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Richard Epstein on deferred prosecution agreements

In today's W$J:

In one such notable agreement, the U.S. attorney for New Jersey, Christopher J. Christie, put the screws to Bristol-Myers Squibb, which got into hot water because of a potential securities violation for inflating its quarterly earnings by a business practice known as channel stuffing. ...The na�ve reader might think that a DPA should prohibit the firm from engaging in future conduct of the sort that got it into hot water in the first place. But Mr. Christie had larger ambitions. The most striking evidence of the abuse of power is paragraph 20 of the agreement, which requires BMS to "endow a chair at Seton Hall University School of Law," Mr. Christie's alma mater, for teaching business ethics, a course that he himself could stand to take. ...

BMS was ordered to restructure its internal operations and appoint a new chief compliance officer to assist Mr. Lacey [Frederick Lacey, a former federal judge advising Mr. Christie]. .... How can any firm act decisively with a government mole in its midst? What other firm would seek to acquire BMS, knowing that they must thereby give Mr. Christie the keys to its boardroom? ...

A DPA such as this one erodes the most elementary protections of the criminal law, by turning the prosecutor into judge and jury, thus undermining our principles of separation of powers. The Bristol-Myers Squibb DPA allows the prosecutor to lower the boom following the recommendation of Mr. Lacey. The corporation's sole remedy is to plead its case before the prosecutor in an environment wholly devoid of the most rudimentary procedural protections.

These powers were implemented when Mr. Christie threatened to reinstate the indictment if the board did not remove CEO Peter R. Dolan for his role in an aborted agreement with Canadian corporation Apotex. The agreement -- to delay Apotex's introduction of a generic competitor to Plavix, BMS's best-selling blood thinner -- led to a criminal antitrust investigation. Any connection between channel stuffing and price fixing remains unclear.



Rafael Mangual
Project Manager,
Legal Policy

Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.