The U.S. Department of Justice (DOJ) recently announced that Germany’s Deutsche Bank would pay a $625 million penalty as part of a negotiated settlement, bringing its total LIBOR penalties to around $2.5 billion.

This settlement is both striking and familiar.


Between 2003 and 2011, the DOJ entered into 368 agreements with public companies to resolve criminal investigations without going to trial, averaging more than 50 per year from 2007-2011. If this number seems unusually high – it is.  New research from the Law & Economics Center (LEC) at George Mason University School of Law finds that criminal settlements with public companies more than doubled annually between 1997 and 2011.  

A large portion of this growth comes in the form of Non Prosecution Agreements (NPAs) and Deferred Prosecution Agreements (DPAs). These increasingly common arrangements bypass the traditional plea bargaining process and allow target companies to avoid pleading guilty to criminal charges in exchange for monetary penalties, legal process waivers and internal governance reforms.

While its London-based subsidiary pled guilty to a crime, Deutsche Bank did not, instead entering into a DPA that required an admission to the facts of the crime and to its role in LIBOR manipulation.

NPAs and DPAs are a topic of much debate within the legal community, yet the evidence of their use relative to traditional plea agreements is only just beginning to emerge. Their popularity derives not from any new statute, but rather from a series of internal DOJ reforms dating back to 2003. Since then, 42 percent of DOJ criminal settlement agreements with public companies have involved these alternative resolutions. 

Debate has centered on the merits of specific agreement provisions and the amount of outside attention and scrutiny they should receive. For example, NPAs are letter agreements between the prosecutor and the company that are never filed in court at all, and as such are subject to little judicial oversight.

The LEC study is the first comprehensive empirical analysis comparing NPAs and DPAs to plea agreements signed by public companies. The findings reveal the types of provisions that these agreements tend to include, the kinds of defendants that enter into them, and the extent of their use.

We were surprised to discover that the DOJ’s increased use of NPAs and DPAs has not been accompanied by a corresponding decline in plea agreements. On the contrary, both forms of settlement continued to rise over the period of the study, indicating an expansion in the overall reach of federal corporate criminal law enforcement.

Some critics argue that NPAs and DPAs reduce the deterrent effect of criminal law; that they allow companies to quietly settle a matter while limiting the overall punitive effect of the sanction. In contrast, we found the monetary penalties associated with NPAs and DPAs did not enable companies to get lower monetary sanctions on average than with a plea agreement. What’s more, we found the non-monetary provisions to be more numerous – indicating more concessions to prosecutors with NPAs and DPAs. For example, these agreements more often require defendants to admit certain facts that would make them easier to prosecute in the event of a breach. This lowers the bar for prosecutors, allowing them to gain concessions based on allegations that have not been proved in a court of law.

One of the more controversial settlement provisions that we found is a requirement that the company hire an external monitor – the kind of provision contained in the Deutsche Bank DPA.  As with other non-monetary sanctions, monitors often constitute a hidden cost that does not make it into the DOJ’s formal settlement announcement.

NPAs and DPAs are not replacing plea agreements; all three types of corporate criminal settlement agreements by public companies were found to be growing during our study period. Yet their use remains controversial. Any serious policy debate should consider the emerging empirical evidence – and implications – of their sustained popularity.

Alexander and Cohen are the principal investigators of the study on DPAs and NPAs recently released by the Searle Civil Justice Institute at the Law & Economics Center (LEC) at George Mason University School of Law. Alexander serves as research fellow at the LEC. Cohen is a professor of Management and Law at Vanderbilt University.