However, in making these decisions, prosecutors differed in their  willingness to use DPAs or NPAs. DOJ plans to determine the need to  require consistency in the use of the labels DPA and NPA. DOJ Prosecutors Cited Principles of Federal Prosecution as Influential in Their Decision on Entering into a DPA or NPA but Were Inconsistent in their Use and Labeling of Agreements

Prosecutors in all 13 DOJ offices we included in our review consistently  said that they based their decision on whether to enter into a DPA or NPA  rather than prosecute the company or decline to do so on the Principles of  Federal Prosecution of Business Organizations. In choosing between a DPA and an NPA, prosecutors most frequently  reported considering the same factors they did when deciding whether to  enter into an agreement at all—namely, cooperation, collateral  consequences, and the companies’ remedial actions. We will continue to assess this issue as part of our ongoing  work. On the other  hand, officials from 4 other companies said that the decision was a result  of negotiations between DOJ and the company. In addition, prosecutors differ in whether they called their agreements  DPAs and NPAs. The Morford Memo also  states that clear and consistent use of these terms will help DOJ more  effectively identify and share best practices and track the use of DPAs and  NPAs. In addition,  DOJ is aware that there may be agreements that share some of the  elements of DPAs and NPAs but may not readily fit the Morford Memo  definitions—for instance, the Office of the Deputy Attorney General  explained that in one case the company had already been indicted on  some of the criminal charges associated with the agreement prior to the  agreement being reached, but had not been indicted on other charges  associated with the agreement, and therefore it was not clear whether the  agreement fit the definition of a DPA—in which charges are filed—or an  NPA—in which charges are not filed. DOJ Considers Input from Company Negotiations and Other Factors, such as the Sentencing Guidelines, When Setting the Terms of DPAs and NPAs

Prosecutors in 11 of the 13 offices and officials from 14 of the 17  companies with whom we spoke reported that they negotiated at least one  of the terms in their DPAs and NPAs, including monetary payments to  victims or the government, the duration of the agreement, or compliance  program requirements, as well as additional terms, such as monetary  donations to foundations or educational institutions. DOJ Oversaw Companies’ Compliance through the Use of Independent Monitors, Coordination with Regulatory Agencies, and Other Means

In 26 of the 57 DPAs or NPAs we have reviewed to date, prosecutors  required that the company hire, at its own expense, an independent  monitor to assist the company in establishing a compliance program,  review the effectiveness of a company’s internal control measures, and  otherwise meet the terms of the agreements. Prosecutors We Contacted Varied in the Extent to which They Involved Companies in the Monitor Selection Process, and DOJ Does Not Require Documentation of the Process and Reasons for Selecting Monitors, Making It Difficult to Determine whether Monitor Selection Guidance Is Followed

We reviewed 26 agreements that required the company to hire a monitor. Although DOJ was not a party to the contracts between companies and  monitors, DOJ generally took the lead in approving the monitors. In selecting the monitors, DOJ sometimes sought input from federal  regulatory agencies. As this example demonstrates, without requiring  documentation of the process used and the reasons for selecting a  particular monitor, it may be difficult for DOJ to validate whether its  monitors have been selected and approved across DOJ offices in a manner  that is consistent with the Morford Memo, which established monitor  selection principles intended to instill public confidence. As part of our ongoing review, we plan to  obtain the perspectives of DOJ officials and monitors, in addition to  companies, regarding the amount and scope of the monitors’ work and the  most appropriate mechanisms companies can use to address any concerns  they may have related to this issue. DOJ has increasingly employed the tools of DPAs and NPAs in order to  carry out this mission, and has recognized the potential long-term benefits  to the company and the public of assigning an independent monitor to  oversee implementation of a DPA or NPA. Recommendation for Executive Action

To enhance DOJ’s ability to ensure that monitors are selected according to  DOJ’s guidelines, we recommend that the Deputy Attorney General adopt  internal procedures to document both the process used and reasons for  monitor selection decisions.
Why GAO Did This Study

Recent cases of corporate fraud and mismanagement heighten the Department of Justice's (DOJ) need to appropriately punish and deter corporate crime. Recently, DOJ has made more use of deferred prosecution and non-prosecution agreements (DPAs and NPAs), in which prosecutors may require company reform, among other things, in exchange for deferring prosecution, and may also require companies to hire an independent monitor to oversee compliance. This testimony provides preliminary observations on (1) factors DOJ considers when deciding whether to enter into a DPA or NPA and setting the terms of the agreements, (2) methods DOJ uses to oversee companies' compliance, (3) processes by which monitors are selected, and (4) companies' perspectives regarding the costs and role of the monitor. It also includes the results of GAO's recently completed work on DOJ's efforts to document the monitor selection process (discussed in objective 3). GAO reviewed DOJ guidance and 57 of the 140 agreements negotiated from 1993 (when the first 2 were signed) through May 2009; and interviewed DOJ officials, officials from 17 companies, and 6 monitors. While not generalizable, these results provide insight into decisions about DPAs and NPAs.

What GAO Found

Prosecutors in all 13 DOJ offices with whom GAO spoke said that they based their decision on whether to enter into a DPA or NPA on DOJ's principles for prosecuting business organizations, particularly those related to the company's willingness to cooperate, collateral consequences to innocent parties, and remedial measures taken by the company. However, prosecutors differed in their willingness to use DPAs or NPAs. In addition, prosecutors' varying perceptions of what constitutes a DPA or NPA has led to inconsistencies in how the agreements are labeled. In March 2008, DOJ issued guidance defining DPAs and NPAs, but this guidance is not consistently followed, in part because not all DOJ offices view it as mandatory. DOJ plans to determine the need to take additional steps to require consistency in the use of the labels DPA and NPA. While DOJ and companies generally negotiated the terms of DPAs and NPAs--such as monetary payments and compliance requirements--DOJ also considered other factors in its decisions, such as monetary gains to the company as a result of the criminal misconduct. To ensure that companies were complying with the terms of the DPAs and NPAs, DOJ employed several oversight mechanisms, including the use of independent monitors, coordination with regulatory agencies, and other means. Of the 57 agreements GAO reviewed, 26 required the company to hire, at its own expense, an independent monitor. In the remaining agreements, DOJ relied, among other things, on reports from regulatory agencies or from monitors hired by companies under separate agreements with these agencies, and company certifications of compliance. For the DPAs and NPAs GAO reviewed, even though DOJ was not a party to the contracts between companies and monitors, DOJ typically selected the monitor, and its decisions were generally made collaboratively among DOJ and company officials. Monitor candidates were typically identified through DOJ or company officials' personal knowledge or recommendations from colleagues and associates. In March 2008, DOJ issued guidance stating that for monitor selection to be collaborative and merit-based, committees should consider the candidates and the selection must be approved by the Deputy Attorney General. However, because DOJ does not require documentation of the process used or the reasons for particular monitor selection decisions, it will be difficult for DOJ to validate whether its monitor selection guidance-which, in part, is intended to instill public confidence-is adhered to. Some company officials GAO spoke with reported that they had little leverage to address concerns about the amount and scope of the monitors' work and, therefore, would like DOJ to assist them. GAO in its ongoing work will assess this and other issues about the use and oversight of DPAs and NPAs.