Fokker had admitted to have violated the International Emergency Economic Powers Act between 2005 and 2010 by trading aircraft parts and other components to Iran, Burma (now Myanmar), and the Sudan, in violation of U.S. sanctions. The division, Fokker Services, voluntarily admitted the violations during the Department of Justice’s (DOJ) four-year probe in the matter, agreeing to forfeit $10.5 million in proceeds and pay a $10.5 million penalty as part of an 18-month deferred prosecution agreement.
Judicial discretion is up for debate in the U.S. Court of Appeals for the D.C. Circuit, as a three-judge appellate panel heard arguments on Friday regarding a settlement agreement that was rejected by a district judge in February between U.S. attorneys and a division of Dutch aerospace company Fokker Technologies. Fokker had admitted to have violated the International Emergency Economic Powers Act between 2005 and 2010 by trading aircraft parts and other components to Iran, Burma (now Myanmar), and the Sudan, in violation of U.S. sanctions. The division, Fokker Services, voluntarily admitted the violations during the Department of Justice’s (DOJ) four-year probe in the matter, agreeing to forfeit $10.5 million in proceeds and pay a $10.5 million penalty as part of an 18-month deferred prosecution agreement. The agreement would have called for the case to be dismissed in 18 month had Fokker complied with the terms of the settlement, and if Judge Richard Leon from the U.S. District Court in D.C. approved the settlement.
Instead, in his February ruling, Leon rejected the terms of the settlement, calling the penalty insufficient and “grossly disproportionate to the gravity of Fokker Services’ conduct in a post-9/11 world.” The $21 million total in the agreement was the equivalent of the gross revenues made by Fokker from the illegal sales, with both the company and the DOJ touting Fokker’s voluntary disclosure of the sales. Judge Leon also rejected the agreement, in part, because the DOJ did not prosecute any individuals, despite the company admitting to over 1,000 sanctions-prohibited sales. Although Leon did say he would revisit a revised version of the settlement, both parties appealed jointly instead, leading to Friday’s hearing on the 14th anniversary of the September 11th terrorist attacks. The hearing also came one day after the DOJ announced a dramatic change in policy for prosecuting corporate crimes, going after individuals responsible for misdeeds as opposed to the current trend of collecting large financial penalties in exchange for deferred prosecution agreements that lack an admission of criminal wrongdoing.
Friday’s hour-long appeals hearing before a three-judge panel included loads of intensive questioning of U.S. attorneys, Fokker’s counsel, and lawyers from the firm Jenner & Block, hired to represent Judge Leon’s side of the argument. Although judges have a degree of statutory latitude in determining whether to accept or reject settlements, Circuit Judge David Sentelle told the court “What we are trying to do here is divine the circumstance under which the statute would apply.” The attorney representing Judge Leon, Adam Unikowsky, argued that the judge was within his rights, given a broad interpretation of “public interest” discretion to reject a deferred prosecution agreement. Unikowsky claimed that his conduct did not constitute “unreasonable” terms for rejection, such as if a judge refuses to accept any deferred prosecution agreements at all. DOJ attorney Aditya Bamzai conceded that judges do have some discretion, but called Judge Leon’s rationale “too intrusive.” Fokker Services attorney Edward O’Callaghan reminded the panel that the settlement is rejected; it could expose Fokker to additional “irreparable” harm from future prosecution, having made admissions of guilt with the assumption that the deal would be approved. Judge Laurence Silberman, however, told O’Callaghan that further prosecution at this stage would be highly unlikely.
The panel members all agreed that judges have discretion in accepting and rejecting settlement agreements, although holding differing opinions on the scope. Judge Sentelle told Bamzai, “You have a very steep hill to climb.” Sentelle is concerned that a favorable ruling will open the appeals door to a flood of similar appeals mid-case, as opposed to the court’s traditional role of hearing appeals once a lower-level case is concluded. Both Bamzai and O’Callaghan argued however, that this case contains a very narrow set of circumstances, and will not affect other litigation. Silberman said he believed that the law requires approval of deferred-prosecution agreements, as allowing a defendant to make good on terms of a probationary agreement was not to be considered “unreasonable.” The third panelist, Judge Sri Srinivasan asked the DOJ attorney to come up with an example of such agreement that could be rejected by the judge. Bamzai replied a judge would have discretion to reject in a circumstance that didn’t involve allowing the defendant time to demonstrate good behavior.
Bloomberg Business – Andrew M. Harris
National Law Journal/Legal Times – Zoe Tillman
U.S. News and World Report/Associated Press – Sam Hananel