HOUSTON — R. Allen Stanford’s relationship with the chief regulator of his Antigua bank was closer than most.

At a meeting in 2003, they became blood brothers, cutting their wrists and mixing their blood in a “brotherhood ceremony� that Mr. Stanford’s chief financial officer said promoted an elaborate scheme to hide a multibillion-dollar fraud from American and other regulators.

The assertion that the two took a “blood oath� was laid out in a plea agreement signed by the officer, James M. Davis, and filed Thursday. After the pact, Leroy King, Antigua’s chief banking supervisor, called Mr. Stanford “Big Brother.� He received Super Bowl tickets, valued at thousands of dollars, for himself and his girlfriend. And he accepted regular bribe payments from a secret Swiss bank account that Mr. Davis said he was told to handle by Mr. Stanford.

The unusual twist to the case, in which Mr. Stanford is accused of operating a multibillion-dollar Ponzi scheme, was disclosed by Mr. Davis as he pleaded guilty on Thursday to fraud and conspiracy in Federal District Court in Houston. Mr. Davis, who oversaw the movement of vast sums of money at Stanford International Bank, also said in a plea agreement that Mr. Stanford ordered him to report false revenue and false investment portfolio balances to banking regulators as far back as 1988, when Mr. Stanford ran an offshore bank on the Caribbean island of Montserrat.

“I did wrong. I’m sorry. I apologize. And I take responsibility for my actions,� Mr. Davis said after the hearing.

Mr. Stanford was also supposed to appear in court on Thursday, but he was hospitalized in the morning after his pulse rate soared, his lawyer said.

While he has repeatedly denied accusations that he ran a Ponzi scheme involving certificates of deposit issued by Stanford International Bank, he has also insisted that if anything illegal did happen, it must have been Mr. Davis’s fault.

Mr. Davis, who had been a friend of Mr. Stanford’s since they were roommates at Baylor University in Waco, Tex., started his own church in Mississippi and led prayers before bank business meetings. His lawyer, David Finn, said Mr. Davis was now working on a family farm in Michigan doing manual labor for $10 an hour as an expression of penance. He now faces up to 30 years in prison.

“He had a very heavy heart,� Mr. Finn said. “He was very contrite, and not all of my clients are.�

The plea agreement and a court presentation on Thursday by prosecutors repeated many facts that were outlined in June in an indictment of Mr. Stanford, several Stanford aides and Mr. King. Mr. Stanford and others are accused of defrauding 30,000 investors of $7 billion, filing false reports to regulators and investors, diverting more than $1.6 billion into undisclosed personal loans to Mr. Stanford, and conspiring to obstruct an investigation by the Securities and Exchange Commission.

But the plea agreement offered an assortment of new details, particularly about the relationship between Mr. Stanford and Mr. King, who ran Antigua’s Financial Services Regulatory Commission for much of the last decade. He has been arrested in Antigua and is awaiting extradition to the United States.

Shortly after their 2003 blood-brother ceremony, which also included a second, unnamed Antiguan regulator, Mr. Stanford complained that two Antiguan regulators who worked for Mr. King were “becoming aggressive and suspicious in their examination� of the Stanford bank on the island, the plea agreement said. Both employees “soon thereafter were reassigned or replaced,� Mr. Davis said in the plea agreement.

To show appreciation for Mr. King’s services, Mr. Stanford paid $8,000 for tickets to the 2004 Super Bowl game in Houston so the regulator could take his girlfriend to the event. The next year, in June, Mr. King showed Mr. Stanford a confidential letter he had received from the S.E.C. seeking information about the Stanford bank’s certificates of deposit investment portfolio, stating that the agency had evidence to suggest the bank was engaged in a “possible Ponzi scheme.� Mr. Stanford and an unnamed aide then drafted “a false and misleading response� to the S.E.C., according to the plea agreement.

In September 2006, Mr. King tipped Mr. Stanford off to another letter from the S.E.C. Mr. Stanford, Mr. Davis and others proposed various responses designed to mislead the American regulators, which Mr. King was expected to transmit back to the S.E.C.

Mr. King also helped mislead regulators of the Eastern Caribbean Central Bank when they began raising questions about Mr. Stanford’s bank, the plea agreement said. He faxed a proposed response to the Caribbean regulators to an unnamed lawyer working for Mr. Stanford. In it, Mr. King joked in a handwritten note: “Please do not bill me (laugh), Thanks a million, Lee.� The note was taken as an oblique reference to bribes already paid, according to the agreement.

Mr. King, who holds American and Antiguan passports, is reviewing legal documents and has not yet publicly responded to the charges against him, according to Attorney General Justin Simon of Antigua and Barbuda. In an interview in February, just after Mr. Stanford’s offices in Houston were raided by federal authorities, Mr. King said, “I am absolutely sure that my banking system is clean.�

Times Topics: Robert Allen StanfordMr. Simon said in an interview that he had become aware of the blood-brotherhood ceremony from his own sources. “It is believable,� he said. “As far as how many people are involved, we are still investigating.�

By the middle of 2008, the agreement asserts, Mr. Stanford, Mr. Davis and others were scrambling “desperately� to hide the details of their fraud by inflating the value of their assets on the books with “bogus real estate.� The conspirators “designed a real estate transaction wherein they would falsely inflate and convert an approximate $65 million real estate transaction in Antigua into a purported $3.2 billion dollar asset,� according to the agreement. But by January the S.E.C. was moving in fast, and when Mr. Davis met with Mr. King, “King appeared very stressed� and wondered if they could still hide their secrets. Mr. Davis tried to reassure him.

In an interview in April, Mr. Stanford said he gave Mr. Davis broad responsibilities to oversee investments. “If bad things were happening, he never brought them to my attention,� Mr. Stanford said. “He did his job and I stayed out of his hair.�

Mr. Finn acknowledged after Thursday’s plea hearing that Mr. Stanford would attempt to discredit his client during a future trial. “The only way he walks is if he can convince a jury that my client is the mastermind,� he said. “Allen Stanford uses people. Did my client allow himself to be used? Absolutely.�

Mr. Finn said it would be strange for his client to have run a fraudulent scheme to pay for Mr. Stanford’s lavish lifestyle when he was getting paid relatively little for his efforts. He said Mr. Davis had earned between $5 million and $6 million after taxes over the last decade, and was now virtually penniless.

Mr. Stanford’s lawyer, Dick DeGuerin, has asked for court permission to quit the case because his client can not assure that he will be paid. Mr. Stanford was supposed to appear in court for a hearing on whether he could retain a new legal team. Mr. Stanford has asked to be represented by two other lawyers, but they also have said they need assurances that they will be paid.

Mr. Stanford’s assets and his companies’ assets have been frozen.

After pleading guilty on Aug. 27 to three criminal charges that could put him in prison for 30 years, James M. Davis, the former chief financial officer for Stanford Financial Group and Stanford International Bank Ltd., expressed remorse for his actions that contributed to the downfall of the bank and began more than a decade ago.

“I did wrong. I’m sorry. I apologize,” the silver-haired, 60-year-old former banker told reporters outside the federal courthouse in Houston following his re-arraignment in U.S. District Judge David Hittner’s court.

David Finn, Davis’ criminal-defense attorney, told reporters that Davis, unlike most of his clients, fessed up to his wrongdoing from the first moment he came to his Dallas office.

“He had a heavy heart the first time I met him. He was very contrite,” Finn, a partner in Milner & Finn in Dallas, recalled from their initial meeting earlier this year. “James Davis came in and said, ‘I know I did wrong.’ ”

The very next day, Davis met with investigators for the U.S. Securities and Exchange Commission, Finn said.

Finn said “greed” may explain Davis’ actions.

“Why does anyone do anything that’s wrong? . . . Frankly, my guy allowed himself to be used by Allen Stanford,” Finn said.

According to the factual basis of Davis’ plea deal, prosecutors allege Davis started making false accounting entries beginning in 1988, when he started a job as controller of a bank owned by R. Allen Stanford in Montserrat, and he continued, while in various executive positions with Antigua-based Stanford International Bank, to create “false books and records” that overestimated the value of the bank’s investments, and helped prepare fictitious investment reports about the bank that were provided to securities regulators in Antigua. By the end of 2008, the prosecutors allege in the factual basis for plea, financial documents put SIB’s assets at more than $7 billion, when they were actually less than $2 billion.

Davis also helped Stanford obtain money from a Swiss bank account that Stanford used to bribe at least two employees of the securities regulation agency in Antigua and an outside auditor, the government alleges in the factual basis of the plea deal.

Davis pleaded guilty to one count of conspiracy to commit mail, wire and securities fraud; one count of mail fraud; and one count of conspiracy to obstruct SEC proceedings. He faces up to five years in prison on the two conspiracy charges and up to 20 years in prison on the mail fraud charge. He also faces a fine of up to $250,000 on each charge.

In the plea agreement Davis signed, he agreed to cooperate with the government in its investigation of the alleged $7 billion conspiracy to defraud. As part of the plea deal, he agreed to a $1 billion forfeiture judgment. The government reserves the right to ask for a “downward departure” from the sentencing guidelines if it determines his cooperation rises to the level of “substantial assistance.”

Finn said Davis expects to receive “stiff punishment.”

The charges against Davis were included in United States v. James M. Davis, an information unsealed on June 19. Also on June 19, several other individuals, including Stanford, chairman of Houston-based Stanford Financial Group, were indicted, and each has pleaded not guilty to the criminal charges.

Stanford, who is being held in a federal prison in Conroe, was supposed to appear in Hittner’s court on Aug. 27 for a hearing on who will represent him, but Hittner announced in court that Stanford was taken by ambulance to a hospital at 5:30 a.m. because of an irregular electrocardiogram and a high pulse rate.

Stanford’s attorney, Dick DeGuerin of DeGuerin & Dickson in Houston, has asked to withdraw as his lawyer because he wants assurance that he will be paid. Hittner said the hearing on whether to allow DeGuerin to withdraw will be reset. Stanford announced earlier this month that his new legal team includes Patton Boggs, but Hittner will not allow DeGuerin to withdraw unless another firm enters the case unconditionally. [ See "Between a Rock and a Hard Case," Texas Lawyer, Aug. 10, 2009, page 6. ]

After Davis’ hearing, DeGuerin said he believed stress may have caused Stanford to have medical problems on Aug. 27. Finn said it’s not serendipitous that Stanford was ill on the day Davis was scheduled to plead guilty to criminal charges.

“It had everything to do with my client and me and the government getting together in this courtroom,” Finn said.

Hittner scheduled Davis’ sentencing for Nov. 20. But Finn said it is doubtful Davis will be sentenced before Stanford’s trial is finished. Finn said Davis has been cooperating with the FBI, the U.S. Department of Justice and the SEC and he will continue to do so. Finn noted that Davis came to Houston on Aug. 26, the day before his re-arraignment, and met with the FBI and federal prosecutors.

Finn says his client’s cooperation is important to the government, but the fraud alleged in the indictment is relatively unsophisticated.

“You can just follow the money,” Finn said.

Finn said Davis’ cooperation has extended to assisting the government with a search for evidence in a pond on his property in Mississippi. Finn would not say what the divers were looking for in the pond. When asked if it was money, Finn replied, “I wish.”

Finn said that because the government has seized Davis’ assets through a civil suit filed by the SEC that is pending in the U.S. District Court for the Northern District of Texas, Davis is living with family in Michigan and is working for $10 an hour on a family farm to raise some money to pay his lawyer.

Finn said there is no way Davis has the money to cover the $1 billion forfeiture order. He said Davis made $5 million to $6 million over the past few years.

DeGuerin said it remains to be seen how Davis’ cooperation will impact the criminal case against Stanford and the other defendants.

“Mr. Davis seems to be the center of their case, and we will have to see what happens,” DeGuerin said.

Finn told reporters that the government’s allegations in the factual basis of the plea deal suggest that others may be indicted. The factual basis mentions but fails to identify by name two attorneys and SIB Executive A.

“Not all shoes have dropped yet,” Finn said.

At the government’s request, Hittner continued the terms of Davis’ bond.

Held: Police may search the passenger compartment of a vehicle incident to a recent occupant’s arrest only if it is reasonable to believe that the arrestee might access the vehicle at the time of the search or that the vehicle contains evidence of the offense of arrest.

This is an important case, imo.

Robert Allen Stanford“I don’t think there is any money missing,� Mr. Stanford said. “There never was a Ponzi scheme, and there never was an attempt to defraud anybody.�

The government has said as much as $6 billion is missing.

In an interview at his lawyer’s office in Houston, a high-strung, emotional Mr. Stanford offered various theories about the problems that have engulfed his Stanford Financial Group and Stanford International Bank.

He allowed that some of the assets held by his organization on behalf of clients might have declined in value. As explanation, he cited the economic crisis and actions the government had taken against him in recent months. But in another part of the interview, Mr. Stanford suggested that if any fraud had been committed, James M. Davis, his former chief financial officer, was to blame.

“The investment and risk committee reported to Jim Davis, not to me,� he said. “The Stanford International Bank quarterly report was produced in Tupelo, Miss., under Davis’s direction and signed off by him. I trusted his integrity.�

Mr. Davis is cooperating with the government, and it seems increasingly likely he and Mr. Stanford will square off in court.

Through his lawyer, Mr. Davis has characterized himself publicly as little more than a dupe. “Stanford told my client what the quarterly numbers for the firm had to be,� said Mr. Davis’s lawyer, David Finn. “He used Davis. And if Davis didn’t go along with it, he said he could easily find someone else who would.�

Mr. Stanford replied, “That is an absolute lie.�

In the interview, Mr. Stanford swung between defiance and self-pity. He tapped his feet much of the time, and when he stopped tapping, his legs shook. He portrayed himself as a hard-working, honest man who loves his children and is dedicated to his former employees and investors.

He denied an accusation by the Securities and Exchange Commission that he had taken a $1.6 billion loan from his company without disclosing it, adding, “the money was not going to me personally; it was going into investments.�

Mr. Stanford has not been charged with a crime. In February, the S.E.C. filed a civil suit accusing him and two other executives of engaging in an international fraud, effectively shutting down the operation. Mr. Stanford has largely remained silent since then. But in one of a series of media interviews in his lawyer’s office on Monday, Mr. Stanford took the gloves off.

Dressed in a somber blue double-breasted suit and conservative tie, he accused the S.E.C. of squandering the assets of his financial companies. He said the court-appointed receiver was a “jerk� whose aides, assigned to look for missing funds, “can’t find their rear end from a hole in a ground.�

He said the credit cards in his wallet were worthless, he had been locked out of his apartment on St. Croix, his bank accounts were frozen and he did not even have money to pay his lawyer.

“It’s debilitating, devastating, horrific,� he said. “But I am going to fight for my name, and I am going to win.� Still wearing the Stanford Eagle logo pin on his lapel, he pledged to work hard to get his investors’ money back.

Mr. Stanford denied the allegation in the civil case that he had operated a “massive Ponzi scheme.�

In a Ponzi scheme, early investors are paid abnormally high returns with money from later investors. Ever more people are lured into the fraud until it eventually collapses.

Mr. Stanford said that he had put his depositors’ money into “real assets backed up by real investments.�

He said the S.E.C. “took an organization that had a net value of about $3.5 to $5 billion and basically crippled it; they rendered it almost worthless.�

His suspected fraud involved billions of dollars of certificates of deposit issued by Stanford International Bank, located on the island of Antigua. The instruments, paying unusually high returns, were marketed from Stanford Financial Group offices around the United States and Latin America. In recent weeks, receivers in the United States and Antigua have frozen assets, closed down Stanford operations and fired hundreds of employees.

Once the S.E.C. stepped in, Mr. Stanford said there was a “ripple effect� around the world with governments freezing assets of his various investment offices. Mr. Stanford’s lawyer, Dick DeGuerin, said any shortages were because “investments have lost value because of the actions of the S.E.C. and the fall of the stock market.�

In the interview, Mr. Stanford appeared to lay out a defense strategy that includes blaming Mr. Davis — his chief financial officer and former roommate at Baylor University — for whatever fraud might have occurred.

Mr. Stanford and Mr. Davis always seemed to be an odd couple, according to former employees of Stanford Financial Group. Mr. Stanford was known for his quick temper and taste for the high life, while Mr. Davis was seen as a soft-spoken religious man who started his own church in Mississippi and led prayers before business meetings.

Now the relationship appears to be turning ugly.

Mr. Finn said Mr. Davis is telling federal investigators “the truth, the whole truth and nothing but the truth, and the truth implicates Mr. Stanford up to his eyeballs in fraud.�

So far only Laura Pendergest-Holt, Stanford Financial’s chief investment officer, has been charged criminally, with obstruction of justice.

An S.E.C. spokesman, John Nester, said he would not comment on Mr. Stanford’s assertions. “We stand by the allegations of our complaint,� Mr. Nestor said.

Mr. Stanford and Mr. Davis are accused of fabricating the performance of Stanford International Bank’s investment portfolio.

“If bad things were happening, he never brought them to my attention,� Mr. Stanford said of Mr. Davis. “He did his job, and I stayed out of his hair.�

April 9 (Bloomberg) — Stanford Group Co. Chief Financial Officer James M. Davis, accused by federal regulators of helping his boss, R. Allen Stanford, run a multibillion dollar Ponzi scheme, will enter plea negotiations with prosecutors.

Davis was sued by the U.S. Securities and Exchange Commission along with Stanford. Davis will negotiate to resolve potential criminal and civil liability related to a suspected $8 billion Ponzi scheme, his attorney said.

“We anticipate beginning those conversations as early as next week,� David Finn, Davis’s lawyer, said today in a phone interview. “Things are accelerating rapidly. We are starting to shift gears and starting to look forward for a resolution.�

The SEC sued Stanford, Davis, Chief Investment Officer Laura Pendergest-Holt and three affiliated companies, accusing them of running a “massive ongoing fraud’’ selling certificates of deposit through Antigua-based Stanford International Bank.

Davis, 60, began cooperating with federal investigators March 25, Finn said. Until now, discussions focused exclusively on helping to locate Stanford assets around the world, including roughly $105 million in Stanford-linked London bank accounts frozen last week by a U.K. High Court order.

“We’ve not had plea negotiations to this point, but we’re making plans to start going down that road,’’ Finn said today. “Thus far virtually all of the time that we’ve spent with the SEC and DOJ investigators has focused on locating assets and helping them understand what did and did not happen.�

‘Most Pressing’

Neither Stanford nor Davis has been charged with a crime. Finn said insuring that talks resolve any potential criminal charges Davis faces would “obviously be the most pressing concern.�

“We’d love to wrap it all up at once,� Finn said. “Our priority will be on the criminal front. The tail won’t be wagging the dog, and the SEC case would be the tail in this situation�

Stanford, 59, said April 6in an interview with ABC News that he might be criminally indicted within the next two weeks. Dick DeGuerin, the Houston lawyer Stanford hopes to hire if he can access court-frozen funds, has denied Stanford did anything wrong.

Pendergest-Holt was charged with criminal obstruction of the investigation and released on $300,000 bail. Her lawyer said she is innocent. Pendergest-Holt agreed to extend the government’s deadline to formally indict her until April 28.

Ian McCaleb, spokesman for the Justice Department, declined to comment on the investigation.

The SEC case is SEC v. Stanford International Bank, 09- 00298, U.S. District Court, Northern District of Texas (Dallas).

To contact the reporter on this story: Laurel Brubaker Calkins in Houston at laurel@calkins.us.com.

Last Updated: April 9, 2009 14:37 EDT

Native Texan R. Allen Stanford told ABC News that fraud allegations against him and his Stanford Financial Group companies are “baloney,� according to a report aired Monday.

In what the network said was Stanford’s first media interview since the Securities and Exchange Commission filed the civil fraud complaint, Stanford also denied the SEC’s allegation that he and codefendants operated a Ponzi scheme — in which early investors are paid with money from later ones.

“I would die and go to hell if it’s a Ponzi scheme,� Stanford said in what appeared to be an unplanned run-in with the television crew. “It’s not a Ponzi scheme. If it was a Ponzi scheme, why are they finding billions and billions of dollars all over the place?�

In February the SEC filed a civil suit against Houston-based Stanford Financial Group, Antigua-based Stanford International Bank and three top executives including Stanford, alleging an $8 billion fraud. Accounts and assets tied to the brokerage, bank and individuals were frozen by court order throughout the U.S. and overseas.

The separate court-appointed receivers for the Stanford companies in the U.S. and Antigua have said there appears to be less than $1 billion in assets tied to the bank based on the property and bank accounts they’ve recovered so far.

Stanford, who so far only faces a civil complaint, also told the network that he expects to be indicted within the next two weeks, but intends to challenge the allegations. “I’m going to fight this with everything in me,� he said.

‘He lost his temper’

Dick DeGuerin, a Houston criminal defense lawyer Stanford hopes to hire, said he has not seen the ABC interview, which he said occurred at a Houston hotel last week.

“It was a chance encounter, and he lost his temper. He felt bad about that and trying to make up for it, he went on and on,� DeGuerin said.

He said he’s not as sure as Stanford that an indictment is imminent.

“It could go quickly, but if they really examine what happened, there will be no indictment,� DeGuerin said.

DeGuerin said Stanford was emotional in the ABC interview, in which he sometimes was tearful, because of his anger over what’s happened to the business he built up for 20 years.

“The SEC caused a run on his banks, they caused banks to be nationalized in other countries,� DeGuerin said. “The SEC has done more damage to the Stanford companies than the stock market crash did.�

In other action in the case Monday, a London court granted the SEC an extended freeze on U.K.-based assets tied to Stanford Financial Group, including more than $100 million in equities and cash.

A freeze order

The High Court in London signed an order freezing the assets through April 27, which according to court documents include about $105 million in assets held in Credit Suisse accounts and another $5 million in accounts at HSBC.

Court-appointed receivers have been searching all over the world for assets tied to the Stanford bank in Antigua. A lawyer representing Stanford Chief Financial Officer James Davis, who also was named in the SEC suit, says his client has been helping the SEC and the Department of Justice in their dealings with European banks.

“We are hopeful that additional assets, particularly with a Swiss flavor, will be located to help compensate the investors,� attorney David Finn said.

According to court papers, Credit Suisse has Stanford accounts with about $97.5  million in hedge fund investments, $1 million in cash, $5.4 million in Swiss franc shares and other assets.

The HSBC accounts contained another $5 million in euros, English pounds, Swiss francs and U.S. dollars.

Credit Suisse had instructions to liquidate the entire London portfolio in early February, just before the SEC filed its case, according to court papers, and on Feb. 12 received an order to wire $17 million to Stanford International Bank accounts in Houston.

According to the court documents, the bank didn’t carry out the orders.

tom.fowler@chron.commary.flood@chron.com

The National Law Journal reports, according to a forthcoming study conducted by Lawrence D. Finder, Ryan D. McConnell, and Scott L. Mitchell, that the number of deferred prosecution agreements (DPAs) and non-prosecution agreements (NPAs) between the Department of Justice and corporations has declined by 60% in 2008.  This is a sharp drop from a historic high of 40 DPAs and NPAs in 2007 to only 16 DPAs and NPAs in 2008.  The study also reports a significant decline in the inclusion of privilege-waiver provisions in DPA/NPAs.

The study sets out some significant findings including, but not limited to, the following:
 

·         FCPA violations were the subject 7 of the 16 DPA/NPAs entered into in 2008

·         Immigration work-site enforcement investigations had their DPA/NPA debut in 2008

o   3 of the 16 DPA/NPAs dealt with immigration work-site enforcement investigations

o   All 3 contained some type of corporate compliance reform provision

·          Decline in privilege-waiver provisions:

o   In 2008 – 2 DPA/NPAs contained waiver provisions

o   In 2007 – 3 DPA/NPAs contained waiver provisions

o   From 2003-06 – About half of the 47 DPA/NPAs contained waiver provisions

·         Three-year upward trend in remedial compliance measures:

o   Of the 75 DPA/NPAs over the last three years, more than 75% contain such measures

o   In 2006 – 13 DPA/NPAs contained remedial compliance measures

o   In 2007 – 29 DPA/NPAs contained remedial compliance measures

o   In 2008 – 16 DPA/NPAs – i.e. 100% – contained remedial compliance measures
 

      February 9, 2009
      National Law Journal

      By Marcia Coyle

       WASHINGTON — The number of deferred and nonprosecution agreements between the U.S. Department of Justice and corporations declined by 60% in 2008 — from a historic high of 40 in 2007 to 16 last year, according to a forthcoming study.

      Despite the lower numbers, violations of the Foreign Corrupt Practices Act continued to dominate the subject of those corporate pretrial agreements, with seven of the 16 agreements last year resolving FCPA violations.

      The study, “Betting the Corporation: Compliance or Defiance?,” was done by Lawrence D. Finder, a partner in the Houston office of Dallas-based Haynes and Boone; Ryan D. McConnell, a Houston assistant U.S. attorney; and Scott L. Mitchell, the chairman of Open Compliance and Ethics Group, a nonprofit think tank. It is scheduled to be published in May in the Corporate Counsel Review of the South Texas College of Law.

      Deferred prosecution agreements (DPAs) and nonprosecution agreements (NPAs) are deals between the Department of Justice (DOJ) and a corporate entity to conclude a corporate criminal investigation. The appropriate label depends on whether a charging instrument is filed.

      Two years ago, Finder and McConnell, who is representing only his personal views and analysis, published a study of each pretrial agreement by the department since 1992. Their latest study reports that there now have been a total of 112 corporate pretrial agreements from 1993 to 2008.

      In 2008, the authors noted, DOJ entered into its first corporate pretrial agreements resolving immigration work-site enforcement investigations — a total of three. And, they reported, every pre-trial agreement contained some type of corporate compliance reform provision — a continuation of a trend seen during the past few years.

      Declines in privilege waivers

      The study also found that the 2008 and 2007 agreements represented significant declines in provisions requiring waiver of attorney-client or work-product protections compared to the 2003 to 2006 period.

      There were two privilege waiver provisions in 2008:

      “In the Willbros DPA, which resolved a lengthy FCPA investigation, the agreement provided for a ‘limited waiver of attorney/client privilege with respect to certain subject matters important to DOJ understanding of the internal investigation.’ In the Jackson Country Club DPA, which resolved a immigration work-site enforcement investigation, the Country Club ‘agree[d] not to assert, in relation to any request of the United States, a claim of privilege (such as attorney-client privilege) or immunity from disclosure (such as work product) as to any documents or information request by the United States.’ ”

      There were three such privilege waivers in 2007. During the “post-Thompson Memo” period of 2003 to 2006, when the corporate community claimed that waiver of attorney-client privilege was demanded by DOJ as evidence of cooperation, roughly half of the 47 agreements contained privilege waivers.

      Haynes and Boone’s Finder said he does not know the reason why the number of DPAs and NPAs declined so significantly in 2008. But he suggested that department resources may have been partly responsible.

      “The department has through the FBI and its U.S. attorney offices, as well as components of the Criminal Division, put a lot of emphasis on anti-terrorism and national security,” he said. “Some resources have been transferred to those areas to keep us safe.”

      But even those areas, such as immigration and export violations, are beginning to show DPAs, Finder said.
       “Investigations take a long time,” he said. “There’s always lag time between the misconduct and the conduct of the investigation and the prosecution.”

      A DOJ spokesman said the department does not routinely track the number of DPAs and NPAs and could not comment on why the number declined last year.

       The study also noted that new corporate charging policies implemented by DOJ last year now make it “absolutely clear” that waiver of attorney-client and work-product protections is not a prerequisite for a corporation to be viewed as cooperative.

       “The waiver language has gone way down,” said Finder. “I think the organized bar was very responsible and responsive to what they perceived as an endangerment of the attorney-client privilege. The department, rather than have Congress legislate in this area, took the responsibility of reviewing its own policies and procedures and implementing remedial measures where necessary.”

      Finally, the study reported a three-year trend: business reforms in DPAs and NPAs. During the past three years, there have been 75 DPAs and NPAs, and more than 75% contain remedial compliance measures — 13 in 2006, 29 in 2007 and all 16 agreements in 2008.
Tiffany M. Joslyn, Esq.

Research Counsel, White Collar Crime Project

National Association of Criminal Defense Lawyers (NACDL)

1660 L Street, NW, Suite 1200

Washington, DC 20036

Phone: (202) 872-8600 ext. 260

Fax: (202) 872-8690

 
David Finn