United States v. Saena Tech Corporation , 140 F. Supp. 3d 11 ( 2015 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
________________________________
)
UNITED STATES OF AMERICA )
)
v. ) Criminal No. 14-66 (EGS)
)
SAENA TECH CORPORATION, )
)
Defendant. )
________________________________)
________________________________
)
UNITED STATES OF AMERICA, )
)
v. ) Criminal No. 14-211 (EGS)
)
INTELLIGENT DECISIONS, INC., )
)
Defendant. )
________________________________)
MEMORANDUM OPINION
The United States Attorney is the representative not of
an ordinary party to a controversy, but of a sovereignty
whose obligation to govern impartially is as compelling
as its obligation to govern at all; and whose interest,
therefore, in a criminal prosecution is not that it shall
win a case, but that justice shall be done.
Berger v. United States, 295 U.S. 78, 88 (1935). Prosecutors are
provided with many tools to use in the pursuit of justice and
are granted significant discretion to decide how best to
approach each case. The pending cases involve one such tool: the
deferred-prosecution agreement (“agreement”).
The concept is simple: The government intends to prosecute a
defendant for criminal wrongdoing, but decides that the
defendant is worthy of a chance at rehabilitation and avoiding
the collateral consequences that accompany a criminal
conviction. Rather than seeking a conviction through a trial or
guilty plea, the government agrees to defer prosecution for a
period of time during which the defendant will be monitored for
compliance with various conditions, in an attempt to assess the
defendant’s rehabilitation. If the defendant succeeds, the
government does not prosecute. If the defendant does not
succeed, the government may prosecute.
In these two cases, deferred-prosecution agreements are
pending before the Court. These agreements are not, however,
with individuals charged with criminal offenses, but rather with
corporations. The government requests in both cases that this
Court determine: (1) that the parties are entitled to an
exclusion of time under the Speedy Trial Act; (2) that Saena
Tech Corporation (“Saena Tech”) and Intelligent Decisions, Inc.
(“Intelligent Decisions”) have presented adequate corporate
representatives who have the ability to bind the corporations;
and (3) that Saena Tech and Intelligent Decisions knowingly and
voluntarily waived the right to indictment. No one disputes that
the Court has the authority to make these determinations. These
cases also present the question of the Court’s role, if any, in
determining whether the agreements should be approved at all.
2
The Court finds that the agreements in these two cases should
be approved. Notwithstanding the government’s opinion of the
Court’s limited role, the Court, as set forth infra, has the
authority to assess the reasonableness of a deferred-prosecution
agreement and to decline to approve agreements that are not
genuinely designed to reform a defendant’s conduct. This
authority is limited by the strong separation-of-powers concerns
that an overly-zealous judicial review of prosecutorial
decisions would raise as well as a recognition of the expertise
that the Executive Branch has in making such decisions. As
discussed infra, Congress intended judicial scrutiny in the
decision to divert prosecution.
Applying these principles to both cases, and upon
consideration of the pleadings, the submission of the amicus
curiae in the Saena Tech case, the applicable law, and the
entire record, the Court GRANTS the motions for exclusion of
time under the Speedy Trial Act and APPROVES both deferred-
prosecution agreements, subject to periodic status hearings to
monitor the defendants’ compliance with those agreements. The
parties are directed to file periodic reports to update the
Court on the defendants’ progress and compliance with the terms
of the deferred-prosecution agreements in each case as set forth
in the Orders accompanying this Memorandum Opinion.
3
In Part I of this opinion, the Court articulates the factual
and procedural background for the two agreements. Part II sets
forth the history of the statutory provision upon which
deferred-prosecution agreements are based and concludes that
court involvement in the deferral of prosecution was
specifically intended by Congress. In Part III, the Court
reviews the two District Court decisions that have examined the
scope of judicial authority to consider deferred-prosecution
agreements and analyzes the two sources of authority identified
in those decisions: the Speedy Trial Act and the Court’s
supervisory power. In Part IV, the Court applies this framework
to approve the agreements in the pending cases. In Part V, the
Court discusses the extent to which the current use of deferred-
prosecution agreements for corporations rather than individual
defendants strays from Congress’s original intent when it
created an exclusion from the speedy trial calculation for the
use of such agreements. The Court is of the opinion that
increasing the use of deferred-prosecution agreements and other
similar tools for eligible individual defendants could be a
viable means to achieve reforms in our criminal justice system.
I. Background.
These cases arise out of a lengthy investigation into
allegations of bribery in connection with certain government
contracts. The investigation yielded a series of guilty pleas
4
beginning in 2012. Most notably, Kerry Khan, a former
contracting official for the U.S. Army Corps of Engineers,
pleaded guilty to bribery and conspiracy to commit money
laundering, and accepted responsibility for more than
$20,000,000 in bribe payments. See Plea Agreement, United States
v. Khan, No. 11-cr-276, ECF No. 74 at 1–2. The investigation of
Mr. Khan led to the discovery of another public official, In
Seon Lim, who ultimately pleaded guilty to accepting bribes in
exchange for favorable treatment of government contractors in
connection with contracts with the United States Army. See Plea
Agreement, United States v. Lim, E.D. Va. No. 14-cr-159, ECF No.
21.
The agreement in the Intelligent Decisions (“the Intelligent
Decisions Agreement”) case is rather standard. Intelligent
Decisions has agreed to pay a fine and institute various
compliance measures to prevent the recurrence of bribery
offenses similar to the one with which it is charged. In
exchange, the government will defer prosecution for a period of
two years and dismiss all charges if Intelligent Decisions
remains in compliance. The government has also charged and
obtained guilty pleas from two employees of Intelligent
Decisions in connection with the crime with which the company is
now charged.
5
The agreement in the Saena Tech (“the Saena Tech Agreement”)
case is somewhat unusual. It is an agreement between not only
the federal government and Saena Tech, but also Jin Seok Kim—the
former Chief Executive Officer of Saena Tech who, according to
the Statement of Facts, is the individual who personally paid
the bribes Saena Tech is charged with paying. Mr. Kim has not
been named in any criminal proceeding, yet the Saena Tech
Agreement provides that prosecution of Saena Tech and Mr. Kim
will be deferred for two years, provided that Saena Tech pays a
fine and institutes a compliance program, and that Saena Tech
and Mr. Kim cooperate in the government’s ongoing investigation.
Successful completion of that two-year term will result in the
dismissal of any charges against Saena Tech. Mr. Kim thus
receives the benefits of deferred prosecution without having
been named in a criminal case.
A. United States v. Saena Tech Corp. 1
1. Factual Background Regarding Saena Tech.
Saena Tech is a South Korean company that was founded by Mr.
Kim in 2005. See Statement of Facts, ECF No. 5-1 at 18. Saena
Tech “operated as a subcontractor for U.S.-based government
contracting companies providing technical services and equipment
1 Unless otherwise noted, the ECF citations in this section refer
to documents filed in United States v. Saena Tech Corp., No. 14-
cr-66 (D.D.C. filed Mar. 24, 2014).
6
for the Eighth United States Army,” which is based in South
Korea. Id. One such contract involved the Program Executive
Office Enterprise Information Systems (“PEO EIS”), an
organization within the United States Army. See id.
Mr. Lim 2 was an Assistant Project Manager for a division of
the PEO EIS known as the Project Manager, Defense Communications
and Army Transmission Systems (“PM DCATS”). See id. at 18–19.
Mr. Lim was employed in this position and based in Seoul, South
Korea until approximately June 2010. See id. at 19. During his
time in South Korea, Mr. Lim was the contracting officer for
part of a contract (“the Prime Contract”) with the Eighth United
States Army, a position which gave him “influence over the
selection of subcontractors who performed work under the Prime
Contract.” Id. at 19. Saena Tech ultimately obtained
subcontracts to work on the Prime Contract from a variety of
sources, including “Company F,” the primary contractor for the
Prime Contract, as well as three subcontractors, “Company E,”
“Company G,” and Avenciatech. See id. at 19–20.
After coming into existence in 2005, Saena Tech began to
perform subcontract work for the United States Army on a project
that originated with the office at which Mr. Lim was employed.
See id. at 20. Mr. Kim, then Saena Tech’s CEO, met Mr. Lim at
2 In Seon Lim is referred to as “Public Official C” in the
Statement of Facts.
7
this time. Id. By early 2009, Saena Tech “was performing a
subcontract for a project administered by [Mr. Lim].” Id. at 20.
Mr. Kim soon “learned from [John Han] Lee that [Mr. Lim] wanted
a car” and Mr. Lee “further informed Kim that Lee would make the
arrangements for the purchase.” Id. at 21. Mr. Kim agreed to
contribute $10,000 toward the purchase of “a 2009 Lexus ES350
for [Mr. Lim] and to wire the [entire] purchase price of the
Lexus.” Id. Mr. Lim used the Lexus between March 2009 and June
2010, when he left South Korea. See id. Before leaving South
Korea, Mr. Lim was unable to sell the Lexus, so Mr. Kim “gave
Lee $25,000 in cash to purchase the Lexus,” and Mr. Lee did so,
without informing Mr. Lim that the money came from Mr. Kim. See
id.
During the Spring of 2009, Mr. Lee suggested that Mr. Kim
“should pay money to [Mr. Lim],” which caused Mr. Kim to believe
that if he failed to do so, “Saena Tech’s ability to retain
subcontracts and obtain new ones based on merit would be
jeopardized.” Id. Accordingly, around September 2009, Mr. Kim
gave Mr. Lim “approximately $40,000 in cash . . . to assist
Saena Tech in obtaining and retaining subcontracting
opportunities through subcontracts administered by [Mr. Lim] on
behalf of the Army.” Id. Around April 2010, Mr. Kim gave another
$30,000 for the same purpose. See id.
8
Also around April 2010, Mr. Kim met with Mr. Lim and the Chief
Executive Officer of Company G, one of the other subcontractors.
See id. at 22. They “agreed that [Mr. Kim] would cause Saena
Tech to submit an invoice to Company G for $250,000 for work
purportedly performed by Saena Tech on a subcontract to Company
G for work administered by [Mr. Lim]. . .” Id. They further
agreed that Saena Tech would not be obligated to perform any
actual work in exchange for that invoice. See id. Mr. Kim
“agreed to pay to [Mr. Lim] the proceeds obtained from the
fraudulent invoice, less 30% for taxes owed. . .” Id. In April
2010, Mr. Kim submitted the fraudulent invoice and paid
$175,000, the proceeds less taxes, “to [Mr. Lim] in several
installments between on or about April 9, 2010 and on or about
May 6, 2010.” Id.
The total amount of cash bribes paid by Mr. Kim on behalf of
Saena Tech was approximately $280,000. See id. at 21-22. During
the same time period, Mr. Kim also provided other things of
value to Mr. Lim, including “meals and entertainment to assist
Saena Tech in obtaining and retaining subcontracting
opportunities through subcontracts administered by [Mr. Lim].”
Id. Ultimately, Saena Tech obtained over fifteen subcontracts to
perform work for the United States Army, between January 2009
and the present. See id. The amount of money Saena Tech earned
on these contracts is unclear.
9
2. The Saena Tech Agreement.
On March 24, 2014, the government filed a one-count
Information charging Saena Tech with bribery of a public
official in violation of 18 U.S.C. § 201. See Information, ECF
No. 1 at 2. The Information charged that Saena Tech gave various
things of value to Mr. Lim
with the intent to influence official acts . . . to wit,
Saena Tech gave, offered, and promised in excess of
$250,000 in cash and other things of value, including
meals and entertainment, to [Mr. Lim] and for [Mr. Lim’s]
benefit in return for [Mr. Lim] using [his] official
assistance to direct subcontracts to Saena Tech and
providing preferential treatment for Saena Tech with
subcontracts awarded through the United States
Department of the Army.
Id. at 1–2. Notably, Mr. Kim was not charged in any criminal
case.
On April 16, 2014, the government filed a joint motion “for
approval of deferred prosecution and exclusion of time under the
Speedy Trial Act.” Mot. for Approval, ECF No. 5. 3 Attached to
that motion was the Saena Tech Agreement. See Deferred-
Prosecution Agreement, ECF No. 5-1. The Saena Tech Agreement is
between three parties: the U.S. Attorney for the District of
Columbia, Saena Tech, and Mr. Kim. See id. at 14–15.
3 The parties have since clarified their intent to move, not for
Court approval of the Agreement itself, but for approval of the
requested exclusion under the Speedy Trial Act. See Consent Mot.
to Clarify, ECF No. 23. To clarify the record regarding the
government’s view of this Court’s authority, the Court GRANTS
that motion.
10
The Saena Tech Agreement, which was entered into by Mi Kyoung
Lee, Chairperson of the Board of Directors, and Mr. Kim,
Managing Director, provides that, in consideration of the “past
and future cooperation” of Saena Tech and Mr. Kim, Saena Tech’s
payment of a fine, and Saena Tech’s implementation of a
corporate-compliance program, “any prosecution of the Company
and Mr. Kim . . . be and hereby is deferred. . .” Id. at 9. The
term of deferral is two years from “the date on which the
Information is filed.” Id. at 3. Saena Tech also admitted to the
truth of the facts set forth in the Statement of Facts and
agreed that “[s]hould [the U.S. Attorney’s Office] pursue the
prosecution that is deferred by this Agreement, the Company . .
. will neither contest the admissibility of nor contradict the
Statement of Facts.” Id. at 3. There is no parallel statement as
to the government’s potential use of the Statement of Facts
against Mr. Kim. In the event that the U.S. Attorney’s Office
were to determine, “in its sole discretion,” that either Saena
Tech or Mr. Kim breached the Agreement, “[they] shall thereafter
be subject to prosecution. . .” Id. at 9. Finally, “by signing
this Agreement, [Saena Tech] and Mr. Kim agree that the statute
of limitations with respect to any such prosecution that is not
time-barred on the date of the signing of this Agreement shall
be tolled for the Term [of the Agreement] plus one year.” Id. at
10.
11
The Saena Tech Agreement creates three obligations necessary
to obtain the deferral:
Cooperation: Mr. Kim and Saena Tech must cooperate in ongoing
investigations by: (1) “[t]ruthfully disclos[ing] all factual
information not protected by [certain privileges] with respect
to” activities of Saena Tech, and related entities and
individuals, “concerning all matters relating to corrupt
payments in connection with United States government contracts”;
(2) “designat[ing] knowledgeable employees, agents, or attorneys
to provide to the Office the [relevant] information and
materials”; (3) “us[ing] . . . best efforts to make available
for interviews or testimony . . . present or former officers,
directors, employees, agents and consultants of the Company”;
and (4) for Mr. Kim, “agree[ing] to travel to the United States
for interviews or testimony as requested.” Id. at 4–5.
Fine: Saena Tech agreed to pay a $500,000 fine “within ten . .
. days of the filing of the Information.” Id. at 6. That fine,
the Saena Tech Agreement declares, “is appropriate given the
facts and circumstances of this case.” Id.
Compliance Program: Saena Tech agreed to implement “a
compliance and ethics program designed to prevent and detect
violations of the applicable anti-corruption laws throughout its
operations. . .” Id. at 8. The Saena Tech Agreement requires
changes to “ensure that the Company maintains: (a) a system of
12
internal accounting controls designed to ensure the making and
keeping of fair and accurate books, records, and accounts; and
(b) a rigorous anti-corruption compliance code, standards, and
procedures designed to detect and deter violations of the
applicable anti-corruption laws.” Id.
3. Procedural History of United States v. Saena Tech.
The Court scheduled a status hearing for May 7, 2014 to
“determine the process and procedures that will apply to further
proceedings regarding the joint motion for approval of the
deferred-prosecution agreement.” Minute Order of April 29, 2014.
At that status hearing, the Court indicated that it would not
consider the Saena Tech Agreement without first receiving in-
person testimony from a corporate officer with the ability to
bind Saena Tech and to testify regarding the provisions of the
deferred-prosecution agreement as well as the underlying facts.
The Court also required Saena Tech to submit corporate documents
proving that its representative had the authority to bind the
corporation.
On June 3, 2014, Saena Tech filed various corporate documents
to demonstrate its approval of the Saena Tech Agreement and to
demonstrate that Ms. Lee, its Chief Executive Officer—who is
also Mr. Kim’s wife—has the authority to bind the corporation.
See Notice of Filing, ECF No. 13. These included Saena Tech’s
Articles of Incorporation and a resolution of Saena Tech’s Board
13
of Directors approving the deferred-prosecution agreement. See
Articles of Incorp., ECF No. 13-3; Resolution, ECF No. 13-5. The
resolution reflects that Saena Tech’s “directors’ meeting” was
attended by only two directors: Ms. Lee and Mr. Kim. See
Resolution, ECF No. 13-5 at 2.
On June 6, 2014, the Court directed Saena Tech “to file
evidence of its new corporate-compliance program.” Minute Order
of June 6, 2014. Saena Tech filed responsive documents regarding
its compliance program on June 12, 2014 and June 16, 2014. See
Proffer, ECF No. 16; Proffer Replacement Doc., ECF No. 17. In
these documents, Saena Tech asserts that it has taken six steps
in furtherance of its obligations:
• Appointment of Compliance Officer: Saena Tech appointed
Choondong Lee as Internal Compliance Officer, “to carry out
the responsibility of implementing and supervising a
corporate-compliance and ethics program.” Proffer, ECF No.
16 at 1-2; see also Board of Directors Resolution, ECF No.
16-1.
• Creation of Internal Control System: Choondong Lee has
“established and implemented an internal control system.”
Proffer, ECF No. 16 at 2. This system requires the
Compliance Officer to monitor company actions and ensure
that only authorized individuals are engaging in company
transactions and using company assets, and that accounting
and inventory audits are regularly and accurately done. See
Report, ECF No. 16-2 at 3-4. The Compliance Officer is also
required to file monthly reports with Saena Tech’s auditor.
Id.
• Establishment of Hotline: Saena Tech created a “Corporate
Compliance Hotline . . . to provide Saenatech’s [sic]
employees with a means by which to raise their concerns and
to report possible wrongdoing” using a confidential
14
procedure that will be investigated by Saena Tech’s outside
counsel. See Proffer, ECF No. 16 at 2; ECF No. 16-3 at 2.
• Design of Code of Conduct: Saena Tech contracted with a law
firm “to draft a Code of Conduct, Standards and Compliance
in furtherance of the requirements of the DPA.” Proffer,
ECF No. 16 at 2; see also Contract, ECF No. 16-4. The Code
of Conduct consists of a 24-slide PowerPoint presentation.
See ECF No. 17-1. It provides guidance regarding various
potential ethical issues, including Saena Tech’s commitment
not to retaliate against those who expose ethical issues,
how to respond to and report ethical and legal concerns,
how to approach business-related gifts, and Saena Tech’s
prohibition on the payment of bribes. See id.
• Holding a Seminar Series: Choondong Lee has conducted the
first of what will be a periodic seminar series “for all
employees for the purpose of instructing them with regard
to anti-corruption and corporate-compliance issues.”
Proffer, ECF No. 16 at 3; see also Report, ECF No. 16-8.
• Appointment of New Compliance Officer: Saena Tech appointed
its outside counsel, Sucheol Noh, to serve as the company’s
auditor “to carry out more professional checking and
balancing” because “[t]he former Inspector had been a
relative of Mr. Kim and Ms. Lee.” Proffer, ECF No. 16 at 3;
see also Stockholders Minutes, ECF No. 16-9.
The Court commenced the July 17, 2014 hearing by expressing a
few concerns regarding the deferred-prosecution agreement. See
Tr. of July 17, 2014 Status Hearing, ECF No. 38 at 4:11–7:11.
Specifically, the Court noted that the agreement appears to
“essentially ha[ve] the effect of immunizing Mr. Kim” and that
this raises concerns regarding the “fundamental fairness of this
agreement” in light of the guilty pleas and criminal records
that have resulted for other defendants charged in the
investigation. Id. at 4:11–25. The government responded to the
Court’s concerns, conceding that the agreement “essentially
15
offers Mr. Kim letter immunity, but it’s contingent upon his
cooperation.” Id. at 7:16–17. Regarding the fairness of the
Saena Tech Agreement, the government agreed that this is
“certainly a better ride than the other defendants,” id. at
9:12-13, but noted what the government considered in making its
decision: (1) “Saena Tech is a Korean corporation . . . does its
work in Korea; no work in the United States at all. Mr. Kim is a
Korean national, did his work for Saena Tech in South Korea, was
not doing work here in the U.S., and so there are obstacles with
regard to a prosecution”; (2) “Mr. Kim’s cooperation is
extremely important to the Government with regard to [Mr. Lim’s]
case . . . and with regard to potential[] future cases”; (3) Mr.
Kim “volunteered a lot of the information that Your Honor sees
in the statement of offense”—“information the Government did not
know”; and (4) “this company is almost assuredly going to be
permanently debarred” from government contracts. See id. at
9:24–12:25.
After this discussion, the Court noted that the case was
“nontraditional” in that “[t]here’s no one else in the courtroom
raising concerns” and “the Court cannot be an advocate.” Id. at
19:13–19. The Court indicated that it would appoint an amicus
curiae to fill that role. See id. at 26:7–20. Accordingly, the
Court proceeded with a colloquy with Mr. Kim and Ms. Lee, as
Saena Tech’s corporate representative, and “defer[red] the
16
question of acceptance or rejection to another date.” Id. at
26:21–25. The Court engaged both Ms. Lee and Mr. Kim in a
colloquy regarding their understanding of the Saena Tech
Agreement, their agreement to the truth of the Statement of
Facts, their waivers of conflicts of interest in connection with
the joint representation, and, in the case of Ms. Lee, her
waiver of indictment and speedy trial, and ability to bind the
corporation. See id. at 41:16–71:1.
After the hearing, the Court appointed Professor Brandon L.
Garrett of the University of Virginia School of Law to serve,
along with Dean Alan Morrison of The George Washington
University Law School as his local counsel, “as amicus curiae to
respond to the parties’ arguments and provide the Court with
advocacy in favor of broader court authority, vel non, to
consider issues including the fairness and reasonableness of a
deferred-prosecution agreement in deciding whether to accept or
reject a deferred prosecution-agreement.” 4 Minute Order of July
21, 2014. The government filed its supplemental brief,
responding to the concerns raised by the Court, on August 8,
2014. See Gov’t’s Suppl. Br., ECF No. 26. The defendant filed a
“letter in lieu of a more formal brief” indicating that it and
Mr. Kim concur with the government’s brief. See Letter, ECF No.
4 The Court appreciates the helpful suggestions and illuminating
analysis provided by amicus curiae.
17
25-1 at 1. The amicus filed his brief on August 22, 2014. See
Amicus Br., ECF No. 31. The government filed a brief in response
to the amicus’s filing on August 29, 2014. See Reply, ECF No.
32.
A motion hearing regarding approval of the deferred-
prosecution agreement was held on September 5, 2014. Counsel for
the government and Saena Tech, as well as the court-appointed
amicus curiae, presented argument during that hearing. After the
hearing, the Court entered the following Minute Order regarding
two questions that had arisen during the hearing:
In accordance with the discussion held on the record
during the September 5, 2014 motion hearing, the parties
are directed to file supplemental briefs addressing the
following issues: (1) whether, after a Court approves an
exclusion of time under Section 3161(h)(2) of the Speedy
Trial Act, the Court has any authority to hold a defendant
that is party to the relevant deferred-prosecution
agreement in contempt for failing to comply with the
agreement’s provisions; and (2) whether the Court may
order a party to a deferred-prosecution agreement to
comply with the provisions of that agreement in
connection with a colloquy regarding that party’s
understanding of the agreement and relinquishment of its
constitutional and statutory right to a speedy trial.
Minute Order of September 5, 2014. The government filed its
brief on October 13, 2014. See Gov’t’s Suppl. Br., ECF No. 35.
The amicus curiae filed his brief on October 21, 2014. See
Amicus Suppl. Br., ECF No. 36.
18
B. United States v. Intelligent Decisions, Inc. 5
1. Factual Background Regarding Intelligent Decisions.
Intelligent Decisions is an information-technology company
based in Ashburn, Virginia, which conducts “the vast majority”
of its business with the United States government. See Statement
of Facts, ECF No. 3-2 at 18. Harry Martin, Jr. was the founder,
President, CEO, and owner of Intelligent Decisions, while Chae
Shim was the company’s Director of Acquisition Accounts for the
Asia/Pacific region. See id. Both Mr. Martin and Mr. Shim were
provided with corporate credit cards by Intelligent Decisions.
See id.
Intelligent Decisions’ involvement in the bribery scheme is
similar to that of Saena Tech. Like Saena Tech, it sought to
obtain contracts related to the PEO EIS organization within the
United States Army. See id. at 19. Also like Saena Tech,
Intelligent Decisions’ interactions were with Mr. Lim in his
capacity as Assistant Project Manager for the PM DCATS division
of the PEO EIS. See id. at 19.
Intelligent Decisions ultimately replaced another company in
providing an Information Technology Help Desk subcontract on the
same Prime Contract that Mr. Lim was supervising and in which
5 Unless otherwise noted, the ECF citations in this section refer
to documents filed in United States v. Intelligent Decisions,
Inc., No. 14-cr-211 (D.D.C. filed October 10, 2014).
19
Saena Tech was involved. See id. at 20. During this time, Saena
Tech “operated as a subcontractor for Intelligent Decisions” as
well as other companies. Id. Intelligent Decisions was involved
in the help desk subcontract from January 2009 until March 2010.
Id.
In January 2009, John Han Lee, an employee of the company that
was then-servicing the help desk subcontract, approached Mr.
Martin and Mr. Shim with the opportunity to take over the
subcontract. Id. at 21. Mr. Shim and Mr. Martin then traveled to
South Korea to meet with Mr. Lim. See id. On approximately
January 23, 2009, Mr. Martin paid $553.03 for dinner with Mr.
Lim and Mr. Shim, among others, and Mr. Shim paid $2,382.49 for
drinks and entertainment with Mr. Martin and Mr. Lim, among
others. See id. Both payments were made using Intelligent
Decisions’ corporate credit cards. See id. On January 30, 2009,
Intelligent Decisions was awarded the help desk contract with
Mr. Lim’s assistance. Id. The contract was worth $525,000, and a
second contract obtained by Intelligent Decisions was worth
$67,294.40. Id. Intelligent Decisions also agreed to hire Mr.
Lee and two other individuals to work on the subcontracts. Id.
For the remainder of 2009, Intelligent Decisions paid a number
of expenses on behalf of Mr. Lim. See id. at 22–26. The total
came to over $10,000 in meals, entertainment, golf outings, and
golf equipment, as well as a vehicle worth over $30,000. See id.
20
at 26. In exchange, Intelligent Decisions obtained modifications
to the existing subcontracts, which increased their values
significantly. See id. at 23–25.
Mr. Shim is no longer with the company. He pleaded guilty
before this Court to one count of felony gratuity in violation
of 18 U.S.C. § 201(c)(1)(A), and was sentenced to two years of
probation. See Plea Agreement, United States v. Chae Shim, No.
14-cr-182 (D.D.C. filed Nov. 6, 2014), ECF No. 8 at 1; J.,
United States v. Chae Shim, No. 14-cr-182 (D.D.C. filed April
17, 2015), ECF No. 27 at 2. Mr. Martin resigned as Chairman and
CEO of Intelligent Decisions, pleaded guilty before this Court
to one count of felony gratuity in violation of 18 U.S.C. §
201(c)(1)(A), and was sentenced to three years of probation and
a fine of $250,000. See Plea Agreement, United States v. Harry
Martin, No. 14-cr-210 (D.D.C. filed Nov. 24, 2014), ECF No. 4 at
1; J., United States v. Harry Martin, No. 14-cr-210 (D.D.C.
filed Mar. 20, 2015), ECF No. 27 at 2, 4.
2. The Intelligent Decisions Agreement.
On October 15, 2014, the government filed a one-count
Information charging Intelligent Decisions with paying a
gratuity to a public official in violation of 18 U.S.C. § 201.
See Information, ECF No. 1 at 1. The Information charged that
Intelligent Decisions gave various things of value to Mr. Lim
21
because of an official act performed and to be performed
by In Seon Lim . . . that is, Intelligent Decisions gave,
offered, and promised to In Seon Lim over $10,000 in
meals, entertainment, golf outings, and golf equipment,
and a vehicle worth over $30,000, for and because of
Lim’s official assistance to direct subcontracts to
Intelligent Decisions and Lim’s provision of
preferential treatment for Intelligent Decisions with
subcontracts awarded through the United States Army.
Id.
On October 28, 2014, the government filed a joint motion for
exclusion of time under the Speedy Trial Act. See Joint Mot.,
ECF No. 3-1 at 1. Attached to that motion was the Intelligent
Decisions Agreement. See Deferred-Prosecution Agreement, ECF No.
3-2. The Intelligent Decisions Agreement provides that, in
exchange for Intelligent Decisions’ cooperation, its payment of
a fine, and its implementation of a corporate-compliance
program, prosecution of Intelligent Decisions will be deferred
for a term of two years. See id. at 3, 4. Intelligent Decisions
admitted, in entering into the Agreement, to the truth of the
Statement of Facts, and also agreed that “[s]hould [the U.S.
Attorney’s Office] pursue the prosecution that is deferred by
this Agreement, the Company . . . will not contradict anything
in the Statement of Facts at any such proceeding.” Id. at 3. In
the event that the U.S. Attorney’s Office were to determine, “in
[its] sole discretion,” that Intelligent Decisions breached the
Agreement, it “shall thereafter be subject to prosecution.” Id.
at 10. Finally, the Intelligent Decisions Agreement provides
22
that “by signing this Agreement, [Intelligent Decisions] agrees
that the statute of limitations with respect to any such
prosecution that is not time-barred on the date of the signing
of this Agreement shall be tolled for the Term [of the
Agreement] plus one year.” Id. at 10.
Much like the Saena Tech Agreement, the Intelligent Decisions
Agreement imposes three obligations on the company that are
necessary to obtain the deferral:
Cooperation: Intelligent Decisions must cooperate fully in any
“investigation of the Company and its affiliates . . . in any
and all matters relating to the conduct described in the
Agreement and [Statement of Facts]. . .” Id. at 4. The company
must (1) “truthfully disclose all factual information not
protected by [certain privileges]”; (2) designate knowledgeable
employees, agents, or attorneys to provide to the Office the
[relevant] information and materials”; (3) “use its best efforts
to make available for interviews or testimony . . . present or
former officers, directors, employees, agents and consultants of
the Company”; and (4) “consent to any and all disclosures . . .
as the Office, in its sole discretion, shall deem appropriate.”
Id. at 5-6.
Fine: Intelligent Decisions agreed to pay a $300,000 fine
within ten days of the filing of the Information. Id. at 7. That
23
fine, the Intelligent Decisions Agreement declares, “is
appropriate given the facts and circumstances of this case.” Id.
Compliance Program: Intelligent Decisions agreed to implement
“a compliance and ethics program designed to prevent and detect
violations of 18 U.S.C. § 201 and other applicable anti-
corruption laws throughout its operations.” Id. at 8. The
Intelligent Decisions Agreement requires that it undertake a
review of its “existing internal accounting controls, policies,
and procedures regarding compliance with anti-corruption laws”
and “adopt new or modify existing internal controls, policies,
and procedures” to maintain: “(a) a system of internal
accounting controls designed to ensure the making and keeping of
fair and accurate books, records, and accounts; and (b) a
rigorous anti-corruption compliance code, standards, and
procedures designed to detect and deter violations of the
applicable anti-corruption laws.” Id. at 8-9.
3. Procedural History of United States v. Intelligent
Decisions, Inc.
On November 13, 2014, the Court held a status hearing “to
discuss the procedures that will govern the Court’s review and
consideration” of the Joint Motion for approval. Minute Order of
October 28, 2014. The Court then ordered a hearing to “conduct a
colloquy with one or more corporate officers of defendant
Intelligent Decisions.” Minute Order of November 13, 2014. The
24
Court also ordered that this hearing would follow procedures
similar to the Saena Tech case: “one or more corporate officers
with authority to bind Intelligent Decisions and familiarity
with the deferred-prosecution agreement and attached statement
of facts shall appear at that hearing” and “Intelligent
Decisions is directed to file . . . copies of documentation
sufficient to show that the corporate officers who will appear
at the January 8 hearing have the authority to speak on behalf
of and to bind the corporation.” Id. The hearing was scheduled
for January 8, 2015. See id.
The Court also ordered Intelligent Decisions to review the
pleadings filed in the Saena Tech case related to the scope of
the Court’s authority to accept or reject deferred-prosecution
agreements. Id. The Court requested that the defendant address
the issues raised by the Court in Saena Tech. See id.
Intelligent Decisions filed a brief addressing these issues on
January 5, 2015. See Def.’s Br., ECF No. 8. The Court held a
hearing on January 15, 2015, at which time the Court conducted a
colloquy similar to that in the Saena Tech case, and indicated
that it would take the Intelligent Decisions Agreement under
advisement. See Minute Entry of January 15, 2015.
25
II. Legislative History of the Speedy Trial Act’s Provisions
Related to Deferred-Prosecution Agreements.
The relevant legislative history demonstrates that deferred-
prosecution agreements were originally intended to give
prosecutors the ability to defer prosecution of individuals
charged with certain non-violent criminal offenses to encourage
rehabilitation. At this time, however, and as discussed in
detail in Part V of this Opinion, deferred-prosecution
agreements appear to be offered relatively sparingly to
individuals, and instead are used proportionally more frequently
to avoid the prosecution of corporations, their officers, and
employees.
A. The Legislative History of the Speedy Trial Act Reflects
an Intent to Permit the Deferral of Individual
Prosecutions in an Effort to Facilitate Rehabilitation.
The Speedy Trial Act permits an exclusion from the speedy
trial calculation of “[a]ny period of delay during which
prosecution is deferred by the attorney for the Government
pursuant to written agreement with the defendant, with the
approval of the court, for the purpose of allowing the defendant
to demonstrate his good conduct.” 28 U.S.C. § 3161(h)(2). It is
this sentence that forms the basis for deferred-prosecution
agreements. Without it, prosecutors would have difficulty
bringing a case onto a court’s docket and thereby obtaining the
26
benefit of the pending criminal charge and potential court
supervision of the defendant.
The legislative history of the Speedy Trial Act demonstrates
that Congress intended to provide a tool to assist in
rehabilitating individuals, modeled on successful deferred
prosecution programs in New York City and the District of
Columbia. In 1969, then-Representative Abner Mikva introduced a
bill that ultimately became the Speedy Trial Act. See Anthony
Partridge, Fed. Judicial Ctr., Legislative History of Tile I of
the Speedy Trial Act of 1974 at 19 (1980), available at
http://www.fjc.gov/public/pdf.nsf/lookup/lhiststa.pdf/$file/lhis
tsta.pdf. The bill introduced by Representative Mikva (“Mikva
Bill”) contained speedy trial exclusions, similar to those
ultimately codified in Section 3161(h) of the Speedy Trial Act.
See id. at 116. Those exclusions included what would become
Section 3161(h)(2), but omitted court involvement in the
deferral process. See id. at 280-81 (excluding “[t]he period of
delay during which prosecution is deferred by the United States
attorney pursuant to written agreement with the defendant for
the purpose of allowing the defendant to demonstrate his good
conduct” in “computing the time for trial”).
In 1970 and again in 1971, Senator Sam Ervin introduced his
own speedy trial legislation. See id. at 13-14. With the
exception of corrections for cross references, the two bills –
27
as introduced – were identical. See id. at 5. The 1970 bill
introduced by Senator Ervin (“Ervin Bill”) included an exclusion
for “[a]ny period of delay during which prosecution is deferred
by the United States attorney pursuant to written agreement with
the defendant for the purpose of allowing the defendant to
demonstrate his good conduct.” Id. at 288. The lack of court
involvement in this provision generated some debate. During a
hearing on the 1971 Ervin Bill, Former Assistant U.S. Attorney
Daniel A. Rezneck submitted a prepared statement arguing that
“the words ‘with the approval of the court’ should be inserted.”
Id. at 116. Mr. Rezneck stated:
This provision, which recognizes and encourages the
deferral of prosecution pursuant to written agreement
with a defendant that he will demonstrate his good
conduct, is desirable. Since it has some of the elements
of a plea bargain and does result in a pro tanto waiver
of the defendant’s right to a speedy trial, approval by
the court on the record is a wise and necessary
safeguard.
Id.
The 1971 Ervin Bill was pending before the Constitutional
Rights Subcommittee of the Senate Judiciary Committee in 1972
when language requiring court approval of the deferral was added
via amendment. See id. at 5, 299 (excluding “[a]ny period of
delay during which prosecution is deferred by the attorney for
the Government pursuant to written agreement with the defendant,
with the approval of the court, for the purpose of allowing the
28
defendant to demonstrate his good conduct”). The same version of
the bill was introduced again in 1973, and it was reported out
by the Senate Judiciary Committee in 1974. See id. at 314. The
Senate Judiciary Committee’s Report on that provision provides
the explanation of its purpose:
Subparagraph 3161(h)(2) is designed to encourage the
current trend among United States attorneys to allow for
deferral of prosecution on the condition of good
behavior. A number of Federal and State courts have been
experimenting with pretrial diversion or intervention
programs in which prosecution of a certain category of
defendants is held in abeyance on the condition that the
defendant participate in a social rehabilitation
program. If the defendant succeeds in the program,
charges are dropped. Such diversion programs have been
quite successful with first offenders in Washington,
D.C. (Project Crossroads) and in New York City
(Manhattan Court Employment Project). Some success has
also been noted in programs where the defendant’s
alleged criminality is related to a specific social
problem such as prostitution or heroin addiction. Of
course, in the absence of a provision allowing the
tolling of the speedy trial time limits, prosecutors
would never agree to such diversion programs. Without
such a provision the defendant could automatically
obtain a dismissal of charges if prosecution were held
in abeyance for a period of time in excess of the time
limits set out in section 3161(b) and (c). This section
of S. 754 differs from its counterpart in S. 895. It now
requires that exclusion for diversion only be allowed
where deferral of prosecution is conducted “with
approval of the court.” This assures that the court will
be involved in the decision to divert and that the
procedure will not be used by prosecutors and defense
counsel to avoid the speedy trial time limits.
Id. at 117 (quoting S. Rep. No. 93-1021, at 36–37 (1974)). The
bill that was reported out by the Senate Judiciary Committee was
ultimately passed by the Senate on July 23, 1974 and signed by
29
the President on January 3, 1975, becoming Public Law No. 93-
619. See id. at 15, 6. Section 3161(h)(2) was not altered in any
way after it was approved by the Senate Judiciary Committee. See
id. at 116. 6 Nor did the 1979 Amendments to the Speedy Trial Act
affect Section 3161(h)(2). Id.
The legislative history thus demonstrates that Court
involvement in the deferral of a prosecution was specifically
intended by Congress when it passed this legislation. The Court
analyzes the contours of that involvement in Part III of this
Opinion.
6 The House Judiciary Committee received some pushback from the
Department of Justice regarding the requirement of court
approval, but did not act on it. In the exhibit to Assistant
Attorney General W. Vincent Rakestraw’s 1974 testimony, the
Department commented:
In juvenile matters the Attorney General presently
authorizes U.S. Attorneys to utilize the so-called
“Brooklyn Plan” for deferred prosecution, and in some
pilot districts a program of deferred prosecution of
adults has been initiated under the Executive Authority
of the Attorney General. Neither of the foregoing
deferred plans for prosecution require approval of the
court. Involving the court in this type of prosecutorial
decision would seemingly violate the doctrine of
separation of powers . . . . Because of the foregoing
reasons, it is proposed that the language “with the
approval of the court” be deleted.
Id. at 117-18.
30
III. The Court’s Role When Presented with a Deferred-Prosecution
Agreement.
A. Decisions in United States v. HSBC and United States v.
Fokker Services.
There is no dispute that the government is empowered to offer
deferred-prosecution agreements to the defendants in these
cases. The question is the Court’s role in reviewing and
approving those agreements. Two District Court opinions have
addressed the source and scope of a district court’s authority
to review a deferred-prosecution agreement. See United States v.
Fokker Servs., B.V., 79 F. Supp. 3d 160 (D.D.C. 2015), appeals
docketed, Nos. 15-3016, 15-3017 (D.C. Cir. filed Feb. 23, 2015);
United States v. HSBC Bank USA, No. 12-cr-763, 2013 WL 3306161
(E.D.N.Y. July 1, 2013). As commentators have noted, “nearly
every . . . DPA that the government has negotiated with a U.S.
company has been approved without judicial modification.” Peter
Reilly, Negotiating Bribery: Toward Increased Transparency,
Consistency, and Fairness in Pretrial Bargaining Under the
Foreign Corrupt Practices Act, 10 Hastings Bus. L.J. 347, 393
(2014); see also Brandon L. Garrett, Structural Reform
Prosecution, 93 Va. L. Rev. 853, 922 (2007) (noting, prior to
the issuance of the HSBC decision, that “[e]very judge approving
a deferred prosecution agreement has done so without any
published rulings or modifications to the agreement”). Judge
John Gleeson’s decision in HSBC was apparently the first in
31
which a District Court Judge declined to automatically approve a
deferred-prosecution agreement, while Judge Richard Leon’s
Opinion in Fokker was the first rejection of a deferred-
prosecution agreement. These decisions provide helpful insight
for this Court’s assessment of its authority regarding the two
pending agreements. The Court therefore reviews each decision in
some detail.
1. United States v. HSBC.
Judge Gleeson’s decision in United States v. HSBC Bank was the
first written decision to address this issue, and it identified
the potential sources of a court’s authority to consider whether
to approve deferred-prosecution agreements. In that case, Judge
Gleeson was presented with an agreement entered into in
connection with charges that HSBC “willfully fail[ed] to
maintain an effective anti-money laundering . . . program” and
“willfully facilitate[ed] financial transactions on behalf of
sanctioned entities.” HSBC, 2013 WL 3306161, at *1. The
government entered into a deferred-prosecution agreement with
HSBC, which “request[ed] that the Court hold the case in
abeyance for five years . . . and exclude that time pursuant to
28 U.S.C. § 3161(h)(2) from the 70-day period within which trial
must otherwise commence.” Id.
Judge Gleeson first concluded that the court’s authority in
addressing a deferred-prosecution agreement has a different
32
basis than its authority in connection with guilty pleas or
pleas of nolo contendere. Id. at *2. Federal Rule of Criminal
Procedure 11(c)(1)(A), which provides for some court oversight
of government dismissals of charges “[i]f the defendant pleads
guilty or nolo contendere,” and Section 6B1.2 of the United
States Sentencing Guidelines, which provides standards for a
court’s acceptance of a plea agreement, did not apply, according
to Judge Gleeson, because the defendant “has not agreed to plead
guilty or nolo contendere to any of the charged offenses . . .
Nor has the government agreed to dismiss other charges in
exchange for a plea of guilty.” Id. at *2.
Judge Gleeson identified two possible sources of authority:
the Speedy Trial Act, which permits the parties in a criminal
case to obtain an exclusion of time pursuant to agreements to
defer prosecution, and the Court’s supervisory power. See id. at
*2–7. Judge Gleeson found that the Speedy Trial Act
unequivocally contemplates a district court’s participation in
the process to approve a deferred-prosecution agreement and that
this approval requirement “is grounded in a concern . . . that
parties will collude to circumvent the speedy trial clock,”
meaning that courts must “consider whether a deferred-
prosecution agreement is truly about diversion and not simply a
vehicle for fending off a looming trial date.” Id. at *3. The
Court’s supervisory power provides additional authority, Judge
33
Gleeson concluded, because “[b]y placing a criminal matter on
the docket of a federal court, the parties have subjected their
DPA to the legitimate exercise of that court’s authority.” Id.
at *5. Judge Gleeson ultimately approved the deferred-
prosecution agreement pursuant to the Court’s supervisory power.
See id. at *1,7 – 11. Judge Gleeson observed that “[a]s long as
the government asks the Court to keep this criminal case on its
docket, the Court retains the authority to ensure that the
implementation of the DPA remains within the bounds of
lawfulness and respects the integrity of this Court.” Id. at
*11. Pursuant to this authority, Judge Gleeson directed the
parties to file quarterly reports “with the Court to keep it
apprised of all significant developments in the implementation
of the DPA. Doubts about whether a development is significant
should be resolved in favor of inclusion.” Id.
2. United States v. Fokker Services.
Judge Leon relied on the HSBC decision when he issued the
first decision declining approval of a deferred-prosecution
agreement. See Fokker, 79 F. Supp. 3d 160. In that case, Fokker
Services, a Dutch aerospace services provider, was charged with
violating export laws from 2005 until 2010 by engaging in
transactions with sanctioned countries including Iran, Burma,
and Sudan. Id. at 162. The United States and Fokker Services
entered into an agreement whereby Fokker Services: (1) accepted
34
responsibility for its conduct, and (2) agreed to pay
$10,500,000; to cooperate with the government; to implement a
new compliance program; and to comply with export laws going
forward. The agreement further provided that if the company were
to fulfill these conditions over the course of eighteen months,
the government would dismiss the charges. Id. at 164.
Relying on HSBC, Judge Leon found that a plain reading of the
Speedy Trial Act calls for a district court to play a role in
approving the agreement. Id. He also “agreed with [Judge
Gleeson’s] well-reasoned conclusion that a District Court has
the authority ‘to approve or reject the DPA pursuant to its
supervisory power.’” Id. at 165 (quoting HSBC, 2013 WL 3306161,
at *4). “One of the purposes of the Court’s supervisory powers,”
Judge Leon wrote, “is to protect the integrity of the judicial
process.” Id. While Judge Leon recognized the government’s
discretion to choose not to prosecute a case, he emphasized that
the government chose to charge Fokker, and asked the court to
lend its “judicial imprimatur” to the deferred-prosecution
agreement. Id. He therefore found that “it is this Court’s duty
to consider carefully whether that approval should be given.”
Id.
Based on these two sources of authority, Judge Leon concluded
that the agreement presented in Fokker was not an appropriate
exercise of prosecutorial discretion because the agreement was
35
”grossly disproportionate to the gravity of Fokker Services’
conduct.” Id. at 167. In arriving at this conclusion, Judge Leon
observed that “the integrity of the judicial proceedings would
be compromised by giving the Court’s stamp of approval to either
overly-lenient prosecutorial action, or overly-zealous
prosecutorial conduct.” Id. at 166. Fokker Services had
allegedly violated export laws for five years and earned more
revenue than it agreed to pay in fines. Judge Leon took issue
with the short compliance period, the low fine, and the lack of
an independent compliance monitor. Id.
* * *
These two cases inform the Court’s analysis of its authority
to approve these two deferred-prosecution agreements. The Court
agrees that the Speedy Trial Act and the judiciary’s supervisory
power appear to be the only potential sources of court authority
to review deferred-prosecution agreements. During the September
5, 2014 hearing in the Saena Tech case, the Court raised the
possibility that it could derive authority to punish failure to
comply with a deferred-prosecution agreement from either the
fact of having approved an exclusion under the Speedy Trial Act
or from a specific Court Order directing compliance with the
agreement’s provisions. Because the Court is not currently
presented with any information indicating that either defendant
36
has failed to comply with their respective agreements, the Court
need not address whether it has this authority at this time.
B. Review of a Deferred-Prosecution Agreement Must Recognize
the Expertise of Prosecutors and the Separation-of-Powers
Concerns Inherent in Judicial Review of Charging
Decisions.
It is well established that the Executive Branch has broad
discretion to decide when to initiate criminal proceedings.
Cmty. for Creative Non-Violence v. Pierce, 786 F.2d 1199, 1201
(D.C. Cir. 1986) (“The power to decide when to investigate, and
when to prosecute, lies at the core of the Executive’s duty to
see the faithful execution of the laws”); see also Interstate
Commerce Comm’n v. Bhd. of Locomotive Eng’rs, 482 U.S. 270, 283
(1987) (“it is entirely clear that the refusal to prosecute
cannot be the subject of judicial review”). This “broad
discretion” is deserved, in part, because the Executive Branch—
exercising its responsibility to take care that the laws be
faithfully executed—must take a variety of factors into
consideration. “Such factors as the strength of the case, the
prosecution’s general deterrence value, the Government’s
enforcement priorities, and the case’s relationship to the
Government’s overall enforcement plan are not readily
susceptible to the kind of analysis the courts are competent to
undertake.” Wayte v. United States, 470 U.S. 598, 607 (1985).
Indeed, “[t]o mandamus a particular prosecution . . . would
37
normally be very difficult, for a prosecutor may lawfully take
account of many factors other than probable cause in making such
decisions.” Nader v. Saxbe, 497 F.2d 676, 679 n.18 (D.C. Cir.
1974).
As such, the decision to prosecute is “particularly ill-suited
to judicial review.” Wayte, 470 U.S. at 607. Thus, “‘[t]he
presumption of regularity supports’ . . . prosecutorial
decisions and, ‘in the absence of clear evidence to the
contrary, courts presume that they have properly discharged
their official duties.’” United States v. Armstrong, 517 U.S.
456, 464 (1996) (quoting United States v. Chem. Found., Inc.,
272 U.S. 1, 14–15 (1926)); see also Nader, 497 F.2d at 679 n.18
(“The federal courts have customarily refused to order
prosecution. . .”).
Not only is the Judicial Branch ill-suited to review
prosecutorial decisions—given the complex factors involved—but
judicial intervention would also undermine the Executive
Branch’s ability to “take Care that the Laws be faithfully
executed.” U.S. Const. art. II, § 3. As the Supreme Court
elaborated:
Judicial supervision in this area, moreover, entails
systemic costs of particular concern. Examining the
basis of a prosecution delays the criminal proceeding,
threatens to chill law enforcement by subjecting the
prosecutor’s motives and decision-making to outside
inquiry, and may undermine prosecutorial effectiveness
by revealing the Government’s enforcement policy. All
38
these are substantial concerns that make the courts
properly hesitant to examine the decision whether to
prosecute.
Wayte, 470 U.S. at 607-08.
Furthermore, “a district judge must be careful not to exceed
his or her constitutional role.” United States v. Microsoft
Corp., 56 F.3d 1448, 1462 (D.C. Cir. 1995). The judiciary is
separated from the prosecutorial function, “keep[ing] the courts
as neutral arbiters in the criminal law generally.” Nader, 497
F.2d at 679 n.18. “When a judge assumes the power to prosecute,
the number [of branches] shrinks to two.” In re United States,
345 F.3d 450, 454 (7th Cir. 2003); see also United States v.
Cox, 342 F.2d 167, 171 (5th Cir. 1965) (“It follows, as an
incident of the constitutional separation of powers, that the
courts are not to interfere with the free exercise of the
discretionary powers of the attorneys of the United States in
their control over criminal prosecutions.”). These institutional
concerns must shape any analysis of the Court’s role in
reviewing the government’s decision to offer a defendant a
deferred-prosecution agreement.
C. The Speedy Trial Act Subjects Deferred-Prosecution
Agreements to Limited, But Meaningful, Court Review.
Section 3161(h)(2) allows for the exclusion of “[a]ny period
of delay during which prosecution is deferred by the attorney
for the Government pursuant to written agreement with the
39
defendant, with the approval of the court, for the purpose of
allowing the defendant to demonstrate his good conduct.” 28
U.S.C. 3161(h)(2). As Judge Gleeson held in HSBC, “a plain
reading of this provision” contemplates court involvement in
approving a deferred-prosecution agreement. See HSBC, 2013 WL
3306161, at *3. The government appears not to contest this
point. See Gov’t’s Br. at 1. That said, however, the Act does
not provide a standard for the court’s review, nor is the term
“approval” defined. See HSBC, 2013 WL 3306161, at *2. 7 Moreover,
with the exception of the HSBC Opinion and Judge Leon’s Opinion
in Fokker, there is no case law on this issue.
7 In HSBC, Judge Gleeson rejected the defendant’s reliance on
Section 3161(h)(7) of the Speedy Trial Act, which provides for
an exclusion of time based on a determination “that the ends of
justice served by [delay] outweigh the best interest of the
public’s and the defendant’s interests in a speedy trial” and
provides set of factors for a court to consider in conducting
this inquiry. HSBC, 2013 WL 3306161, at *3. That provision,
Judge Gleeson held, “is not a ‘catch-all provision’; rather, it
describes one specific type of exclusion—i.e., when the ends of
justice served by the exclusion outweigh the best interests of
the public—permitted by the Speedy Trial Act.” Id. Moreover, he
found, “nowhere” does the Speedy Trial Act “suggest[] that this
balancing inquiry applies to the myriad other types of exclusion
enumerated in 28 U.S.C. § 3161(h).” Id; but see United States v.
Wright Med. Tech., No. 10-8233, 2010 WL 6606785, at *1 (D.N.J.
Sept. 30, 2010) (importing, without analysis or explanation, the
3161(h)(7) factors in deciding to grant an exclusion of time
under 3161(h)(2)). The Court agrees with Judge Gleeson. The
3161(h)(7) factors have not been used to inform court decisions
regarding any other Speedy Trial Act exclusion and it would be
anomalous to apply them to Section 3161(h)(2).
40
The text of the Act grants an exclusion when prosecution is
deferred “pursuant to written agreement with the defendant, with
the approval of the court, for the purpose of allowing the
defendant to demonstrate his good conduct.” 28 U.S.C. §
3161(h)(2). Although this language is not crystal clear, the
requirement of court approval implies that the court must place
its formal imprimatur on the agreement. This is significant, as
the amicus notes, because “other provisions of the [Speedy
Trial] Act do not require court approval, while still other
provisions of the Act limit discretion, for example, by
providing factors to be considered when deciding whether to
grant a continuance, or by supplying standards for whether a
type of delay is reasonable.” Amicus Br., ECF No. 31 at 4. 8 The
8 See 28 U.S.C. § 3161(h)(1) (excluding “[a]ny period of delay
resulting from other proceedings concerning the defendant” and
providing a representative list of such proceedings); id. §
3161(h)(3) (excluding “[a]ny period of delay resulting from the
absence or unavailability of the defendant or an essential
witness” and defining “absence”); id. § 3161(h)(4) (excluding
“[a]ny period of delay resulting from the fact that the
defendant is mentally incompetent or physically unable to stand
trial”); id. § 3161(h)(5) (excluding, in cases where an
information or indictment is dismissed by the government and
charges are re-filed for the same offense, “any period of delay
from the date the charge was dismissed to the date the time
limitation would commence to run as to the subsequent charge had
there been no previous charge”); id. § 3161(h)(6) (excluding
“[a] reasonable period of delay when the defendant is joined for
trial with a codefendant as to whom the time for trial has not
run and no motion for severance has been granted”); id. §
3161(h)(7) (excluding “[a]ny period of delay resulting from a
continuance” provided that the judge finds “that the ends of
justice served by taking such action outweigh the best interest
41
language does not grant the Court plenary power to review the
agreement, however. The Court’s approval authority is located
within a sentence stating that the agreement must be “for the
purpose of allowing the defendant to demonstrate his good
conduct.” 28 U.S.C. § 3161(h)(2). Arguably, then, court review
must be tied to determining whether the agreement satisfies this
purpose. Had Congress intended courts to review a deferred-
prosecution agreement for other purposes, it presumably would
have provided courts with guidance as to those purposes.
In the Court’s opinion, the legislative history of Section
3161(h)(2) clearly shows that court involvement in the deferred-
prosecution process was specifically intended. See supra Part
II. This involvement was included to “assure[] that the court
will be involved in the decision to divert and that the
procedure will not be used by prosecutors and defense counsel to
avoid the speedy trial time limits.” S. Rep. No. 93-1021, at 37
(1974). One could seize on this final sentence of the Senate
Judiciary Committee’s Report to construct an argument in favor
of the public and the defendant in a speedy trial” and reciting
factors for the court to consider in making this determination);
id. § 3161(h)(8) (excluding “[a]ny period of delay, not to
exceed one year, ordered by a district court upon an application
of a party and a finding by a preponderance of the evidence that
an official request . . . has been made for evidence of any such
offense and that it reasonably appears, or reasonably appeared
at the time the request was made, that such evidence is, or was,
in such foreign country”).
42
of greater court authority. However, stating that the court
“will be involved in the decision to divert” should not be
interpreted to mean that the court will make the decision
whether to divert.
The amicus argues in favor of a broad reading of the Speedy
Trial Act, based on the Act’s delegation of authority to the
Court to “approve,” and the absence of factors that are provided
in other Speedy Trial Act exclusions. See Amicus Br. at 3–5. In
light of the novelty of corporate deferred-prosecution
agreements, amicus argues, the Court should fashion its own
standards for approving or rejecting an agreement on a case-by-
case basis, looking to standards provided for court oversight of
other types of agreements. See id. at 5–7. The government would
limit the Court’s authority to deciding whether an agreement is
merely an attempt to put off a pending trial. See Gov’t’s Br.,
ECF No. 26 at 6–7.
Faced with arguably ambiguous text that most clearly reads as
tying the Court’s authority to approve the agreement to
determining whether it is truly designed to hold prosecution in
abeyance while a defendant demonstrates good conduct, and
arguably ambiguous legislative history that most clearly reads
as intending that same result, the Court concludes that its
authority under the Speedy Trial Act is limited to assessing
43
whether the agreement is truly about diversion. 9 This limited
interpretation is especially appropriate where a broader one
could effectively seize authority by the Judicial Branch over a
traditional Executive Branch function. See supra Part III.B.
Accordingly, the Court finds that approval of a deferred-
prosecution agreement should be granted under the Speedy Trial
Act when the agreement is intended to hold prosecution in
abeyance while a defendant demonstrates good conduct. See HSBC,
2013 WL 3306161, at *3 (the text and legislative history of the
Speedy Trial Act make clear that the Court’s involvement in
deferred-prosecution agreements “is grounded in a concern . . .
that parties will collude to circumvent the speedy trial clock,”
meaning that courts must “consider whether a deferred-
prosecution agreement is truly about diversion and not simply a
vehicle for fending off a looming trial date”); cf. United
States v. Credit Suisse AG, No. 9-352, 2009 WL 4894467, at *1
(D.D.C. Dec. 16, 2009) (brief order stating that “following a
careful review” of a deferred-prosecution agreement, the Court
9 This ambiguity, combined with the fact that Congress’s original
purpose had nothing to do with the broad-ranging corporate
deferred-prosecution agreements that have become commonplace,
suggests that congressional action to clarify the standards a
court should apply when confronted with a corporate deferred-
prosecution agreement may be appropriate. As the amicus has
written, corporate deferred-prosecution agreements often result
in large structural reforms that may have far-reaching
consequences. See Brandon L. Garrett, Structural Reform
Prosecution, 93 Va. L. Rev. 853 (2007).
44
concluded “that the period of delay . . . is for the purpose of
allowing Defendant . . . to demonstrate its good conduct and
implement its remedial measures”).
This authority necessarily involves limited review of the
fairness and adequacy of an agreement, to the extent necessary
to determine the agreement’s purpose. In this respect, the Court
finds that its authority is greater than the largely
administrative authority contemplated by the government. The
Court must determine whether an agreement is truly about
permitting a defendant to demonstrate reform. In so doing, the
factors the amicus provided could be useful guideposts. See
Amicus Br. at 11–17 (suggesting that courts look at nine factors
in reviewing deferred-prosecution agreements: (1) reasonableness
of any fines or other punitive measures; (2) compliance-related
safeguards; (3) independent corporate monitors to supervise
compliance; (4) cooperation with authorities in ongoing
investigations; (5) the lack of unrelated requirements that
might require judicial intervention; (6) potential collateral
consequences of the agreement; (7) the appropriateness of
restitution to any victims; (8) the effect of the agreement on
other regulators; and (9) the effect of the period of delay on
statutes of limitations or other interests). An agreement that
contained neither punitive measures (such as fines) nor
requirements designed to deter future criminality (such as
45
compliance programs and independent monitors) could not be said
to be designed to secure a defendant’s reformation and should be
rejected. Even an agreement that contained some of these
elements could be ineffective if the obligations were found to
be so vague or minimal as to render them a sham. Cf. Fokker
Servs., 79 F. Supp. 3d at 166 (finding fines and compliance
measures to be weak and noting the complete lack of an
independent monitor or requirement that the defendant submit
compliance reports in denying approval of a deferred-prosecution
agreement). Accordingly, the Court is persuaded that it retains
authority under the Speedy Trial Act, albeit limited, to
consider the terms of a deferred-prosecution agreement to
determine whether they provide the defendant an opportunity to
demonstrate good conduct while prosecution is deferred.
D. The Court’s Supervisory Power Permits the Court to Deny
Approval Where a Deferred-Prosecution Agreement Would
Involve the Court in Illegal or Especially Problematic
Agreements.
“The supervisory power . . . permits federal courts to
supervise ‘the administration of criminal justice’ among the
parties before the bar.” United States v. Payner, 447 U.S. 727,
735 n.7 (1980) (quoting McNabb v. United States, 318 U.S. 332,
340 (1943)). “Judicial supervision of the administration of
criminal justice in the federal courts implies the duty of
establishing and maintaining civilized standards of procedure
46
and evidence. . . [which are] not satisfied merely by observance
of those minimal historic safeguards for securing trial by
reason which are summarized as ‘due process of law.’” McNabb,
318 U.S. at 340.
The courts have exercised this authority at times
“substantively, that is, to provide a remedy for the violation
of a recognized right of a criminal defendant.” HSBC, 2013 WL
3306161, at *4. Thus, the supervisory power may be used “to
exclude evidence taken from the defendant by ‘willful
disobedience of law.’” Payner, 447 U.S. at 735 n.7 (quoting
McNabb, 318 U.S. at 345). It may relatedly be used “to correct
an error which permeated [a judicial] proceeding.” Ballard v.
United States, 329 U.S. 187, 193 (1946) (grand and petit juries
were drawn, in violation of applicable state law, from a pool
that excluded women).
The power has also been used to “formulate[] rules of evidence
to be applied in federal criminal prosecutions.” McNabb, 318
U.S. at 341. As the Supreme Court explained more recently, “[i]n
the exercise of its supervisory authority, a federal court ‘may,
within limits, formulate procedural rules not specifically
required by the Constitution or the Congress.’” Bank of Nova
Scotia v. United States, 487 U.S. 250, 254 (1988) (quoting
United States v. Hasting, 461 U.S. 499, 505 (1983)). This
Circuit has exercised its supervisory power to mandate the use
47
of a particular jury-deadlock instruction, United States v.
Thomas, 449 F.2d 1177, 1187 (D.C. Cir. 1971). The U.S. District
Court for the District of Columbia used the power to establish
standards governing the sealing and unsealing of court records.
See United States v. Ring, No. 8-274, 2014 WL 2584054, at *2
(D.D.C. June 10, 2014) (citing United States v. Hubbard, 650
F.2d 293, 315–18 (D.C. Cir. 1980)). Moreover, “courts have
historically exercised their supervisory power to develop
appropriate exceptions to the rule of grand jury secrecy.” In re
Kutler, 800 F. Supp. 2d 42, 46 (D.D.C. 2011).
Of utmost importance, the supervisory power serves “to protect
the integrity of the federal courts.” Payner, 447 U.S. at 744
(Marshall, J., dissenting) (citing McNabb, 318 U.S. at 342, 345,
347); see also id. (“The Court has particularly stressed the
need to use supervisory powers to prevent the federal courts
from becoming accomplices to . . . misconduct”); Mesarosh v.
United States, 352 U.S. 1, 14 (1956) (“This is a federal
criminal case, and this Court has supervisory jurisdiction over
the proceedings . . . . If it has any duty to perform in this
regard, it is to see that the waters of justice are not
polluted.”). As Justice Holmes stated in Olmstead v. United
States, “no distinction can be taken between the government as
prosecutor and the government as judge. If the existing code
does not permit district attorneys to have a hand in such dirty
48
business it does not permit the judge to allow such iniquities
to succeed.” 277 U.S. 438, 470 (1928) (Holmes, J., dissenting);
see also id. at 483 (Brandeis, J., dissenting) (“When the
government, having full knowledge, sought, through the
Department of Justice, to avail itself of the fruits of these
acts in order to accomplish its own ends, it assumed moral
responsibility for the officers’ crimes. . . . [A]nd if this
court should permit the government, by means of its officers’
crimes, to effect its purpose of punishing the defendants, there
would seem to be present all the elements of a ratification. If
so, the government itself would become a lawbreaker.”). “One of
the primary purposes of the supervisory power is to protect the
integrity of judicial proceedings.” HSBC, 2013 WL 3306161, at *4
(citing Hasting, 461 U.S. at 526; Payner, 447 U.S. at 735 n.8;
Elkins v. United States, 364 U.S. 206,216 (1960)).
The supervisory power is a limited power, however. It “is an
extraordinary one which should be ‘sparingly exercised.’” United
States v. Jones, 433 F.2d 1176, 1181–82 (D.C. Cir. 1970)
(quoting Lopez v. United States, 373 U.S. 427, 440 (1963)). This
is so because it arguably functions as “a form of specialized
and limited federal common law.” United States v. Gatto, 763
F.2d 1040, 1045 (9th Cir. 1985); see also United States v.
Strothers, 77 F.3d 1389, 1397 (D.C. Cir. 1996) (Sentelle, J.,
concurring) (“[W]hatever its historical underpinnings, the
49
exercise of the supervisory power denotes a distinctive form of
judicial lawmaking by the federal courts.” (citation omitted)).
The authority is thus limited by the doctrine of separation of
powers. Even if exercised in a “sensible and efficient” fashion,
it “is invalid if it conflicts with constitutional or statutory
provisions.” Bank of Nova Scotia, 487 U.S. at 254 (citation
omitted); see also Payner, 447 U.S. at 737 (Burger, C.J.,
concurring) (“this Court has no general supervisory authority
over operations of the Executive Branch, as it has with respect
to the federal courts”); Gatto, 763 F.2d at 1046 (“Proper regard
for judicial integrity does not justify a ‘chancellor’s foot
veto’ over activities of coequal branches of government”)
(quoting United States v. Russell, 411 U.S. 423, 435 (1973)).
Use of the supervisory power must therefore be balanced against
concerns of competing branches of the federal government.
In the context of prosecutorial decisions, “the federal
judiciary’s supervisory powers over prosecutorial activities
that take place outside the courthouse is extremely limited, if
it exists at all.” United States v. Lau Tung Lam, 714 F.2d 209,
210 (2d Cir. 1983). As previously discussed,
[T]he decision to prosecute is particularly ill-suited
to judicial review. Such factors as the strength of the
case, the prosecution’s general deterrence value, the
government’s enforcement priorities, and the case’s
relationship to the government’s overall enforcement
plan are not readily susceptible to the kind of analysis
the courts are competent to undertake.
50
Wayte, 470 U.S. at 607. In this vein, the Court would have
little authority, if any, to review an out-of-court non-
prosecution agreement between the government and a defendant.
See Amicus Br., ECF No. 31 at 6. Similarly, the government may
offer an individual immunity from prosecution and courts have no
discretion to review the appropriateness of the Executive
Branch’s decision. See Ullmann v. United States, 350 U.S. 422,
432-33 (1956); United States v. Moore, 651 F.3d 30, 82 (D.C.
Cir. 2011) (holding that district courts have “no authority to
immunize . . . or to compel the government to immunize”; “[t]he
decision to grant immunity from prosecution rests solely with
the Executive Branch”).
Nonetheless, the Court is not presented with an outright
grant of immunity, a decision not to prosecute, or a non-
prosecution agreement. The parties have brought criminal cases,
consented to the waiver of an indictment, and presented the
Court with deferred-prosecution agreements for the Court’s
approval. Whether the parties label that approval as the
approval only of a Speedy Trial Act exclusion, or approval of
the agreements themselves is of little consequence. The Court is
being asked to place its formal imprimatur on the agreements, to
hold open two federal criminal cases, and to make various
51
findings with respect to the Speedy Trial Act. As Judge Gleeson
found in HSBC:
[F]or whatever reason or reasons, the contracting
parties have chosen to implicate the Court in their
resolution of this matter. There is nothing wrong with
that, but a pending federal criminal case is not window
dressing. Nor is the Court, to borrow a famous phrase,
a potted plant. By placing a criminal matter on the
docket of a federal court, the parties have subjected
their DPA to the legitimate exercise of that court’s
authority.
HSBC, 2013 WL 3306161, at *5. This implicates the aspect of the
supervisory power that is “concerned with law enforcement
practices . . . in so far as courts themselves become
instruments of law enforcement.” McNabb, 318 U.S. at 347.
The question remains what standard the Court should apply in
deciding whether a request for approval of a deferred-
prosecution agreement and placement of that agreement on the
Court’s docket must be rejected “to protect the integrity of the
federal courts.” Payner, 447 U.S. at 744 (Marshall, J.,
dissenting). As the amicus notes “[a] court would be
particularly deferential in reviewing the decision whether to
offer pre-trial diversion.” Amicus Br. at 10. That decision,
like the decision whether to prosecute, is largely within the
discretion of the Executive, and the Court may review it only in
very limited circumstances. See United States v. Richardson, 856
F.2d 644, 647 (4th Cir. 1988) (the decision whether to offer
pre-trial diversion “is one entrusted to the United States
52
Attorney”); United States v. Hicks, 693 F.2d 32, 34 n.1 (5th
Cir. 1982) (“Since pretrial diversion is a program administered
by the Justice Department, considerations of separation of
powers and prosecutorial discretion might mandate an even more
limited standard of review.”).
With respect to the contents of the agreements, the Court is
of the view that the amicus’s proposal of largely plenary court
review, discussed above in connection with the Speedy Trial Act,
is too broad. The power to protect the integrity of the
judiciary keeps courts from becoming accomplices in illegal or
untoward actions, but the Court’s review is necessarily limited.
Here, in particular, Congress, in passing the Speedy Trial Act,
has arguably prescribed a narrower role for courts in reviewing
these very sensitive and important decisions. See supra Part
III.C. Respect for the separation of powers thus counsels in
favor of Judge Gleeson’s view of the role the supervisory power
plays:
[I]t is easy to imagine circumstances in which a deferred
prosecution agreement, or the implementation of such an
agreement, so transgresses the bounds of lawfulness or
propriety as to warrant judicial intervention to protect
the integrity of the Court. For example, the DPA, like
all such agreements, requires HSBC to “continue to
cooperate fully with the [government] in any and all
investigations.” Recent history is replete with
instances where the requirements of such cooperation
have been alleged and/or held to violate a company’s
attorney-client privilege and work product protections,
or its employees’ Fifth or Sixth Amendment rights. The
DPA also contemplates, in the event of a breach by HSBC,
53
an explanation and remedial action, which the government
will consider in determining whether to prosecute the
pending charges and/or bring new ones. What if, for
example, the “remediation” is an offer to fund an endowed
chair at the United States Attorney’s alma mater? Or
consider a situation where the current monitor needs to
be replaced. What if the replacement’s only
qualification for the position is that he or she is an
intimate acquaintance of the prosecutor proposing the
appointment?
HSBC, 2013 WL 3306161, at *6–7 (citations omitted). This is far
from an exhaustive list, but it demonstrates the situations
where a court’s integrity might truly be imperiled. Two of the
factors proposed by the amicus are useful here: (1) whether the
agreement “impos[es] substantial, unrelated obligations on an
organization . . . such as requiring charitable contribution
unrelated to remedying the harm caused by the crime”; and (2)
the potential collateral consequences of an agreement. See
Amicus Br. at 14–15. An agreement with especially problematic
collateral consequences—whether intended or not—might be viewed
as involving the Court in something inappropriate. In that
regard, the Court can envision an especially unfair or lenient
agreement as transgressing these bounds and therefore justifying
rejection, independent of a court’s review under the Speedy
Trial Act.
54
IV. Applying these Standards to the Agreements in the Case, the
Court Approves Both Agreements.
The Court need not opine further on the precise circumstances
in which the Court’s authority under the Speedy Trial Act or the
supervisory power would warrant rejection of an agreement. The
agreements in these cases, although somewhat troubling to the
Court in the Saena Tech case, do not implicate the integrity of
the Court. For that reason, the Court will approve both
agreements and grant the requested exclusion of time under the
Speedy Trial Act.
A. United States v. Saena Tech.
The Saena Tech Agreement clearly is about diversion with
respect to Saena Tech itself. Saena Tech has paid a $500,000
fine that, while not clearly shown to be proportional to the
offense, 10 is not de minimis. Moreover, the Saena Tech Agreement
provides that prosecution will be reinstated in the event that
Saena Tech breaches the agreement. See Deferred-Prosecution
Agreement, ECF No. 5-1 at 9. The Saena Tech Agreement also
provides for the creation of a corporate-compliance program to
ensure that Saena Tech does not commit bribery in the future.
10The Agreement provides, without support or explanation, that
$500,000 is “appropriate given the facts and circumstances of
this case.” Deferred-Prosecution Agreement, ECF No. 5-1 at 5.
Given that Mr. Kim paid approximately $280,000 in bribes and
received fifteen subcontracts for Saena Tech, it is certainly
conceivable that he and the corporation earned far more than
$500,000.
55
See id. at 7. In response to this provision, Saena Tech has
created a Code of Conduct and guide for its employees addressing
ethical issues including those related to gifts and bribery,
created a confidential hotline for employees to report
misconduct, and appointed its outside counsel to monitor the
hotline and serve as an independent auditor. See Proffer, ECF
No. 16. The Saena Tech Agreement thus contains both punitive and
rehabilitative elements sufficient to convince the Court that it
is designed to defer prosecution for two years to enable Saena
Tech to reform itself and demonstrate its rehabilitation.
Although no independent compliance monitor with reporting
responsibilities is included in the Saena Tech Agreement, and
the Court shares Judge Leon’s concerns with deferred-prosecution
agreements that lack such monitoring, see Fokker Servs., 79
F. Supp. 3d at 166, given the relatively small size of Saena Tech,
its appointment of its outside counsel to serve as a monitor,
and the Court’s exercise of authority to require reports and
status hearings, the Court finds that the lack of an independent
compliance monitor in this case does not doom the Saena Tech
Agreement. 11
11Initially, Saena Tech had used an individual who was related
to Mr. Kim as its compliance monitor. Because that practice
changed before the Court’s September 5, 2014 hearing, see
Proffer, ECF No. 16, the Court need not address whether such a
concerning practice would alone be enough to justify rejection
56
The Saena Tech Agreement is novel, however, because it also
includes Mr. Kim, who is not currently subject to prosecution at
all. Although the parties do not seek approval of a Speedy Trial
exclusion as to him (there is no pending case and thus no clock
to toll), and the government argues that any grant of immunity
is unreviewable by this Court, Gov’t’s Br., ECF No. 26 at 10–11,
nonetheless, the government decided to include Mr. Kim in a
deferred-prosecution agreement that the Court must review before
approving an exclusion for Saena Tech. 12 Just as the parties may
not collude to enter into a deferred-prosecution agreement with
each other for reasons other than allowing the defendant to
demonstrate good conduct, so too may they not enlist a third
party—in this case a company controlled by Mr. Kim and his wife—
to effect the same result.
Thus, if the punitive and remedial measures regarding Saena
Tech were mere “window-dressing” to cover an attempt to collude
between Mr. Kim and the government, the Court would be empowered
to reject the Saena Tech Agreement under the Speedy Trial Act.
Although it could be readily criticized for its favorable
of the Saena Tech Agreement or a finding of non-compliance with
that Agreement.
12 As discussed supra, the government conceded that in the Saena
Tech Agreement, Mr. Kim is essentially being immunized, but
noted that the immunity is contingent upon his cooperation. The
government also articulated its rationale for not charging Mr.
Kim.
57
treatment of Mr. Kim vis-à-vis others who arguably played lesser
roles in related criminal activity but received felony
convictions, in view of the prior discussion about the
application of deferred-prosecution agreements for individuals
in appropriate cases, it is not so problematic as to implicate
the Court’s authority here. Though Mr. Kim faces no punitive
measures personally, he and his wife are the sole owners of
Saena Tech; thus the agreement’s punitive force against Saena
Tech touches him as well. Moreover, Mr. Kim may be prosecuted in
the event of a breach, and he admitted to the truth of the
Statement of Facts at the July 17, 2014 hearing. See Deferred-
Prosecution Agreement, ECF No. 5-1 at 9; Tr. of July 17, 2014
Hearing, ECF No. 38 at 66:14–67:4. Mr. Kim remains free to
operate Saena Tech along with his wife, but he must institute
and follow the compliance program required of the company. It is
therefore not apparent that the Saena Tech Agreement is an
elaborate attempt to collude to put off a trial of Mr. Kim.
Indeed, no Speedy Trial clock is ticking and the government
presumably could have obtained his agreement to waive the
statute of limitations out-of-court, making collusion
unnecessary. Accordingly, despite the odd posture, the
provisions regarding Mr. Kim do not change the outcome under the
Speedy Trial Act.
58
Nor does the Court’s supervisory power justify denial of the
Saena Tech Agreement because nothing in the Saena Tech Agreement
strikes the Court as implicating the concern with avoiding court
involvement in unlawful or untoward collusion. The authority to
make charging decisions is entrusted to prosecutors for a
reason: their expertise and the separation of powers mandates
it. Absent a stark deviation from reasonable exercise of that
discretion, it is not this Court’s role to second-guess such
decisions. 13
B. United States v. Intelligent Decisions.
The Intelligent Decisions Agreement is a relatively easy one
to approve. Much like the Saena Tech Agreement, it contains most
of the hallmarks of an agreement that is designed to reform a
company’s conduct. See Deferred-Prosecution Agreement, ECF No.
12. Intelligent Decisions paid a fine that appears to be within
a range of reasonableness, and agreed to cooperate and institute
compliance measures. For reasons similar to the Saena Tech
Agreement, the Court finds that the lack of an independent
compliance monitor with reporting responsibilities alone is not
sufficient to warrant rejection of the Intelligent Decisions
13Congress, of course, has the ability to dictate a more
involved role for district courts that would extend to such
searching review of deferred-prosecution agreements. The Court
expresses no opinion on the propriety of such an action or any
separation-of-powers concerns that may arise therefrom.
59
Agreement. The Intelligent Decisions Agreement deviates from the
Saena Tech Agreement in that it contains nothing that would
immunize an individual responsible for the crime with which
Intelligent Decisions is charged. Indeed, the owner and former
CEO of Intelligent Decisions pleaded guilty to a felony, as did
a key employee who was also involved in the conduct. There is
thus nothing to indicate that the Intelligent Decisions
Agreement is anything but an attempt to reform the company and
allow it to demonstrate good conduct. Nor is there anything in
the Intelligent Decisions Agreement that would appear to
implicate the Court’s supervisory powers.
V. Original Intent vs. Current Use of Deferred-Prosecution
Agreements.
Although the Court approves the two deferred-prosecution
agreements in these cases, the Court observes that the current
use of deferred-prosecution agreements for corporations rather
than individual defendants strays from Congress’s intent when it
created an exclusion from the speedy trial calculation for the
use of such agreements. The Court is of the opinion that
increasing the use of deferred-prosecution agreements and other
similar tools for individuals charged with certain non-violent
criminal offenses could be a viable means to achieve reforms in
our criminal justice system.
60
A. Congress Modeled the Provision Allowing Deferred-
Prosecution Agreements on Projects Designed to
Rehabilitate Individuals Charged with Certain Non-
Violent Offenses.
The legislative history of the Speedy Trial Act, discussed
supra Part II, shows just how far the use of Section 3161(h)(2)
to defer the prosecution of corporations departs from what
Congress intended. The history demonstrates that the provision
was intended to encourage practices that had been ongoing in
certain courts, which permitted the deferral of prosecution on
the condition that a defendant participate in a rehabilitation
program. The Senate Judiciary Committee specifically cited a
successful project in New York City, the Manhattan Court
Employment Project, as well as the District of Columbia’s
Project Crossroads as examples of the types of deferred
prosecution it intended with this provision.
1. The Manhattan Court Employment Project.
The Manhattan Court Employment Project (“the Project”) was
designed as an experimental, alternative disposition available
for select, eligible defendants. It was developed in 1967 by the
Vera Institute of Justice, was sponsored by the Mayor of New
York City, and received funding from the United States
Department of Labor. See Vera Inst. of Justice, The Manhattan
Court Employment Project of the Vera Institute for Justice:
Final Report 1967-1970 at 1 (1970), available at
61
http://www.vera.org/sites/default/files/resources/downloads/the-
manhattan-court-employment-project.pdf. After the three-year
“experimental phase”, the Project published a Final Report
summarizing its process, progress, and findings. Id. at 2. 14
The Project would intervene after a defendant’s arrest,
offering counseling and vocational opportunities for ninety
days. If the defendant cooperated, the Project would recommend
that the prosecutor (and judge) dismiss the charge(s). Id. The
Project was designed to “convert a defendant’s arrest from a
losing to a winning experience” by freeing the overburdened
criminal justice system, reducing recidivism, employing
defendants, and benefitting the community by rehabilitating
defendants. Id.
The Project established eligibility standards for potential
participants to identify defendants most likely to benefit from
the program. The criteria included individuals: (1) between the
ages of 16 and 45; (2) who were residents of New York City;
(3) not earning more than $125/week; (4) not charged with a
petty offense, homicide, rape, kidnapping, or arson; (5) with no
identifiable drug or alcohol addiction; and (6) who have not
spent more than one continuous year in a penal institution. Id.
14The Court was unable to determine how long the Project
continued. The Report indicates the Project was expanding at the
time of publishing and that “the Mayor and other city and court
officials continue to support the Project.” Id. at 61.
62
at 3. The Project initially eliminated defendants arrested for
engaging in the drug trade or prostitution, id. at 21, but over
time, became more capable of assisting defendants with drug or
alcohol problems and defendants charged with more serious
crimes. See id. at 22.
The District Attorney’s office and Project administrators
would request that the court and prosecutors permit a defendant
to participate. Once participation was approved, the case would
be put on hold for ninety days. Id. at 3. Depending on
participant success, the Project would recommend dismissal,
further adjournment to permit additional counseling, or
termination of the defendant’s participation and the resumption
of the case. Id. at 3-4. To remain in the Project and receive a
dismissal recommendation, a participant was required to: (1)
avoid re-arrest and narcotics use; (2) keep all appointments
with Project staff; (3) attend all counseling sessions; and (4)
make a satisfactory vocational adjustment. Id. at 4.
Over three years, 1,300 defendants participated in the
Project, id. at 5, and the number of successful participants –
those for whom dismissals were recommended and accepted –
increased over the Project’s three years from 38.9% in the first
year to 45.6% in the second year, and 61.4% in the third year.
Id. at 39. The Report also assessed the Project’s success in
63
placing defendants in employment, providing counseling and
social services, and preventing recidivism.
Employment. While not every participant was unemployed upon
entry into the Project, most were. Id. at 7. The Project was
successful in placing defendants in employment. In the first
year, 14.3% of participants were employed at intake and 91.4%
were employed at dismissal. Id. In the second year, 43.1% of
defendants were employed at intake and 95.4% were employed at
dismissal. Id. In the third year, 30.6% of participants were
employed at intake and 79.3% were employed at dismissal. Id. The
Project attributed the drop in the third year to a change in the
minimum-wage law in July 1970 and an increase in the number of
students participating in the Project that year. Id. at 8.
Further, the Project checked the employment status of a random
sample of 100 successful participants who had been dismissed
from the Project for 14 months. The Project was able to locate
87 participants; 70 were still employed 14 months later. Id.
Considering that the Project had certified its participants as
previously having been “hard-core” unemployed, these results
were encouraging. Id. at 27.
Counseling and Social Services. The Project provided both
group and individualized counseling for participants. Though it
was difficult for the Project to quantify success on this front,
the rate of participation in group counseling increased from 45%
64
to 67% over the Project’s three years. Id. at 10. The Project
also had a Social Service Unit, which worked with New York
City’s Department of Social Services to respond to participants’
financial, medical, and housing needs. Id. Participants’ need
for welfare decreased, in part due to increased employment. Id.
at 11.
Recidivism. Finally, the Project compared recidivism rates for
successful participants whose charges were dismissed and rates
for participants who were unsuccessfully terminated from the
Project. Id. at 12. During the first two years, the re-arrest
rate for the dismissed group was about 50% less than that of the
terminated group: 15.8% of successful participants were re-
arrested compared to 30.8% of terminated participants. Id. at
12. In the last nine months of the three year experimental
phase, the re-arrest rate dropped to 2.9%. Id. at 10.
Significantly, the Project found that the recidivism rates for
terminated participants, whose prosecution was ultimately only
diverted for a few months, and the control group, were
statistically identical. Id. The data “strongly suggests that
diversion from prosecution alone does not affect the likelihood
of re-arrest” and that “supportive and rehabilitative services
can significantly alter the incidence of repeated criminal
activity.” Id.
65
2. Project Crossroads.
Project Crossroads was created in 1967 to provide a pre-trial
intervention alternative for youthful, first-time defendants in
Washington, D.C. It provided services to approximately 800
participants for a limited period of time. 15 Roberta Rovner-
Pieczenik, Nat’l Comm. for Children and Youth, Project
Crossroads as Pre-Trial Intervention: a Program Evaluation 1
(1970), available at http://files.eric.ed.gov/fulltext/
ED113651.pdf. The Project received funding from the United
States Department of Labor. Id. at 2. Like the Manhattan Court
Employment Project, Project Crossroads intervened after arrest,
offering a variety of services for defendants including
counseling, job placement, job training and remedial education.
Id. at 1. If a defendant cooperated and participated
successfully for ninety days, the Project would recommend that
the charges be dismissed. Id. at 2. According to the program
evaluation, “[i]t was the hope of all concerned that the court,
in its willingness to aid the individual by providing him with a
non-punitive opportunity for rehabilitation, would come to be
15The program evaluation was written three years after Project
Crossroads began. See id. at 1. The Court was unable to
determine how long the project continued after the evaluation
was published.
66
viewed as an institution interested in the individual and
oriented toward the treatment approach to crime prevention.” Id.
Project Crossroads set general eligibility standards for
potential participants, including individuals: (1) between the
ages of 16 and 26; (2) with no prior conviction record in that
court; (3) who were unemployed, underemployed, tenuously
employed, or school enrolled; and (4) who were charged with a
crime accepted by both the court and Project. Id. at 1.
Ultimately, participants who were terminated favorably had their
charges dismissed three times as often as a control sample. Id.
at 15.
Employment. The evaluation of Project Crossroads found that
twice as many individuals were employed at program termination
than were employed at intake. Id. at 14. It found that
participants’ wages and skill level increased after termination
when compared to the same measures taken at entrance. Id. It
also found that participants were more likely to be steadily
employed during the year following project termination. Id. The
evaluation followed up with a sample of 134 participants one
year after termination. About 60% of those favorably terminated
were employed for more than 80% of the year following
termination, while only about 23% of those unfavorably
terminated were employed over the same period. Id. at 12.
Further, favorably terminated participants were almost all
67
working in a non-Crossroads job within four months after
termination. Id. at 13. Thus, the Project concluded “that the
routine of work, as well as such intangibles as self-confidence
and increased aspiration derived from the Crossroads experience,
tend to keep an individual employed after the official
relationship with Crossroads is ended.” Id.
Recidivism. The evaluation also found the rate of recidivism
to be the “most dramatic positive finding related to the
project’s legal success. . .” Id. at 17. “[T]here is little
doubt that recidivism in . . . [the] 15-month period following
initial arrest was markedly lower for participants favorably
terminated.” Id. at 17-18. The overall recidivism rate within
fifteen months of initial arrest for those favorably terminated
was 20.13% compared to 56.65% for those unfavorably terminated
and 43.36% for the control group. Id. at 17.
B. Current Use of Deferred-Prosecution Agreements.
Notwithstanding Congress’s intent in enacting Section
3161(h)(2) of the Speedy Trial Act, rather than offering
deferrals to individuals charged with certain non-violent
criminal offenses to encourage rehabilitation, the government
increasingly now offers—as it did to the defendants in these
cases—to defer prosecution of a corporation for criminal
misconduct in exchange for the payment of a fine and the
institution of compliance measures. See, e.g., Gibson Dunn, 2015
68
Mid-Year Update on Corporate Non-Prosecution Agreements and
Deferred Prosecution Agreements 1, (July 8, 2015), available at
http://www.gibsondunn.com/publications/Pages/2015-Mid-Year-
Update-Corporate-Non-Prosecution-Agreements-and-Deferred-
Prosecution-Agreements.aspx. From 2000 through 2005, the average
number of deferred-prosecution agreements was just over four per
year. See id. In contrast, from 2005 through 2015, the number of
deferred-prosecution agreements increased dramatically, and the
number of agreements with corporations may exceed historical
highs in 2015. See id. Often, but not always, as the Intelligent
Decisions case demonstrates, the corporation is the only entity
ever charged and the individuals responsible face no charges.
See Defs.’ Br., ECF No. 8 at 2-3 (“two [Intelligent Decisions]
employees, Chae Shim and Harry Martin, have pled guilty to one
count of providing travel and entertainment gratuities to Mr.
Lim, for which they are awaiting sentencing.”); see also Gibson
Dunn, 2010 Year-End Update at 1 (discussing the increased
criticism and heightened judicial scrutiny surrounding the use
of deferred-prosecution agreements without related prosecutions
of any individuals whose conduct resulted in corporate
liability).
In response to criticism surrounding the practice of failing
to prosecute the individuals whose actions are actually the
cause of corporate crimes, the Department of Justice recently
69
issued guidance designed to strengthen its ability to hold
individuals accountable for corporate wrongdoing in future
investigations and pending investigations “to the extent it is
practicable to do so.” See Memorandum from Sally Quillian
Yates, Deputy Attorney General, to Assistant Attorneys Gen.,
Dirs. Of the Fed. Bureau of Investigation and the Exec. Office
for U.S. Trs., and U.S. Attorneys at 2-3 (Sept. 9, 2015),
available at http://www.justice.gov/dag/file/769036/download.
The memo sets forth six key steps to achieve this goal:
(1) In order to qualify for any cooperation credit,
corporations must provide to the Department all relevant
facts relating to the individuals responsible for
misconduct;
(2) Criminal and civil corporate investigations should focus
on individuals from the inception of the investigation;
(3) Criminal and civil attorneys handling corporate
investigations should be in routine communication with
one another;
(4) Absent extraordinary circumstances or approved
departmental policy, the Department will not release
culpable individuals from civil or criminal liability
when resolving a matter with a corporation;
(5) Department attorneys should not resolve matters with a
corporation without a clear plan to resolve related
individual cases, and should memorialize any declinations
as to individuals in such cases; and
(6) Civil attorneys should consistently focus on individuals
as well as the company and evaluate whether to bring suit
against an individual based on considerations beyond that
individual’s ability to pay.
70
Id. at 2-3. The memo states that some of these steps reflect
policy shifts, but does not identify those which change current
policy. Id. at 2.
Just a week after announcing this policy shift, however, and
in a shocking example of potentially culpable individuals not
being criminally charged, the Department of Justice announced
that it had entered into a Deferred-Prosecution Agreement with
General Motors Company (“GM”) regarding its failure to disclose
a safety defect. Under this agreement, GM admitted that it
failed to disclose a “potentially lethal safety defect” and that
it “affirmatively mislead consumers about the safety of GM cars
afflicted by the defect,” resulting in numerous deaths. General
Motors Company – Deferred Prosecution Agreement, 15-cv-7342
(N.Y.S.D.), ECF No. 1-1 at 3, 34-36 (describing fatalities
associated with the safety defect). Despite the fact that the
reprehensible conduct of its employees resulted in the deaths of
many people, the agreement merely “imposes on GM an independent
monitor to review and assess policies, practices, and procedures
relating to GM’s safety-related public statements, sharing of
engineering data, and recall processes” plus the payment of a
$900 million fine. Press Release, Dep’t of Justice, Manhattan
U.S. Attorney Announces Criminal Charges Against General Motors
and Deferred Prosecution Agreement with $900 Million Forfeiture
(Sept. 17, 2015), available at http://www.justice.gov/usao-
71
sdny/pr/manhattan-us-attorney-announces-criminal-charges-
against-general-motors-and-deferred. If GM abides by the terms
of the agreement for three years, the government will defer
prosecution and then seek to dismiss the charges. Id.
Despite this evolution in the use of deferred-prosecution
agreements, the Court does not find that approving such
agreements with corporations to be legally improper: Congress
provided the deferred-prosecution tool without limiting its use
to individual defendants or to particular crimes.
Notwithstanding clear congressional intent, however, the Court
is disappointed that deferred-prosecution agreements or other
similar tools are not being used to provide the same opportunity
to individual defendants to demonstrate their rehabilitation
without triggering the devastating collateral consequences of a
criminal conviction. Department of Justice statistics indicate
that in fiscal year 2012, there were a total of 253 pretrial
diversions for individual defendants, accounting for 0.9% 16 of
the reasons why Assistant United States Attorneys declined to
prosecute. See Mark Motivans, Statistician, Dep’t of Justice,
Office of Justice Programs, Bureau of Justice Statistics,
“Federal Justice Statistics, 2012 - Statistical Tables”, tbl.
16Percent is based on suspects for whom a reason for declination
could be determined. See Bureau of Justice Statistics, at tbl.
2.3 p. 12.
72
2.3 p. 12 (2015), available at http://www.bjs.gov/content/pub/
pdf/fjs12st.pdf. This is in contrast to the use of corporate
deferred-prosecution agreements and non-prosecution agreements
in the Department of Justice’s Criminal Division, which the
Government Accountability Office found were comparable to the
number of corporate prosecutions undertaken between fiscal years
2004 and 2009. See U.S. Gov’t Accountability Office, GAO 10-110,
DOJ Has Taken Steps to Better Track Its Use of Deferred and Non-
Prosecution Agreements, but Should Evaluate Effectiveness 1
(2009), available at http://www.gao.gov/assets/300/299781.pdf.
That said, in the U.S. Attorneys’ Offices, the number of
deferred-prosecution and non-prosecution agreements was less
than the number of corporate prosecutions. Id. at 13.
As the use of deferred-prosecution agreements to benefit
corporate defendants has increased, public dialogue has begun to
focus on ways in which the criminal justice system can be
reformed to reduce over-incarceration of individuals for non-
violent crimes, especially drug crimes. President Barack H.
Obama recently acknowledged that “[m]ass incarceration makes our
country worse off, and we need to do something about it.”
President Barack Obama, Remarks by the President at the NAACP
Conference (July 14, 2015), available at https://www.whitehouse
.gov/the-press-office/2015/07/14/remarks-president-naacp-
73
conference. The President went on:
The United States is home to 5 percent of the world’s
population, but 25 percent of the world’s prisoners.
Think about that. Our incarceration rate is four times
higher than China’s. We keep more people behind bars
than the top 35 European countries combined. And it
hasn’t always been the case -- this huge explosion in
incarceration rates. In 1980, there were 500,000 people
behind bars in America -- half a million people in
1980. . . . Today there are 2.2 million. It has
quadrupled since 1980. Our prison population has
doubled in the last two decades alone.
* * *
But here’s the thing: Over the last few decades, we’ve
also locked up more and more nonviolent drug offenders
than ever before, for longer than ever before. And that
is the real reason our prison population is so high. In
far too many cases, the punishment simply does not fit
the crime. If you’re a low-level drug dealer, or you
violate your parole, you owe some debt to society. You
have to be held accountable and make amends. But you
don’t owe 20 years. You don’t owe a life
sentence. That’s disproportionate to the price that
should be paid.
Id. Along similar lines just last year, then-Attorney General
Eric H. Holder celebrated the first year-to-year drop in the
federal prison population in decades:
[T]he United States will never be able to prosecute or
incarcerate its way to becoming a safer nation. We must
never, and we will never, stop being vigilant against
crime—and the conditions and choices that breed it. But,
for far too long—under well-intentioned policies
designed to be “tough” on criminals—our system has
perpetuated a destructive cycle of poverty, criminality,
and incarceration that has trapped countless people and
weakened entire communities—particularly communities of
color.
* * *
74
Perhaps most troubling is the fact that this astonishing
rise in incarceration—and the escalating costs it has
imposed on our country, in terms both economic and human—
have not measurably benefitted our society. We can all
be proud of the progress that’s been made at reducing
the crime rate over the past two decades—thanks to the
tireless work of prosecutors and the bravery of law
enforcement officials across America. But statistics
have shown—and all of us have seen—that high
incarceration rates and longer-than-necessary prison
terms have not played a significant role in materially
improving public safety, reducing crime, or
strengthening communities.
* * *
We know that over-incarceration crushes opportunity. We
know it prevents people, and entire communities, from
getting on the right track. And we’ve seen that—as more
and more government leaders have gradually come to
recognize—at a fundamental level, it challenges our
commitment to the cause of justice.
Eric Holder, Att’y Gen., One Year After Launching Key Sentencing
Reforms, Attorney General Holder Announces First Drop in Federal
Prison Population in More Than Three Decades (Sept. 23, 2014),
available at http://www.justice.gov/opa/pr/one-year-after-
launching-key-setencing-reforms-attorney-general-holder-
annouces-first-drop-0. The Federal Bureau of Prisons (BOP)
recently announced that the number of inmates also decreased in
fiscal year 2015, marking the second consecutive year of
decreases and reversing a 34 year trend of successive increases.
Press Release, Bureau of Prisons, Federal Inmate Population
Declines (October 5, 2015), available at https://www.bop.gov
/resources/news/20151001_populationDecline.jsp. BOP stated that
75
an overall inmate reduction of over 11% is expected by the end
of fiscal year 2016. Id.
Consistent with these observations, Congress, the President,
and the Sentencing Commission have worked to expand the
flexibility of the criminal justice system in various ways. Much
effort has focused on reducing sentencing disparities and
lowering the offense levels applicable to certain drug crimes.
See, e.g., Fair Sentencing Act of 2010, Pub. L. No. 111-220, 124
Stat. 2372 (2010); U.S. SENTENCING GUIDELINES MANUAL app. C, amend.
782 (U.S. SENTENCING COMM’N 2014). The 2014 amendments to the
Guidelines, which lowered the base offense levels applicable to
drug offenses, will soon result in the early release of 6,000
prisoners, and ultimately are expected to result in the early
release of up to 46,000 prisoners nationwide. Sari Horwitz,
Justice Department Set to Free 6,000 Prisoners, Largest One-time
Release, WASH. POST (October 6, 2015), https://www.washingtonpost
.com/world/national-security/justice-department-about-to-free
6000-prisoners-largest-one-time-release/2015/10/06/961f4c9a-
6ba2-11e5-aa5b-f78a98956699_story.html. Moreover, the Sentencing
Commission recently identified “encourage[ing] the use of
alternatives to incarceration” as a new policy priority for
2015-16. 80 FR 48957 (Aug. 14, 2015).
In another example, the Department of Justice has altered its
charging policies in a manner that grants prosecutors more
76
discretion to take into account the unique facts of particular
defendants and cases. See Memorandum from Eric Holder, Att’y
Gen., to United States Attorneys and the Assistant Att’y Gen.
for the Criminal Division, (Aug. 12, 2013), available at
http://www.justice.gov/sites/default/files/oip/legacy
/2014/07/23/ag-memo-department-policypon-charging-mandatory-
minimum-sentences-recidivist-enhancements-in-certain-
drugcases.pdf. Moreover, in his recent speech to the NAACP, the
President proposed a number of additional reforms:
We should pass a sentencing reform bill through Congress
this year. . . . We need to ask prosecutors to use their
discretion to seek the best punishment, the one that's
going to be most effective, instead of just the longest
punishment. We should invest in alternatives to prison,
like drug courts and treatment and probation programs.
. .which ultimately can save taxpayers thousands of
dollars per defendant each year.
President Barack Obama, Remarks by the President at the NAACP
Conference (July 14, 2015), available at https://www.whitehouse.
gov/the-press-office/2015/07/14/remarks-president-naacp-
conference. Proposals are currently pending in Congress that
would reduce mandatory-minimum sentences in certain cases and
otherwise provide more opportunity for the sentences of drug
offenders to be more closely tailored to the particular offense.
See, e.g., SAFE Justice Act, H.R. 2944, 114th Cong. (2015);
Justice Safety Valve Act of 2015, S. 353, H.R. 706, 114th Cong.
(2015); Smarter Sentencing Act, S. 502, H.R. 920, 114th Cong.
77
(2015); Sentencing Reform and Corrections Act of 2015, S. 2123,
114th Cong. (2015).
These reform efforts are laudable because they would provide
prosecutors and judges with greater flexibility and more tools
to address the facts of individual cases and defendants, seeking
to serve the twin goals of punishment and deterrence while also
serving society’s compelling interest in the rehabilitation of
individuals. Regrettably, despite the renewed focus on such
reforms, the deferred-prosecution agreement and other similar
tools have not been used as much as they could to achieve
reform. This oversight is lamentable, to say the least! The
United States Attorneys’ Manual contemplates the use of pretrial
diversion for certain individuals, and the Criminal Resource
Manual sets forth the procedures governing pretrial diversion
agreements for such individuals. See U.S. Attorneys’ Manual, 9-
22.000, Pretrial Diversion Program, available at
http://www.justice.gov/usam/usam-9-22000-pretrial-diversion-
program#9-22.100 (Updated April 2011). To provide individuals
with the opportunity for meaningful rehabilitation, it is
critical that they be provided with adequate supervision. The
Criminal Resource Manual contemplates the need for such
supervision: "If it is determined that [Pretrial Diversion] is
appropriate for an offender, supervision should be tailored to
the offender's needs and may include employment, counseling,
78
education, job training, psychiatric care, etc. Many districts
have successfully required restitution or forms of community
service as part of the pretrial program. Innovative approaches
are strongly encouraged." See U.S. Attorneys’ Manual, Criminal
Resource Manual, 712, Pretrial Diversion, available at
http://www.justice.gov/usam/criminal-resource-manual-712-
pretrial-diversion.
Another seldom used tool is pre-judgment probation, which is
authorized by the Federal First Offender Act, 18 USC § 3607.
Section 3607(a) gives courts the authority to place on probation
persons found guilty of simple possession of a controlled
substance if the person: (1) has not been convicted of violating
a federal or state law relating to controlled substances; and
(2) has not had a previous disposition under 18 USC § 3607. If
the person complies with the conditions of probation, the court
is authorized to dismiss the proceedings without entering a
judgment of conviction. 18 USC § 3607(a). Furthermore, if the
person was less than 21 years of age at the time of the offense,
the court is authorized to enter an expungement order. 18 USC §
3607(c).
The Court recognizes that prosecutors are confronted regularly
with difficult questions of how to exercise their discretion.
The decision how to proceed in each case is within the expertise
and constitutional responsibility of the Executive Branch, and
79
this Court has neither the desire nor the authority to dictate
charging decisions. The Court is, however, extremely dismayed
that despite all of the focus on providing tools for prosecutors
to reduce over-incarceration, attack the root causes of crime,
and mitigate where possible the collateral consequences of
criminal convictions, deferred-prosecution agreements for
individuals and other similar tools have gone largely
unmentioned. As President Obama recently recognized in commuting
the sentences of forty-six individuals convicted of non-violent
drug offenses, “America is a nation of second chances.” Sari
Horwitz & Juliet Eilperin, Obama Commutes Sentences of 46
Nonviolent Drug Offenders, Wash. Post, July 13, 2015,
https://www.washingtonpost.com/world/national-security/obama-
commutes-sentences-of-46-non-violent-drug-
offenders/2015/07/13/b533f61e-2974-11e5-a250-42bd812efc09
_story.html. Deferred-prosecution agreements could provide a
powerful opportunity for a second chance for deserving
individuals. 17 Individual defendants should be given a chance to
rehabilitate, subject to the supervision of a court and
17In the Court’s opinion, some will argue that deferred-
prosecution agreements would not serve a unique purpose because
drug courts can serve the same purpose. Such a position fails to
take into account the fact that federal drug courts are
dependent upon Congressional funding, and that drug offenses are
not the only offenses for which deferred-prosecution agreements
may be appropriate.
80
prosecutor, with an eye toward avoiding the very serious
collateral consequences that a criminal conviction can have for
an individual and for society. Cf. Doe v. United States, No. 14-
mc-1412, 2015 WL 2452613, at *4 (E.D.N.Y. May 21, 2015)
(expunging a prior conviction, Judge Gleeson chronicles the
“wide-ranging effects” of a criminal conviction, many of which
result in punishment that lasts long after a sentence has been
served without any corresponding benefit to the public: “simply
put, the public safety is better served when people with
criminal convictions are able to participate as productive
members of society by working and paying taxes.”); Stephenson v.
United States, 2015 WL 5884810, at *3-*7 (E.D.N.Y. Oct. 7,
2015)(denying without prejudice Ms. Stephenson’s application to
expunge a prior conviction based on controlling precedent and
the fact that she was employed and that her ability to become a
licensed nurse was realistic in light of applicable law
prohibiting discrimination on the basis of criminal history, but
noting the inconsistency between controlling precedent and the
accumulation of “solid evidence establishing that a criminal
conviction is often a significant obstacle to employment” as
well as the link between unemployment and recidivism, and
calling on all three branches of government to take action to
better ensure that persons who have “pa[id] [their] debt to
society” are truly given a second chance).
81
The Court is of the opinion that people are no less prone to
rehabilitation than corporations. Drug conspiracy defendants are
no less deserving of a second-chance than bribery conspiracy
defendants. And society is harmed at least as much by the
devastating effect that felony convictions have on the lives of
its citizens as it is by the effect of criminal convictions on
corporations. Extending the use of deferred-prosecution
agreements to individuals who are charged with certain non-
violent offenses would be a powerful tool to achieve one of the
goals proposed by President Obama this year: “give judges some
discretion around nonviolent crimes so that, potentially, we can
steer a young person who has made a mistake in a better
direction.” President Barack Obama, Remarks by the President at
the NAACP Conference (July 14, 2015), available at
https://www.whitehouse.gov/the-press-office/2015/07/14/remarks-
president-naacp-conference.
VI. Conclusion.
Unless and until Congress amends the Speedy Trial Act to
provide for broader involvement by the judiciary in assessing
the substance of deferred-prosecution agreements, courts will be
constrained to reviewing an agreement for: (1) whether it is
truly intended to hold prosecution in abeyance while a defendant
demonstrates rehabilitation, as required by the Speedy Trial
Act; and (2) whether the agreement involves the Court in the
82
type of illegal or untoward activity that might impugn the
Court’s integrity. That authority, however, is not as limited as
the government might prefer. Because the agreements in these
cases transgress neither boundary, the Court approves them, and
does not have occasion to set forth the full scope of a district
court’s authority to review and reject a deferred-prosecution
agreement. Nothing in this Opinion should be interpreted to
approve the judicial abdication of this review authority. Even
agreements that clearly meet the requirements of the Speedy
Trial Act and do not at all implicate a court’s supervisory
authority warrant searching review to establish why they should
receive court approval.
The Court respectfully requests the Department of Justice to
consider expanding the use of deferred-prosecution agreements
and other similar tools to use in appropriate circumstances when
an individual who might not be a banker or business owner
nonetheless shows all of the hallmarks of significant
rehabilitation potential. The harm to society of refusing such
individuals the chance to demonstrate their true character and
avoid the catastrophic consequences of felony convictions is, in
this Court’s view, greater than the harm the government seeks to
avoid by providing corporations a path to avoid criminal
convictions. If the Department of Justice is sincere in its
expressed desire to reduce over-incarceration and bolster
83
rehabilitation, it will increase the use of deferred-prosecution
agreements for individuals as well as increase the use of other
available resources as discussed in this Opinion.
For the foregoing reasons, the Court GRANTS the requests for
approval of the deferred-prosecution agreements and an exclusion
of time under the Speedy Trial Act in each of these cases.
Further, given that these cases remain pending on this Court’s
docket, the parties are directed to file periodic reports to
update the Court on the status of the implementation of the
agreements in each case as set forth in the Orders accompanying
this Memorandum Opinion.
Signed: Emmet G. Sullivan
United States District Judge
October 21, 2015
84