Pretrial diversion agreements after Andersen’s prosecution: a utilitarian theoretical framework

Abstract

Purpose

Using the ethical consequentialist theory of utilitarianism, this paper aims to demonstrate the correlation between the prosecution of Arthur Andersen LLP and the United States Department of Justice’s (DOJ) increased use of pretrial diversion agreements, both nonprosecution and deferred prosecution agreements (N/DPA) for criminal corporations.

Design/methodology/approach

Through an analysis of previous literature, the United States Justice Manual, and data from the Corporate Prosecution Registry, this study examines the trend of N/DPAs from 1992 to 2021. Specifically, the data is examined to assess whether a pattern exists before and after the 2002 prosecution of Andersen.

Findings

This study finds an exponential increase of N/DPAs after Andersen’s prosecution. The DOJ’s basis for the increased use of these agreements is rooted in the utilitarian theory that the punishment of criminal corporations should deter and rehabilitate behavior while also maximizing the benefit to society (e.g. shareholders, employees and business community). The justice manual, memorandums and public speeches explicitly promote the use of N/DPAs for corporations to minimize collateral damage and the potential for negative societal impact.

Originality/value

This study applies a utilitarian framework to explain the criminal justice system’s increased use of pretrial diversion agreements for criminal corporations.

Citation

Gates, S.K. (2023), "Pretrial diversion agreements after Andersen’s prosecution: a utilitarian theoretical framework", Journal of Financial Crime, Vol. 30 No. 6, pp. 1549-1556. https://doi.org/10.1108/JFC-08-2022-0203