By Sue Reisinger, From Corporate Counsel

Thanks mostly to massive misconduct by banks, U.S. enforcement officials are en route to signing a record number of deferred and nonprosecution agreements (DPAs and NPAs) this year.

A new study from Gibson, Dunn & Crutcher released Tuesday shows the U.S. Department of Justice and the U.S. Securities and Exchange Commission already have signed 29 agreements in the first half of 2015. That’s just one fewer that the 30 deals reached in all of last year, and one more than those signed in all of 2013.

Some 20 of the 29 deals so far this year involve banks that have violated trade sanctions, committed fraud, or admitted tax or other offenses, according to the study.

And DOJ has indicated many more settlements with financial institutions are expected this year, due to DOJ’s Tax Swiss Bank Program. The program grants an NPA to any bank that voluntarily discloses that its clients are dodging U.S. taxes.

“We expect a glut of additional NPAs in the coming months as DOJ concludes negotiations with the remaining dozens of Swiss banks that declared their intent to participate” in the program, the law firm said. The record number of settlements is 40, reached in 2010.

Joseph Warin, the law firm’s head of litigation in the Washington, D.C., office and co-chair of its white-collar defense and investigations group, told CorpCounsel.com that the data showed four significant legal developments:

1. Continuing scrutiny of deferred prosecution agreements by federal judges: “We are seeing federal judges going into issues that historically prosecutors believe are only their province, such as what is the nature of the charges, and are they suitable or not,” Warin said. This scrutiny may well lead to fewer DPAs and more NPAs or guilty pleas, he predicted.
2. Increasing use of approaches such as the Swiss Bank program: “This could be the litmus test for other sorts of structural approaches to mass cases that have similar fact patterns,” he said. “Imagine a similar regime or structure with other countries.”
3. Revocation of the NPA of a misbehaving bank: That happened when Zurich-based UBS, after being granted immunity from antitrust charges, admitted it had conspired to rig the price of foreign exchange currencies. But the admission meant it could be charged with violating its 2012 NPA for manipulating LIBOR interest rates (London Interbank Offered Rate). “Nonvoluntary revocation is a substantial sea change from how the DOJ has exercised its prerogatives historically,” Warin noted.
4. Growing use of NPAs and DPAs: “What you are seeing,” Warin said, “is an explosion in the use of this vehicle.” He noted 15 years ago such deals were rarely used outside of Main Justice and the U.S. attorney’s office in New York. In fact, in 2000 there were only two settlements.

But their use mushroomed on Foreign Corrupt Practice Act and health care fraud cases, he said, and now they are used by nearly every U.S. attorney’s office across the country. “It has become the first option for a corporation that has serious federal criminal exposure,” Warin said. “And it is a vehicle that can offer some degree of happiness on both sides.”

Photo by J E Theriot, via Flickr

For more on this story go to: http://www.corpcounsel.com/id=1202731728174/Bank-Misconduct-Fuels-Surge-of-Federal-DPAs-and-NPAs#ixzz3fUzzEKs9