When Roger Williams Medical Center, which had been facing a 38-count federal indictment, entered into a deferred prosecution agreement earlier this year, it avoided the risks of a criminal conviction, such as being disqualified from the Medicare and Medicaid programs, or even losing its license.
To get to that point, however, the hospital had to admit to criminal wrongdoing and waive its right to attorney-client privilege as the investigation continues.
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The admission of guilt came before former CEO Robert Urciuoli, who was charged along with the nonprofit health center, had appeared in court. But do deferred prosecution agreements deny certain rights to the accused?
According to William P. Devereaux, who represented the hospital, the issue is a controversial one being looked at right now in the federal judicial system.
“It’s clearly a subject of debate that I would imagine is even going on in the hallowed halls of the Department of Justice,” said Devereaux, who will present to the R.I. Bar Association on the topic of corporate criminal liability this week.
Most of the principles for corporate criminal prosecutions come from a document referred to as the “Thompson memorandum,” penned by Deputy U.S. Attorney General Larry D. Thompson in January 2003.
Issued in the wake of corporate criminal cases such as the one involving Enron, the memorandum said that corporations should not be “treated leniently because of their artificial nature nor should they be subject to harsher treatment.”
Enforcing laws against corporate criminals would help the government positively change corporate culture and help deter potential wrongdoing, Thompson wrote.
The memorandum also outlined steps that companies can take to attempt avoiding a corporate indictment. However, those guidelines – which include waiving attorney-client privilege to give investigators access to internal documents and denying legal support to company officers under indictment – have recently come under scrutiny.
Often, companies will enter into agreements to avoid what Devereaux referred to as the “corporate death sentence.” But in the process, the companies may give up some rights to not incriminate themselves or their officers.
In the case of accounting firm KPMG, where former executives face charges for an alleged tax evasion scheme, the company entered into a deferred prosecution agreement in August 2005, admitting criminal activities.
Defense attorneys for the former executives claimed that prosecutors pressured the company to limit or prohibit legal reimbursements to the defendants.
U.S. District Judge Lewis A. Kaplan, who is presiding over the matter in federal court in Manhattan, held a hearing to examine the issue as well as the alleged threats by the company to fire anyone who didn’t cooperate with the investigation.
While he refused to throw out the case, Kaplan left the question open for further examination.
An expected ruling on the issue, which would examine the Thompson memorandum in relation to the Fifth and Sixth Amendments to the U.S. Constitution, could set a precedent on the issue.
Devereaux said that deferred prosecution agreements do pose a dilemma for corporations facing indictment and their accused employees.
“In some cases, people enter into plea agreements as an individual,” Devereaux said. “It kind of goes without saying that you as a corporation are acknowledging what has already occurred. The tougher situation is when you have individuals that have not had their day in court yet.”
J. Richard Ratcliffe, a Providence-based attorney who will also present to bar association this week, said that the debate is centering on whether the deferred prosecution agreements are fair to employees who have not been proven guilty by a jury.
“The corporation becomes judge and jury for the employees,” he said.
So aside from copping pleas, how else can companies avoid prosecution?
Both Devereaux and Ratcliffe recommended that corporations look into adopting strong compliance plans and adhering to them. Ratcliffe said that the plans can set the tone for employees, letting them know what actions are not tolerated.
But the key to compliance plans are making sure they are not weak plans, which are often referred to as “paper compliance plans,” he said.
Devereaux said that having a strong plan in place can work to the corporation’s benefit should it face an investigation. In Roger Williams Medical Center’s case, the company already had a plan, he said. However, it didn’t address all the issues that the hospital came under fire for – including the issue of mail fraud, which Devereaux said was a “unique theory” for prosecuting a corporation (checks and letters involved in the case were sent by mail).
More often than not, companies institute a policy because of an external force, such as an investigation.
“In business, you do strategic planning – you look at where you are going ethically,” Ratcliffe said.
