In a decision that will provide reassurance both to prosecutors and to the institutions with whom they enter into deferred prosecution agreements (“DPAs”), the Second Circuit (Katzmann, Lynch, Pooler (concurring)) held in United States v. HSBC Bank USA, N.A., No. 16-308(L), that the periodic reports submitted by an independent monitor responsible for evaluating compliance with a DPA are not “judicial documents” to which the public enjoys a First Amendment right of access. To reach its holding, the Court was required to address foundational separation-of-powers questions regarding a court’s role in approving and supervising the implementation of a DPA. The decision, written by Chief Judge Katzmann, will discourage courts from second-guessing decisions made by the executive branch in the legitimate exercise of its prosecutorial discretion. Along with the Second Circuit’s decision in SEC v. Citigroup Global Markets, Inc., 752 F.3d 285 (2d Cir. 2014), which held that a district court reviewing a proposed SEC consent decree may only reject it under limited circumstances, last week’s decision makes clear that the Second Circuit envisions that district courts will not play a significant role in assessing the fairness of the government’s settlements with financial and other institutions.
Background
In 2012, the government entered into a five-year DPA with HSBC, in which the government agreed to defer prosecution of charges included in a four-count criminal information for alleged violations of the Bank Secrecy Act, the International Emergency Economic Powers Act, and the Trading with the Enemy Act. The underlying wrongdoing related to HSBC’s failure to develop, implement, and maintain an effective anti-money laundering program, failure to conduct due diligence on correspondent bank accounts, and facilitation of financial transactions with sanctioned entities, including several in Cuba. In exchange for entering into the DPA, HSBC committed to adopt a variety of measures designed to improve its compliance program, including retaining an independent monitor tasked with evaluating HSBC’s efforts to improve its anti-money laundering policies, procedures, and controls. Pursuant to the DPA, the monitor is required to submit periodic reports to the government detailing his findings and recommending future action. According to the terms of the DPA, these reports are to remain confidential.
Because the Speedy Trial Act, 18 U.S.C. § 3161(c)(1), mandates that a criminal trial begin within 70 days after a defendant is charged or makes an initial appearance, the parties were required to obtain the district court’s permission to exclude the five-year term of the DPA in computing that time limitation—a routine request necessary to ensure the proper functioning of any DPA. Rather than rubber stamp the parties’ joint request, the district court invoked its “inherent supervisory power” to carefully scrutinize the details of the DPA and to either approve or reject the agreement on its merits. According to the district court, “[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.”
In July 2013, the court granted the parties’ request for a speedy trial waiver and approved the DPA “subject to [the court’s] continued monitoring of its execution and implementation.” To facilitate its oversight, the court ordered the independent monitor to file quarterly letters with the court providing updates as to HSBC’s progress. In April 2015, also pursuant to court order, the government filed with the court the monitor’s annual compliance report. Originally filed under seal, the report spoke favorably of HSBC’s efforts to develop an effective compliance program but also noted, among other criticisms, that in some instances, HSBC’s progress had been “too slow.” A few months later, a member of the public submitted a letter to the court noting that the report might be relevant to a complaint he had filed against the bank with the Consumer Financial Protection Bureau. Based on that letter...
