense counsel to appeal to higher levels at the Justice Department, those appeals are not always heard and only infrequently lead to a decision to overrule federal prosecutors or a component of the department.

When reviews of prosecutors’ decisions happen, they can create tensions between those prosecutors, who value their independence, and high-level officials at headquarters, who oversee those prosecutors. These reviews can strengthen the cases that the Justice Department brings, stop unmeritorious legal actions from moving forward, and ensure greater consistency in enforcement. But when defense counsel’s appeals to DOJ higher-ups have led to prosecutors downgrading charges, that has at times led to controversy, including allegations of unequal justice and improper interference in the enforcement of the law in favor of the rich and well-connected.

Fueling these concerns is the lack of any formal process or guidelines for hearing these appeals, as well as the fact that there is no requirement to create a paper trail when Main Justice overrules a prosecutor. The Justice Department did not respond to POGO’s request for comment.

Leverage

Since the financial crisis a decade ago, many have opined that the department has been too soft on corporations and their executives when they break the law. More recently, prosecution trends have taken a downward turn. Justice Department data show white-collar prosecutions in fiscal year 2019 are approaching an all-time low number of annual prosecutions since those records were first collected in the mid-1980s, according to the nonprofit Transactional Records Access Clearinghouse (TRAC), which analyzed the data. (David Burnham, a co-director of TRAC, is a former POGO board member.)

While there may be many reasons for the decline, Duke University law school professor Samuel Buell has argued there is a connection between appeals to Main Justice and lenient corporate crime enforcement. Buell was the lead prosecutor for the federal government’s Enron Task Force. That task force obtained convictions of the company’s executives in the wake of Enron’s disastrous collapse in the early 2000s.

In a 2014 paper, Buell argued that while white-collar corporate offenders may not have it as easy as many think, they enjoy significant advantages that most people accused of crimes do not. Perhaps the most powerful of these advantages is that they can often influence Justice Department decisions on what charges to bring, or whether to bring charges at all.

“Corporate criminal practice is characterized by a kind and degree of defense lawyering at the precharge stage that is virtually nonexistent in street crime cases,” Buell wrote (by “street crime,” Buell means almost any crime that isn’t considered a white-collar offense). “The most likely point of resource leverage for the corporate offender is at the stage of informal negotiation and litigation over charging decisions.”

Overruled: Top Justice Department Appointees Quash Felony Charge Against Monsanto

This spring, Justice Department prosecutors were on the verge of charging biotech giant Monsanto with a felony for illegally spraying a banned, highly toxic pesticide and nerve agent in Hawaii, not far from beachside resorts on Maui. But then, according to an internal April 2019 government document viewed by the Project on Government Oversight (POGO), that decision was overruled.

In the Monsanto case and in others cited in POGO’s recent story, it was during the pre-charge stage that former high-level DOJ officials who went through the revolving door to work on corporate defense teams successfully influenced Justice Department decisions.

For example, according to an article reported by American Banker and ProPublica, appeals from the Royal Bank of Scotland’s defense team—which included two former deputy attorneys general—to then-Deputy Attorney General Rod Rosenstein directed prosecutors in the spring of 2018 not to seek criminal charges at all and only pursue a civil case. That case prompted Senator Elizabeth Warren (D-MA) to send questions to and request documents from the Justice Department in August.

“These weak settlements send a clear message to financial institutions and white-collar criminals that they can evade accountability as long as they are wealthy and well connected,” Warren wrote.

Extra Bite(s) at the Apple

How a prosecutor arrives at a charging decision—including, say, whether to charge someone with a felony versus a misdemeanor or whether to charge them at all—is usually opaque to most defendants.

But that is generally not the case for potential corporate defendants.

“The charging decision in corporate cases usually follows a kind of negotiation or litigation that involves pitches from defense lawyers to prosecutors—under circumstances in which the defense has knowledge of much of the prosecutor’s evidence,” Buell wrote in his 2014 paper.

“The process even includes informal levels of appeal, as defense attorneys work their way up the hierarchy in the prosecutor’s office,” he wrote.

In a recent episode of the New York Times-produced television series The Weekly, a federal prosecutor who led the criminal case against opioid manufacturer Purdue Pharma made a similar observation.

Referring to the defense lawyers “for well-financed defendants,” Rick Mountcastle, an assistant U.S. attorney at the time of the case said, “they will want to meet with the U.S. attorney and explain how the government may be taking the wrong view.”

But defense lawyers’ appeals don’t necessarily stop with one of the 93 U.S. attorneys around the country. Appeals can go up to the attorney general, the nation’s top law enforcement official.

This all means potential corporate defendants have many more opportunities to influence the process than most people have. And it happens before corporations or their executives are charged with violating the law, if they face charges at all.

On top of that, high-powered defense attorneys with previous Justice Department experience and connections have more access, as lobbyist Todd Boulanger wrote in 2017. Boulanger, who pleaded guilty to bribing congressional staffers in connection with the Jack Abramoff scandal, wrote that “When you are under attack from the Justice Department you learn one thing quickly: The big law firm defense teams and Justice prosecutors are a club.”

“People are far more likely to take your call from the outside if you have a relationship with them. That’s lobbying 101 whether you call yourself a lobbyist or not,” Boulanger wrote, calling the movement of attorneys from private practice to DOJ and back a “highly profitable legal revolving door.”

And the presence of a high-powered defense team aggressively arguing against “over-criminalizing” a violation of law can lead top Justice Department officials to second-guess line prosecutors’ decisions.

“This system of precharge procedure amounts to an additional bite at the apple—though it comes first—to which street offenders almost never have access,” Buell wrote.

“Fairness in the Justice System”

Among the ranks of elite former DOJ officials is George J. Terwilliger III, who served as Attorney General William Barr’s deputy during the George H.W. Bush administration and briefly served as the acting attorney general. (His son is the current U.S. attorney for the Eastern District of Virginia.) Terwilliger has said that the Justice Department should adopt written guidance for handling defense attorneys’ appeals of prosecutors’ charging decisions.

As Terwilliger stated at a 2017 Federalist Society event, he said this is aimed at addressing the “public perception of fairness in the justice system,” acknowledging that there is at least an appearance of inequity in access to appeals at Main Justice.

Terwilliger said Main Justice “rarely” grants these appeals. But some attorneys are more likely to have their clients’ appeals taken up. “In my day, who got heard depended a lot on who was asking, frankly,” Terwilliger said.

Instead of the “oral policy that exists,” he said, “it would be good for the department to put in place a more regularized process.”

“Some guidance, at least as to what merits review, ought to be out there,” Terwilliger said.

Pelletier, a former federal prosecutor who was deputy chief of the department’s fraud section, told POGO that a formal process with general rules and requiring a record of a decision would “help make people accountable” within DOJ.

The most questionable situations are when Main Justice’s “decision is opaque or it’s not obvious why they came to a decision” to overrule a prosecutor, Pelletier told POGO.

“The goal here is to make decisions solely on the merits, not because of politics and not because of who’s sitting across the table from you,” Pelletier said.

In an appearance on The Weekly, Pelletier said the Main Justice decision to overrule prosecutors in the Purdue Pharma case in 2006, after defense attorneys appealed to higher levels, showed there are “two systems of justice in America”—one for the wealthy and well-connected and one for everyone else.

“It looked like people were exercising privilege over prudence,” he said, when high-level Main Justice officials took meetings with Purdue’s defense team. That defense team included former DOJ officials, such as Mary Jo White, the former U.S. attorney for the Southern District of New York, and Howard Shapiro, the FBI’s former general counsel.

Last month, Senators Maggie Hassan (D-NH) and Sheldon Whitehouse (D-RI) demanded documents from the Justice Department on the case. They wrote that Congress has “a duty to examine whether former DOJ officials working on the behalf of the targets of an investigation exercised improper influence over the DOJ’s decision-making.”

Pelletier told POGO a formal review process could also help stop ill-conceived decisions to prosecute, such as the failed case against FedEx for its alleged participation in a conspiracy to traffic drugs. In that case, two days into the 2016 trial, federal prosecutors from the Office of the U.S. Attorney for the Northern District of California dropped the case after the judge pressed them on the need to produce evidence of criminal intent to support the criminal charges against the company. “They did not have criminal intent,” Judge Charles Breyer remarked of FedEx when DOJ dismissed the charges (Charles Breyer is the brother of Supreme Court Justice Stephen Breyer). “The dismissal is an act, in the court’s view, entirely consistent with the government’s overarching obligation to seek justice even at the expense of some embarrassment.”

In commentary on the FCPA Blog on white-collar enforcement (FCPA refers to the Foreign Corrupt Practices Act), Pelletier wrote that he participated in many reviews of “corporate charging decisions of U.S. Attorneys’ offices prior to the filing of the charging instrument or indictment.”

“With few exceptions,” Pelletier wrote, he and other reviewers “generally recommended authorizing the corporate prosecution, sometimes with modest adjustments.”

“Arguably that process is flawed in its informality; it is not mandatory and does not require a written synopsis of DOJ’s views,” he wrote.

A review of the FedEx case by the U.S. attorney for the Northern District of California has led the office to conduct more robust internal oversight of complex cases, according to Reuters, rather than increasing the involvement of Main Justice.

Buell, the law professor and former Enron litigator, also agreed with the idea of formalizing Main Justice’s role when it hears appeals. “It would be helpful for DOJ to publish some principles or guidelines about how it handles appeals,” he wrote in an email to POGO. “I don’t think any such rules could be very hard-edged because there are so many factors involved, and so much variation across cases.”

“It would be extremely helpful for DOJ to be compelled to state even at the level of principle what it thinks the purposes of internal appeals are and how officials should think about their roles in that process,” he added.

“Declined Per Instructions from DOJ”

The Justice Department could also consider increasing transparency regarding how often senior officials at Main Justice overrule career attorneys’ decisions.

In July, Senator Cory Booker (D-NJ) requested statistical information on how often the attorney general overrules career prosecutors. Booker’s request came in response to reporting on a case that does not involve white-collar crime. The Justice Department’s Civil Rights Division’s prosecutors reportedly wanted to bring civil rights charges in the case of Eric Garner, who died after a New York City police officer put him in a chokehold. Video footage shows Garner’s last words were, “I can’t breathe.” Attorney General William Barr overruled the civil rights division, favoring arguments by the U.S. Attorney’s Office for the Eastern District of New York that there wasn’t sufficient evidence of willful intent on the police officer’s part.

“This is yet another disappointing sign that our criminal justice system is tragically broken,” wrote Booker, a member of the Senate Judiciary Committee. “It’s why many people—particularly people of color—feel as if the system is stacked against them without hope of accountability, even when a violent and unnecessary homicide is captured on video, for all the world to see.”

Booker’s office did not respond to a request for comment.

Though prompted by a different kind of case, the information Booker requested could help experts learn more about how the Justice Department handles white-collar crime in the key phase before charges are filed. Buell has written that the lack of data makes it challenging to study prosecutors’ decisions not to charge corporate offenders. “The empirical difficulty is that decisions not to pursue cases by prosecutors who operate in the exceedingly discretionary arena of corporate crime enforcement are not measurable or even observable,” he wrote in his 2014 paper.

The prospect of making this information available gives Pelletier pause, however.

If statistics on the process were made public or shared regularly with Congress, this could invite congressional interference with the Justice Department’s independent decision-making functions, he told POGO. He said more targeted congressional oversight when there’s evidence that a potentially improper act occurred in an individual case, as in the Purdue Pharma matter, doesn’t pose the same risks.

Acosta-Epstein Deal Sparks Calls for Independent DOJ Misconduct Investigations

News about the lenient plea deal that Labor Secretary Alexander Acosta struck with a powerful defendant when Acosta was a federal prosecutor has provided new urgency for legislation that would lead to more independent and transparent investigations of alleged misconduct by Justice Department attorneys.

But there is a precedent for publicly releasing some information on internal Justice Department decisions by U.S. attorneys’ offices, which handle the majority of cases. Summary data on decisions by those offices to decline prosecution, each accompanied by one of six explanations, are public through records supplied to the Transactional Records Access Clearinghouse as a result of that group’s Freedom of Information Act lawsuits. Those six explanations are vague; for example, “insufficient evidence,” “prioritization of federal resources and interests,” and “alternative to federal prosecution appropriate.”

The Justice Department presents this sort of summary data in annual reports on its prosecution efforts in Indian Country, and the Government Accountability Office presented summary data in a 1992 report on criminal enforcement of financial fraud.

The Justice Department used to release more detailed data. Prior to March 2014, the department used 33 codes to detail reasons for declining prosecutions, including “declined per instructions from DOJ.” The department has since consolidated the 33 codes into the current six. “Declined per instructions from DOJ” is now part of the umbrella category of “prioritization of federal resources and interests,” as are “lack of prosecutorial resources,” “minimal federal interest or no deterrent value,” “suspect serving sentence,” and five others.

To be clear, summary data accompanied by “declined per instructions from DOJ” does not necessarily indicate defense attorneys appealed to Main Justice in all or any of those cases, but it could encompass such situations. And it wouldn’t necessarily reflect examples where charges were just downgraded, for instance, from felonies to misdemeanors.

But the more detailed information that the department used to release showed that U.S. attorneys’ offices only rarely declined prosecution of cases at DOJ’s instruction. For instance, between fiscal years 2009 and 2013, the U.S. Attorney’s Office for the Southern District of New York, which has jurisdiction over Wall Street, declined only five white-collar criminal referrals from the FBI “per instructions from DOJ” out of 581 decisions to decline prosecution in such referrals.

Four of the five decisions appear to be connected to one bank fraud case labeled as a “national priority,” where the estimated loss listed is $100 million. The case was declined in October 2008 after multiple federal prosecutors worked on it beginning in 2001. The fifth decision to decline at the Justice Department’s instruction came in June 2013 and involved a healthcare fraud case.

Buell welcomed more transparency. In an email to POGO, he said, “More information is rarely a bad thing. It’s hard to think of a reason why we all wouldn’t benefit from more data about when DOJ management is overruling prosecutor decisions.” But, he said, “I think this one would be harder to convince DOJ to collect data on.”

He also raised concerns that DOJ might not always record “the full or real story” when it decided to overrule a prosecutor.

However, “it’s probably marginally more useful to make people write something down then to let them not have to do that,” Buell told POGO. “A bigger issue perhaps is whether DOJ would ever let anyone see the documents.”

Recommendations

On balance, the exercise of prosecutorial discretion and the ability of potential defendants to make their case before the Justice Department charges them are positive aspects of the federal justice system. But everyone facing potential charges must have fair and equitable access to the Justice Department, including to its higher levels, in requesting reviews of charging decisions. The following reforms would create a more transparent and standardized process, which would benefit the department, potential defendants, those overseeing the department, and the public at large:

The Justice Department should craft and publish written guidance detailing under what general circumstances it will hear pre-charge appeals regarding prosecutorial decisions, the process that will be followed, criteria for reversing prosecutorial decisions, and other relevant information. In crafting this policy, the department should consult with experts, involving a diverse group of stakeholders including those with experience in criminal defense and public defense. It should follow a transparent process by sharing a draft for public comment and, after receiving comments, explaining publicly its reasons for adopting or rejecting suggestions.

The Justice Department should publish data annually on the frequency of instances in which Main Justice has reviewed prosecutorial decisions at the request of defense counsel and the outcome of those reviews. The department should consult with experts, including a diverse group of stakeholders, in crafting this transparency policy, with consideration to mitigating undue external interference in department decision-making.

The Justice Department should return to its previous practice of providing information on the more specific reasons for declining prosecution of cases, in response to Freedom of Information Act requests.

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