By Lawrence Hurley
WASHINGTON (Reuters) - A U.S. appeals court on Friday weighed whether judges should have greater oversight on agreements between the U.S. Justice Department and companies to resolve charges of corporate misconduct.
The three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit heard oral arguments over whether a judge had grounds to reject an agreement by Dutch company Fokker Services B.V. to pay $10.5 million to resolve a criminal investigation of whether it illegally shipped aircraft parts to Iran, Sudan and Myanmar in violation of sanctions.
The panel members indicated that judges do have a role in approving so-called deferred prosecution agreements, in which prosecutors agree to ultimately end a criminal investigation if a company agrees to change its conduct. But the judges appeared uncertain as to how much discretion district courts should have to reject a deal.
It is unclear how the court will rule. Based on questions asked by the judges, one outcome could be that the court dismisses the appeal as premature, which would be a loss for the Justice Department and the company, but would not definitely resolve the legal question.
"You have a steep hill to climb," Judge David Sentelle told government lawyer Aditya Bamzai.
The question is whether U.S. District Judge Richard Leon in Washington crossed the line in his February decision rejecting the deal. He described the payment as "grossly disproportionate" given the seriousness of the company's actions.
Under questioning from Sentelle and Judge Laurence Silberman, Bamzai conceded that a district court could, in limited circumstances, reject an agreement.
But Bamzai said Leon had "gone well beyond" what was appropriate.
Critics, including some members of Congress, have questioned whether the Justice Department over-uses deferred prosecution agreements and whether judges should have greater oversight of such deals.
Prosecutors agreed in June 2014 to defer and ultimately drop charges that Fokker sent more than 1,000 parts, technology and services to sanctioned countries between 2005 and 2010 without first obtaining a license, as long as the company abided by the terms of the pact.
The Justice Department cited the company's efforts to disclose the conduct, improve its compliance program and discipline employees as reasons for the lenient treatment.
The case is U.S. v. Fokker Services, U.S. Court of Appeals for the District of Columbia Circuit, No. 15-3016.
(Reporting by Lawrence Hurley; Editing by Dan Grebler)