United States District Court, District of Columbia
EMMET G. SULLIVAN UNITED STATES DISTRICT JUDGE
The United States Attorney is the representative not of an ordinary party to a controversy, but of a sovereignty whose obligation to govern impartially is as compelling as its obligation to govern at all; and whose interest, therefore, in a criminal prosecution is not that it shall win a case, but that justice shall be done.
Berger v. United States, 295 U.S. 78, 88 (1935). Prosecutors are provided with many tools to use in the pursuit of justice and are granted significant discretion to decide how best to approach each case. The pending cases involve one such tool: the deferred-prosecution agreement (“agreement”).
The concept is simple: The government intends to prosecute a defendant for criminal wrongdoing, but decides that the defendant is worthy of a chance at rehabilitation and avoiding the collateral consequences that accompany a criminal conviction. Rather than seeking a conviction through a trial or guilty plea, the government agrees to defer prosecution for a period of time during which the defendant will be monitored for compliance with various conditions, in an attempt to assess the defendant’s rehabilitation. If the defendant succeeds, the government does not prosecute. If the defendant does not succeed, the government may prosecute.
In these two cases, deferred-prosecution agreements are pending before the Court. These agreements are not, however, with individuals charged with criminal offenses, but rather with corporations. The government requests in both cases that this Court determine: (1) that the parties are entitled to an exclusion of time under the Speedy Trial Act; (2) that Saena Tech Corporation (“Saena Tech”) and Intelligent Decisions, Inc. (“Intelligent Decisions”) have presented adequate corporate representatives who have the ability to bind the corporations; and (3) that Saena Tech and Intelligent Decisions knowingly and voluntarily waived the right to indictment. No one disputes that the Court has the authority to make these determinations. These cases also present the question of the Court’s role, if any, in determining whether the agreements should be approved at all.
The Court finds that the agreements in these two cases should be approved. Notwithstanding the government’s opinion of the Court’s limited role, the Court, as set forth infra, has the authority to assess the reasonableness of a deferred-prosecution agreement and to decline to approve agreements that are not genuinely designed to reform a defendant’s conduct. This authority is limited by the strong separation-of-powers concerns that an overly-zealous judicial review of prosecutorial decisions would raise as well as a recognition of the expertise that the Executive Branch has in making such decisions. As discussed infra, Congress intended judicial scrutiny in the decision to divert prosecution.
Applying these principles to both cases, and upon consideration of the pleadings, the submission of the amicus curiae in the Saena Tech case, the applicable law, and the entire record, the Court GRANTS the motions for exclusion of time under the Speedy Trial Act and APPROVES both deferred-prosecution agreements, subject to periodic status hearings to monitor the defendants’ compliance with those agreements. The parties are directed to file periodic reports to update the Court on the defendants’ progress and compliance with the terms of the deferred-prosecution agreements in each case as set forth in the Orders accompanying this Memorandum Opinion.
In Part I of this opinion, the Court articulates the factual and procedural background for the two agreements. Part II sets forth the history of the statutory provision upon which deferred-prosecution agreements are based and concludes that court involvement in the deferral of prosecution was specifically intended by Congress. In Part III, the Court reviews the two District Court decisions that have examined the scope of judicial authority to consider deferred-prosecution agreements and analyzes the two sources of authority identified in those decisions: the Speedy Trial Act and the Court’s supervisory power. In Part IV, the Court applies this framework to approve the agreements in the pending cases. In Part V, the Court discusses the extent to which the current use of deferred-prosecution agreements for corporations rather than individual defendants strays from Congress’s original intent when it created an exclusion from the speedy trial calculation for the use of such agreements. The Court is of the opinion that increasing the use of deferred-prosecution agreements and other similar tools for eligible individual defendants could be a viable means to achieve reforms in our criminal justice system.
These cases arise out of a lengthy investigation into allegations of bribery in connection with certain government contracts. The investigation yielded a series of guilty pleas beginning in 2012. Most notably, Kerry Khan, a former contracting official for the U.S. Army Corps of Engineers, pleaded guilty to bribery and conspiracy to commit money laundering, and accepted responsibility for more than $20, 000, 000 in bribe payments. See Plea Agreement, United States v. Khan, No. 11-cr-276, ECF No. 74 at 1-2. The investigation of Mr. Khan led to the discovery of another public official, In Seon Lim, who ultimately pleaded guilty to accepting bribes in exchange for favorable treatment of government contractors in connection with contracts with the United States Army. See Plea Agreement, United States v. Lim, E.D. Va. No. 14-cr-159, ECF No. 21.
The agreement in the Intelligent Decisions (“the Intelligent Decisions Agreement”) case is rather standard. Intelligent Decisions has agreed to pay a fine and institute various compliance measures to prevent the recurrence of bribery offenses similar to the one with which it is charged. In exchange, the government will defer prosecution for a period of two years and dismiss all charges if Intelligent Decisions remains in compliance. The government has also charged and obtained guilty pleas from two employees of Intelligent Decisions in connection with the crime with which the company is now charged.
The agreement in the Saena Tech (“the Saena Tech Agreement”) case is somewhat unusual. It is an agreement between not only the federal government and Saena Tech, but also Jin Seok Kim-the former Chief Executive Officer of Saena Tech who, according to the Statement of Facts, is the individual who personally paid the bribes Saena Tech is charged with paying. Mr. Kim has not been named in any criminal proceeding, yet the Saena Tech Agreement provides that prosecution of Saena Tech and Mr. Kim will be deferred for two years, provided that Saena Tech pays a fine and institutes a compliance program, and that Saena Tech and Mr. Kim cooperate in the government’s ongoing investigation. Successful completion of that two-year term will result in the dismissal of any charges against Saena Tech. Mr. Kim thus receives the benefits of deferred prosecution without having been named in a criminal case.
A. United States v. Saena Tech Corp.
1. Factual Background Regarding Saena Tech.
Saena Tech is a South Korean company that was founded by Mr. Kim in 2005. See Statement of Facts, ECF No. 5-1 at 18. Saena Tech “operated as a subcontractor for U.S.-based government contracting companies providing technical services and equipment for the Eighth United States Army, ” which is based in South Korea. Id. One such contract involved the Program Executive Office Enterprise Information Systems (“PEO EIS”), an organization within the United States Army. See id.
Mr. Lim was an Assistant Project Manager for a division of the PEO EIS known as the Project Manager, Defense Communications and Army Transmission Systems (“PM DCATS”). See Id. at 18-19. Mr. Lim was employed in this position and based in Seoul, South Korea until approximately June 2010. See Id. at 19. During his time in South Korea, Mr. Lim was the contracting officer for part of a contract (“the Prime Contract”) with the Eighth United States Army, a position which gave him “influence over the selection of subcontractors who performed work under the Prime Contract.” Id. at 19. Saena Tech ultimately obtained subcontracts to work on the Prime Contract from a variety of sources, including “Company F, ” the primary contractor for the Prime Contract, as well as three subcontractors, “Company E, ” “Company G, ” and Avenciatech. See Id. at 19-20.
After coming into existence in 2005, Saena Tech began to perform subcontract work for the United States Army on a project that originated with the office at which Mr. Lim was employed. See Id. at 20. Mr. Kim, then Saena Tech’s CEO, met Mr. Lim at this time. Id. By early 2009, Saena Tech “was performing a subcontract for a project administered by [Mr. Lim].” Id. at 20. Mr. Kim soon “learned from [John Han] Lee that [Mr. Lim] wanted a car” and Mr. Lee “further informed Kim that Lee would make the arrangements for the purchase.” Id. at 21. Mr. Kim agreed to contribute $10, 000 toward the purchase of “a 2009 Lexus ES350 for [Mr. Lim] and to wire the [entire] purchase price of the Lexus.” Id. Mr. Lim used the Lexus between March 2009 and June 2010, when he left South Korea. See Id. Before leaving South Korea, Mr. Lim was unable to sell the Lexus, so Mr. Kim “gave Lee $25, 000 in cash to purchase the Lexus, ” and Mr. Lee did so, without informing Mr. Lim that the money came from Mr. Kim. See id.
During the Spring of 2009, Mr. Lee suggested that Mr. Kim “should pay money to [Mr. Lim], ” which caused Mr. Kim to believe that if he failed to do so, “Saena Tech’s ability to retain subcontracts and obtain new ones based on merit would be jeopardized.” Id. Accordingly, around September 2009, Mr. Kim gave Mr. Lim “approximately $40, 000 in cash . . . to assist Saena Tech in obtaining and retaining subcontracting opportunities through subcontracts administered by [Mr. Lim] on behalf of the Army.” Id. Around April 2010, Mr. Kim gave another $30, 000 for the same purpose. See id.
Also around April 2010, Mr. Kim met with Mr. Lim and the Chief Executive Officer of Company G, one of the other subcontractors. See Id. at 22. They “agreed that [Mr. Kim] would cause Saena Tech to submit an invoice to Company G for $250, 000 for work purportedly performed by Saena Tech on a subcontract to Company G for work administered by [Mr. Lim]. . .” Id. They further agreed that Saena Tech would not be obligated to perform any actual work in exchange for that invoice. See Id. Mr. Kim “agreed to pay to [Mr. Lim] the proceeds obtained from the fraudulent invoice, less 30% for taxes owed. . .” Id. In April 2010, Mr. Kim submitted the fraudulent invoice and paid $175, 000, the proceeds less taxes, “to [Mr. Lim] in several installments between on or about April 9, 2010 and on or about May 6, 2010.” Id.
The total amount of cash bribes paid by Mr. Kim on behalf of Saena Tech was approximately $280, 000. See id. at 21-22. During the same time period, Mr. Kim also provided other things of value to Mr. Lim, including “meals and entertainment to assist Saena Tech in obtaining and retaining subcontracting opportunities through subcontracts administered by [Mr. Lim].” Id. Ultimately, Saena Tech obtained over fifteen subcontracts to perform work for the United States Army, between January 2009 and the present. See Id. The amount of money Saena Tech earned on these contracts is unclear.
2. The Saena Tech Agreement.
On March 24, 2014, the government filed a one-count Information charging Saena Tech with bribery of a public official in violation of 18 U.S.C. § 201. See Information, ECF No. 1 at 2. The Information charged that Saena Tech gave various things of value to Mr. Lim
with the intent to influence official acts . . . to wit, Saena Tech gave, offered, and promised in excess of $250, 000 in cash and other things of value, including meals and entertainment, to [Mr. Lim] and for [Mr. Lim’s] benefit in return for [Mr. Lim] using [his] official assistance to direct subcontracts to Saena Tech and providing preferential treatment for Saena Tech with subcontracts awarded through the United States Department of the Army.
Id. at 1-2. Notably, Mr. Kim was not charged in any criminal case.
On April 16, 2014, the government filed a joint motion “for approval of deferred prosecution and exclusion of time under the Speedy Trial Act.” Mot. for Approval, ECF No. 5. Attached to that motion was the Saena Tech Agreement. See Deferred-Prosecution Agreement, ECF No. 5-1. The Saena Tech Agreement is between three parties: the U.S. Attorney for the District of Columbia, Saena Tech, and Mr. Kim. See Id. at 14-15.
The Saena Tech Agreement, which was entered into by Mi Kyoung Lee, Chairperson of the Board of Directors, and Mr. Kim, Managing Director, provides that, in consideration of the “past and future cooperation” of Saena Tech and Mr. Kim, Saena Tech’s payment of a fine, and Saena Tech’s implementation of a corporate-compliance program, “any prosecution of the Company and Mr. Kim . . . be and hereby is deferred. . .” Id. at 9. The term of deferral is two years from “the date on which the Information is filed.” Id. at 3. Saena Tech also admitted to the truth of the facts set forth in the Statement of Facts and agreed that “[s]hould [the U.S. Attorney’s Office] pursue the prosecution that is deferred by this Agreement, the Company . . . will neither contest the admissibility of nor contradict the Statement of Facts.” Id. at 3. There is no parallel statement as to the government’s potential use of the Statement of Facts against Mr. Kim. In the event that the U.S. Attorney’s Office were to determine, “in its sole discretion, ” that either Saena Tech or Mr. Kim breached the Agreement, “[they] shall thereafter be subject to prosecution. . .” Id. at 9. Finally, “by signing this Agreement, [Saena Tech] and Mr. Kim agree that the statute of limitations with respect to any such prosecution that is not time-barred on the date of the signing of this Agreement shall be tolled for the Term [of the Agreement] plus one year.” Id. at 10.
The Saena Tech Agreement creates three obligations necessary to obtain the deferral:
Cooperation: Mr. Kim and Saena Tech must cooperate in ongoing investigations by: (1) “[t]ruthfully disclos[ing] all factual information not protected by [certain privileges] with respect to” activities of Saena Tech, and related entities and individuals, “concerning all matters relating to corrupt payments in connection with United States government contracts”; (2) “designat[ing] knowledgeable employees, agents, or attorneys to provide to the Office the [relevant] information and materials”; (3) “us[ing] . . . best efforts to make available for interviews or testimony . . . present or former officers, directors, employees, agents and consultants of the Company”; and (4) for Mr. Kim, “agree[ing] to travel to the United States for interviews or testimony as requested.” Id. at 4-5.
Fine: Saena Tech agreed to pay a $500, 000 fine “within ten . . . days of the filing of the Information.” Id. at 6. That fine, the Saena Tech Agreement declares, “is appropriate given the facts and circumstances of this case.” Id.
Compliance Program: Saena Tech agreed to implement “a compliance and ethics program designed to prevent and detect violations of the applicable anti-corruption laws throughout its operations. . .” Id. at 8. The Saena Tech Agreement requires changes to “ensure that the Company maintains: (a) a system of internal accounting controls designed to ensure the making and keeping of fair and accurate books, records, and accounts; and (b) a rigorous anti-corruption compliance code, standards, and procedures designed to detect and deter violations of the applicable anti-corruption laws.” Id.
3. Procedural History of United States v. Saena Tech.
The Court scheduled a status hearing for May 7, 2014 to “determine the process and procedures that will apply to further proceedings regarding the joint motion for approval of the deferred-prosecution agreement.” Minute Order of April 29, 2014. At that status hearing, the Court indicated that it would not consider the Saena Tech Agreement without first receiving in-person testimony from a corporate officer with the ability to bind Saena Tech and to testify regarding the provisions of the deferred-prosecution agreement as well as the underlying facts. The Court also required Saena Tech to submit corporate documents proving that its representative had the authority to bind the corporation.
On June 3, 2014, Saena Tech filed various corporate documents to demonstrate its approval of the Saena Tech Agreement and to demonstrate that Ms. Lee, its Chief Executive Officer-who is also Mr. Kim’s wife-has the authority to bind the corporation. See Notice of Filing, ECF No. 13. These included Saena Tech’s Articles of Incorporation and a resolution of Saena Tech’s Board of Directors approving the deferred-prosecution agreement. See Articles of Incorp., ECF No. 13-3; Resolution, ECF No. 13-5. The resolution reflects that Saena Tech’s “directors’ meeting” was attended by only two directors: Ms. Lee and Mr. Kim. See Resolution, ECF No. 13-5 at 2.
On June 6, 2014, the Court directed Saena Tech “to file evidence of its new corporate-compliance program.” Minute Order of June 6, 2014. Saena Tech filed responsive documents regarding its compliance program on June 12, 2014 and June 16, 2014. See Proffer, ECF No. 16; Proffer Replacement Doc., ECF No. 17. In these documents, Saena Tech asserts that it has taken six steps in furtherance of its obligations:
• Appointment of Compliance Officer: Saena Tech appointed Choondong Lee as Internal Compliance Officer, “to carry out the responsibility of implementing and supervising a corporate-compliance and ethics program.” Proffer, ECF No. 16 at 1-2; see also Board of Directors Resolution, ECF No. 16-1.
• Creation of Internal Control System: Choondong Lee has “established and implemented an internal control system.” Proffer, ECF No. 16 at 2. This system requires the Compliance Officer to monitor company actions and ensure that only authorized individuals are engaging in company transactions and using company assets, and that accounting and inventory audits are regularly and accurately done. See Report, ECF No. 16-2 at 3-4. The Compliance Officer is also required to file monthly reports with Saena Tech’s auditor. Id.
• Establishment of Hotline: Saena Tech created a “Corporate Compliance Hotline . . . to provide Saenatech’s [sic] employees with a means by which to raise their concerns and to report possible wrongdoing” using a confidential procedure that will be investigated by Saena Tech’s outside counsel. See Proffer, ECF No. 16 at 2; ECF No. 16-3 at 2.
• Design of Code of Conduct: Saena Tech contracted with a law firm “to draft a Code of Conduct, Standards and Compliance in furtherance of the requirements of the DPA.” Proffer, ECF No. 16 at 2; see also Contract, ECF No. 16-4. The Code of Conduct consists of a 24-slide PowerPoint presentation. See ECF No. 17-1. It provides guidance regarding various potential ethical issues, including Saena Tech’s commitment not to retaliate against those who expose ethical issues, how to respond to and report ethical and legal concerns, how to approach business-related gifts, and Saena Tech’s prohibition on the payment of bribes. See id.
• Holding a Seminar Series: Choondong Lee has conducted the first of what will be a periodic seminar series “for all employees for the purpose of instructing them with regard to anti-corruption and corporate-compliance issues.” Proffer, ECF No. 16 at 3; see also Report, ECF No. 16-8.
• Appointment of New Compliance Officer: Saena Tech appointed its outside counsel, Sucheol Noh, to serve as the company’s auditor “to carry out more professional checking and balancing” because “[t]he former Inspector had been a relative of Mr. Kim and Ms. Lee.” Proffer, ECF No. 16 at 3; see also Stockholders Minutes, ECF No. 16-9.
The Court commenced the July 17, 2014 hearing by expressing a few concerns regarding the deferred-prosecution agreement. See Tr. of July 17, 2014 Status Hearing, ECF No. 38 at 4:11-7:11. Specifically, the Court noted that the agreement appears to “essentially ha[ve] the effect of immunizing Mr. Kim” and that this raises concerns regarding the “fundamental fairness of this agreement” in light of the guilty pleas and criminal records that have resulted for other defendants charged in the investigation. Id. at 4:11-25. The government responded to the Court’s concerns, conceding that the agreement “essentially offers Mr. Kim letter immunity, but it’s contingent upon his cooperation.” Id. at 7:16-17. Regarding the fairness of the Saena Tech Agreement, the government agreed that this is “certainly a better ride than the other defendants, ” id. at 9:12-13, but noted what the government considered in making its decision: (1) “Saena Tech is a Korean corporation . . . does its work in Korea; no work in the United States at all. Mr. Kim is a Korean national, did his work for Saena Tech in South Korea, was not doing work here in the U.S., and so there are obstacles with regard to a prosecution”; (2) “Mr. Kim’s cooperation is extremely important to the Government with regard to [Mr. Lim’s] case . . . and with regard to potential future cases”; (3) Mr. Kim “volunteered a lot of the information that Your Honor sees in the statement of offense”-“information the Government did not know”; and (4) “this company is almost assuredly going to be permanently debarred” from government contracts. See Id. at 9:24-12:25.
After this discussion, the Court noted that the case was “nontraditional” in that “[t]here’s no one else in the courtroom raising concerns” and “the Court cannot be an advocate.” Id. at 19:13-19. The Court indicated that it would appoint an amicus curiae to fill that role. See Id. at 26:7-20. Accordingly, the Court proceeded with a colloquy with Mr. Kim and Ms. Lee, as Saena Tech’s corporate representative, and “defer[red] the question of acceptance or rejection to another date.” Id. at 26:21-25. The Court engaged both Ms. Lee and Mr. Kim in a colloquy regarding their understanding of the Saena Tech Agreement, their agreement to the truth of the Statement of Facts, their waivers of conflicts of interest in connection with the joint representation, and, in the case of Ms. Lee, her waiver of indictment and speedy trial, and ability to bind the corporation. See Id. at 41:16-71:1.
After the hearing, the Court appointed Professor Brandon L. Garrett of the University of Virginia School of Law to serve, along with Dean Alan Morrison of The George Washington University Law School as his local counsel, “as amicus curiae to respond to the parties’ arguments and provide the Court with advocacy in favor of broader court authority, vel non, to consider issues including the fairness and reasonableness of a deferred-prosecution agreement in deciding whether to accept or reject a deferred prosecution-agreement.” Minute Order of July 21, 2014. The government filed its supplemental brief, responding to the concerns raised by the Court, on August 8, 2014. See Gov’t’s Suppl. Br., ECF No. 26. The defendant filed a “letter in lieu of a more formal brief” indicating that it and Mr. Kim concur with the government’s brief. See Letter, ECF No. 25-1 at 1. The amicus filed his brief on August 22, 2014. See Amicus Br., ECF No. 31. The government filed a brief in response to the amicus’s filing on August 29, 2014. See Reply, ECF No. 32.
A motion hearing regarding approval of the deferred-prosecution agreement was held on September 5, 2014. Counsel for the government and Saena Tech, as well as the court-appointed amicus curiae, presented argument during that hearing. After the hearing, the Court entered the following Minute Order regarding two questions that had arisen during the hearing:
In accordance with the discussion held on the record during the September 5, 2014 motion hearing, the parties are directed to file supplemental briefs addressing the following issues: (1) whether, after a Court approves an exclusion of time under Section 3161(h)(2) of the Speedy Trial Act, the Court has any authority to hold a defendant that is party to the relevant deferred-prosecution agreement in contempt for failing to comply with the agreement’s provisions; and (2) whether the Court may order a party to a deferred-prosecution agreement to comply with the provisions of that agreement in connection with a colloquy regarding that party’s understanding of the agreement and relinquishment of its constitutional and statutory right to a speedy trial.
Minute Order of September 5, 2014. The government filed its brief on October 13, 2014. See Gov’t’s Suppl. Br., ECF No. 35. The amicus curiae filed his brief on October 21, 2014. See Amicus Suppl. Br., ECF No. 36.
B. United States v. Intelligent Decisions, Inc.
1. Factual Background Regarding Intelligent Decisions.
Intelligent Decisions is an information-technology company based in Ashburn, Virginia, which conducts “the vast majority” of its business with the United States government. See Statement of Facts, ECF No. 3-2 at 18. Harry Martin, Jr. was the founder, President, CEO, and owner of Intelligent Decisions, while Chae Shim was the company’s Director of Acquisition Accounts for the Asia/Pacific region. See id. Both Mr. Martin and Mr. Shim were provided with corporate credit cards by Intelligent Decisions. See id.
Intelligent Decisions’ involvement in the bribery scheme is similar to that of Saena Tech. Like Saena Tech, it sought to obtain contracts related to the PEO EIS organization within the United States Army. See Id. at 19. Also like Saena Tech, Intelligent Decisions’ interactions were with Mr. Lim in his capacity as Assistant Project Manager for the PM DCATS division of the PEO EIS. See Id. at 19.
Intelligent Decisions ultimately replaced another company in providing an Information Technology Help Desk subcontract on the same Prime Contract that Mr. Lim was supervising and in which Saena Tech was involved. See Id. at 20. During this time, Saena Tech “operated as a subcontractor for Intelligent Decisions” as well as other companies. Id. Intelligent Decisions was involved in the help desk subcontract from January 2009 until March 2010. Id.
In January 2009, John Han Lee, an employee of the company that was then-servicing the help desk subcontract, approached Mr. Martin and Mr. Shim with the opportunity to take over the subcontract. Id. at 21. Mr. Shim and Mr. Martin then traveled to South Korea to meet with Mr. Lim. See Id. On approximately January 23, 2009, Mr. Martin paid $553.03 for dinner with Mr. Lim and Mr. Shim, among others, and Mr. Shim paid $2, 382.49 for drinks and entertainment with Mr. Martin and Mr. Lim, among others. See Id. Both payments were made using Intelligent Decisions’ corporate credit cards. See Id. On January 30, 2009, Intelligent Decisions was awarded the help desk contract with Mr. Lim’s assistance. Id. The contract was worth $525, 000, and a second contract obtained by Intelligent Decisions was worth $67, 294.40. Id. Intelligent Decisions also agreed to hire Mr. Lee and two other individuals to work on the subcontracts. Id.
For the remainder of 2009, Intelligent Decisions paid a number of expenses on behalf of Mr. Lim. See Id. at 22-26. The total came to over $10, 000 in meals, entertainment, golf outings, and golf equipment, as well as a vehicle worth over $30, 000. See id. at 26. In exchange, Intelligent Decisions obtained modifications to the ...