The decision gives corporate defendants subject to a monitor further confidence that internal company information provided to monitors will be protected from disclosure to the public at large.
On July 12, the U.S. Court of Appeals for the Second Circuit issued an important decision regarding the role of federal courts in cases resolved through deferred prosecution agreements (DPAs) — a settlement avenue that the Department of Justice and corporations under investigation have used routinely in recent years. In United States v. HSBC Bank USA, the court held that a written report issued by an independent monitor retained pursuant to a DPA could not be publicly disclosed because it was not relevant to any matter at issue before the district court. The HSBC court articulated a fairly narrow role for district courts in approving cases resolved through DPAs and in exercising oversight over those cases while DPAs are in effect.
Background on DPAs
In recent years, the government and corporate defendants have regularly settled criminal investigations by entering into DPAs. Under these agreements, the government files with the district court a criminal information but defers prosecution on those charges, often in exchange for monetary penalties and remedial measures from the corporate defendant.
Many DPAs also require the corporation to retain an independent monitor — typically an attorney — for an agreed duration of time (often three to five years) to ensure compliance with the provisions of the DPA and federal law. If the corporate defendant satisfies the requirements of the DPA, the government agrees to dismiss with prejudice the criminal charges in the information. If the defendant breaches the DPA — a decision that is often left to the sole discretion of the government — those charges may be pursued as if the DPA never existed.
For DPAs requiring the appointment of a monitor, the agreement typically requires the monitor to regularly provide the government with written reports in order to keep the government apprised of the corporation’s compliance with the DPA. These reports are designated as confidential because they often contain sensitive business information derived from internal company records and interviews of company employees.
HSBC Case
In December 2012, HSBC’s U.S. subsidiary and the Department of Justice entered into a five-year DPA, following a four-year investigation into allegations that the bank violated federal money-laundering laws by failing to enact sufficient compliance controls. In addition to a $1.3 billion monetary forfeiture, the agreement called for HSBC to retain a monitor and to remediate the deficiencies in its compliance program. In exchange, the government filed a criminal information for money laundering and related offenses but agreed to defer prosecution on those charges subject to HSBC’s adherence to the DPA.
The government’s filing of the information started the clock under the Speedy Trial Act (STA), which requires a criminal defendant to be tried within 70 days of being charged with a crime. To stop the clock for the period during which the DPA was in effect, the parties filed a motion in the district court to exclude that period from the computation of time...
