April 19, 2013

DOJ Antitrust Division Announces Two Key Changes to its “Carve Out” Policy for Corporate Plea Agreements

By Ronald A. Sarachan and Nicholas S. Feltham

On April 12, 2013, the Department of Justice’s Antitrust Division announced two key changes to its “carve out” policy for individuals employed by corporations entering criminal antitrust plea agreements. These changes were announced in a written statement from Assistant Attorney General Bill Baer (available here), and come one day after the Antitrust Division released the 2013 edition of its annual newsletter.

First, the Antitrust Division will no longer publicly release the names of individual employees that have been “carved out” of the non-prosecution protection in a company’s plea agreement. Typically, corporate plea agreements contain a non-prosecution provision, which protects the company’s employees from criminal liability related to the antitrust activity at issue. The Antitrust Division will exclude or “carve out” certain employees from this protective provision, on the belief that these individuals may be criminally culpable and could be targeted in the future for their particular involvement.  Previously, the names of employees being carved out from a company’s plea agreement protections were listed in the publicly available version of the document. This oft criticized practice was contrary to the stated position of every other unit within the Department of Justice, all of which have adopted policies against the public naming of uncharged third parties. Following Friday’s announcement, the names of carved out individuals will only be listed in an appendix to the plea agreement, and that appendix will be filed with the court under seal. This logical change creates a uniform policy within the Department of Justice, and will prevent carved out employees from experiencing serious reputational harm until and unless the government has sufficient evidence to charge them.

Second, the Antitrust Division will only carve out employees who they have reason to believe were involved in criminal wrongdoing or who are potential targets of the investigation. Previously, the division would also carve out non-prosecution protection for employees who refused to cooperate with the investigation or employees with potentially relevant information who could not be located. While the Antitrust Division will “continue to demand the full cooperation of anyone who seeks to benefit from the non-prosecution protection of a corporate plea agreement,” they “will no longer carve out employees for reasons unrelated to culpability.” Employees often refuse to cooperate or cannot easily be located for numerous reasons, many of which have nothing to do with covering up culpable behavior. This policy change will remove the cloud of doubt and negative stigma that presently plagues these employees, as the Division will now only carve out those it believes are culpable or those still under investigation. Going forward, there will be no uncertainty about the meaning of being carved out of the plea agreement – any employee in that unenviable position should know that they are being targeted for prosecution or further investigation.

Last week, the Antitrust Division announced that the 2012 fiscal year provided record high numbers for criminal fines ($1.14 billion), as well as the percentage of individual defendants sentenced to prison time (78%). The division also announced that the average prison sentence over the last three years has risen to 25 months, up significantly from the 1990s average of 8 months and the 2000s average of 20 months. Both changes to the division’s carve out practice are positive news for corporate employees, especially in the present era of heightened criminal antitrust enforcement.

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