The Gulf Oil Spill Case

The Justice Department should not settle the Gulf oil spill criminal cases with deferred prosecution agreements.

That’s the take of David Uhlmann.

Uhlmann is the former chief of the Department’s Environmental Crimes Section.

And he’s currently a Professor at the University of Michigan Law School.

“The Justice Department should not enter deferred prosecution or non-prosecution agreements with the companies responsible for the Gulf oil spill,” Uhlmann said in an interview last week. “A deferred prosecution or non-prosecution agreement would send a terrible message to the families of the workers who died on the Deepwater Horizon, the thousands of victims of the spill, and the communities along the shores of the Gulf of Mexico that have suffered so much.”

“If the Justice Department agrees to a deferred or non-prosecution agreement in the Gulf oil spill case, it has lost its way when it comes to corporate crime,” Uhlmann said. “The only argument that can be made for deferred prosecution is that there are some corporate violations that are too serious for civil enforcement, but not so egregious that they require criminal prosecution.”

“We also use a type of deferred prosecution, known as pre-trial diversion, for first time offenders in the criminal justice system.  When someone is very young or has no criminal record and commits a non-violent crime – like a drug possession offense – prosecutors frequently will agree to pre-trial diversion, because the conduct involved – while serious – is not so egregious that it must be criminally prosecuted.”

“To take that approach and apply it in cases like the Gulf oil spill and the Upper Big Branch mine disaster is a misuse of prosecutorial discretion.”

Uhlmann said the possibility of a deferred prosecution in the case was raised last year when Deputy Attorney General James Cole transferred responsibility for the criminal investigation from the Environmental Crimes Section to the Criminal Division and created a task force there to coordinate the efforts of the various offices involved in the criminal investigation.

“The Deputy Attorney General said that he moved the case to the Criminal Division because the Criminal Division has more resources and creating a task force would allow the Department to better coordinate the multi-district investigation,” Uhlmann said.

“It was a questionable decision, however, because the Criminal Division has never prosecuted an oil spill case and does not have responsibility for environmental crimes.”

“Prior to March 2011, the criminal investigation was being coordinated by the Environmental Crimes Section and the U.S. Attorneys’ offices along the Gulf Coast.”

“The Criminal Division had a role in the case – they were looking at possible securities violations. But the Criminal Division did not have a leadership role.”

“Moving the case to the Criminal Division allowed the Department to provide more centralized control and draw on the greater resources of the Criminal Division. But it took the case away from the part of the Department that has the greatest expertise in oil spill cases.”

How will that change the outcome of the case?

“The Department is still likely to bring criminal charges and still likely to seek a record criminal fine. But the charging decisions will be made by attorneys who do not have experience prosecuting environmental crimes and may have a different set of priorities than would have been the case if the Environmental Crimes Section remained more involved.”

Uhlmann says he still expects the Justice Department to bring criminal charges under the Clean Water Act, the Seaman’s Manslaughter Statute, and the Migratory Bird Treaty Act.

“I also expect that the case will result in the largest fines ever imposed for corporate crime in the United States,” Uhlmann said. “But the shift of the case to the Criminal Division raises the possibility that the Department would consider deferred prosecution. That would not have happened had the case remained in the Environmental Crimes Section.”

Why wouldn’t it have happened?

“The Criminal Division routinely uses deferred prosecutions to resolve its cases. The Environmental Crimes Section almost never uses deferred prosecution agreements.”

When the Department entered into a non-prosecution agreement last year to resolve criminal investigation into the Upper Big Branch mine disaster, Uhlmann wrote a scathing piece in the New York Times titled “29 Dead Miners, No Justice.”

“The decision to enter a non-prosecution agreement with the new owners of Massey did surprise me,” Uhlmann says.

Because?

“Because 29 miners died in West Virginia. They died because Massey had a history of mine safety violations. They died at a facility where the company kept a double set of books – one for internal purposes, which documented violations, and one for mine safety officials that covered up those violations.”

“To enter a non-prosecution agreement in a case where 29 people died and there is so much evidence of criminal wrongdoing reflects poorly on the Justice Department.”

“If the Department is willing to enter non-prosecution agreements in cases like Massey, it raises questions about the Department’s commitment to prosecute corporate crime.”

“The Department has set up a false choice in entering deferred prosecution agreements. It has suggested that deferred prosecution agreements are necessary to allow the Department to pursue charges against individuals. But it is not an either or proposition. The Justice Department can and should prosecute corporations that commit crime. The Justice Department also can and should prosecute officials within those corporations if they have engaged in criminal conduct.”

“There are senior officials within the Department who question whether corporate criminal prosecution achieves anything that deferred prosecutions cannot achieve,” Uhlmann said.

“With both approaches, the primary sanction is a financial penalty. So, the thinking among some senior Department officials – both in the Bush administration and in the Obama administration – is that there is not a significant difference between criminal prosecution and deferred prosecution.”

“I disagree. A criminal prosecution sends a different message than a deferred prosecution. A criminal prosecution makes clear our societal condemnation of the conduct involved. A criminal prosecution requires the company to admit wrongdoing. A criminal prosecution exposes the company to potential suspension and debarment from government contracting.”

“A deferred prosecution agreement by its very nature indicates that the conduct is not serious enough to warrant criminal prosecution. A deferred prosecution agreement – like the non-prosecution agreement in the Massey case – may not involve any admission of liability. A deferred prosecution may not have the same collateral consequences.”

“So, the notion that a criminal prosecution and a deferred prosecution are essentially the same is erroneous.”

“There is no question that companies don’t want the reputational damage of being labeled a corporate criminal.”

“When I was the Chief of the Environmental Crimes Section, presidents and general counsels of companies frequently met with me to ask our office to decline criminal charges. During those meetings, senior corporate management spoke passionately about how important it was to their companies to avoid the stigma of a criminal prosecution.”

“Not every case of corporate misconduct warrants or requires criminal prosecution. But if the Justice Department concludes that criminal prosecution is not warranted, it should decline prosecution and refer the matter for civil enforcement.”

“The notion that there should be a way station between criminal prosecution and civil enforcement where the companies involved can avoid the stigma of criminal prosecution, if they are willing to pay enough money, makes it appear that justice can be bought.”

[For the complete q/a transcript of the Interview with David Uhlmann, see 26 Corporate Crime Reporter 12(11), March 19, 2012, print edition only.]

Russell Mokhiber edits Corporate Crime Reporter.