When the federal government alleges or investigates criminal conduct against a corporation, it is rare for the corporation to put up a sustained fight against the allegations. Because the government can seem to have leverage to affect the public image and investor perceptions on corporations, those corporations often want to resolve criminal investigations before charges are ever brought and even before the criminal investigation is ever made public. In many cases, attorneys representing the corporation cooperate with the government from the outset of the investigation. And if the criminal investigation is made public, any criminal issues are resolved through either a Non-Prosecution Agreement (NPA), a Deferred Prosecution Agreement (DPA), or the company pleading to an agreed upon Information and penalties. Prior to such an agreement, companies and their outside counsel often conduct their own internal investigations and hand over evidence gathered and legal conclusions directly to the federal government in the hopes that the government will not bring criminal charges, or at the very least agree to a reduced penalty, based on this cooperation.
With this atmosphere, the officers and directors of a corporate defendant may wonder how it is possible to provide the federal government with all the evidence it needs to make its case while at the same time defending itself. And even when the government compiles its own evidence many companies decide that it is far too risky or costly (it is unclear if this is true considering that companies rarely test this belief) to go to trial to defend themselves, and so opt to settle with the government rather than put up a fight. What has resulted is an environment where evidence and theories of prosecution remain unchecked and unchallenged. Anyone can champion a winning theory or positive summary of their evidence in a conference room – where it matters is in the courtroom.
So it came as a refreshing change of pace when FedEx chose to fight criminal charges brought against it for its alleged role in delivering pharmaceuticals illegally prescribed through online pharmacies. FedEx faced potential criminal fines of $1.6 billion but had the courage to require the Department of Justice to prove its case in the courtroom. It also came as no surprise that when gearing up to fight the charges, Fedex retained an attorney known as a fierce defender, Cris Arguedas, of Arguedas, Cassman & Headley, LLP. Arguedas and the defense team won their first major victory in March of this year when the judge dismissed many counts because the prosecutors charged the wrong entities and the statute of limitations limited their ability to amend the charges. The parties agreed to a bench trial before United States District Judge Charles Breyer for the Northern District of California which started June 13th. After only a few days into the trial, the prosecutors dismissed all remaining charges against FedEx, giving the company and Arguedas a major and well-deserved victory.
What does this mean for the future of corporate criminal investigations and cases? I personally hope it will serve as a wakeup call to other corporations. I have often wondered what would happen if all corporations and outside counsel just refused to continue conducting internal investigations on behalf of the federal government. The system would collapse as we know it, because there simply aren’t enough prosecutors and investigators to support it. The federal government has done a masterful job of outsourcing investigations to the private sector and the loser is not only the corporation, but all citizens.
Our system is at its best when it is adversarial. That is what our constitution intends. That means that evidence is challenged and tested. That means the government has the burden to introduce its own evidence and prove beyond a reasonable doubt that a crime has taken place. But, instead, what has developed over time is a government who acts like an emboldened bully, forcing corporations to hire outside counsel to do its work for them and assume a non-adversarial posture for fear of losing cooperation credit. It’s time that more and more companies stand up to the bully in the room – thankfully we still have companies like FedEx and attorneys like Cris Arguedas who are willing to do just that.