North Carolina Law Review

University of North Carolina School of Law

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Chapel Hill, NC 27514

Non-Prosecution of Corporations: Toward a Model of Cooperation and Leniency

96 N.C. L. Rev. 859 (2018) 


We apply the Kaplow-Shavell model of optimal law enforcement to study the effects of prosecutors’ use of non-prosecution agreements (NPAs) to obtain cooperation on broader enforcement objectives, including deterrence of crime. The NPA policy of the Department of Justice is documented in a series of memos that provide guidance to federal prosecutors on the charging of corporations. Prosecutors may offer NPAs as alternatives to a plea agreement in exchange for the company’s authentic cooperation. A benefit of authentic cooperation is to reduce the prosecutors’ costs of case development, both post- referral and pre-trial. But in order for the NPA to induce cooperation, the company must regard it as more lenient (or no less lenient) than the plea settlement. Thus, one concern regarding the use of a NPA is that the leniency it provides may, if anticipated, undermine general deterrence. For this reason, the prosecutor who seeks to maximize general deterrence may be more cautious in offering NPAs than one who is primarily concerned about minimizing the use of federal resources. A closer look at the tradeoffs reveals strategic benefits of the use of NPAs beyond the resource savings from cooperation. Using our basic model application as a guide, we conclude that the policy of limiting the use of NPAs to cases where the company provides authentic cooperation serves several enforcement objectives. From a traditional social welfare perspective, the efficiency of the NPA relative to a plea depends on whether the value of the resources saved through cooperation—in the form of increased ex ante probability of sanction faced by the offender—exceed the direct loss of deterrence due to the leniency of the sanction needed to obtain cooperation under the policy, other things equal. We also conclude that the use of NPAs—with or without cooperation—can facilitate efficient substitution between the informal sanctions that attach to criminal conviction, which can be socially costly (a deadweight loss), and the monetary sanction (a transfer). We suggest extensions of the model in which the effect of the NPA is to facilitate substitution into more efficient forms of settlement than those that would occur through plea agreements alone.



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