Corporate criminal deferred prosecution agreements are on the rise.

And often, as a condition of those agreements, the Justice Department will demand a monitor to keep an eye on those corporate criminals.

The monitors file their reports with the Department of Justice.

Should those reports be made public?

That’s the question brewing in the Second Circuit Court of Appeals.

Max Mishkin of Levine Sullivan is pro bono counsel to Hubert Dean Moore.

In 2015, Moore wrote a letter to Judge John Gleeson asking to see a copy of the HSBC monitor report.

Both the Justice Department and HSBC said — no way. Keep this report under seal.

Gleeson ordered the report released to Moore — with redactions.

HSBC and the Justice Department are now appealing that order to the Second Circuit.

Briefs on behalf of Moore have been filed.

The monitor in the HSBC case is Michael Cherkasky.

“Cherkasky submitted an affidavit with the district court saying that he believes that a redacted version of the report could be released,” Mishkin told Corporate Crime Reporter in an interview last week. “That helps us because we are ultimately arguing for the release of a redacted version of the report.”

What are the government and HSBC arguing?

“The First Amendment right of access generally says that if there is a judicial record then the public has a right of access to it if it passes the experience and logic test. If that test is satisfied, and the right of access attaches, the government can still close off the record or proceeding at issue if it passes strict scrutiny,” Mishkin said.

“That is — closure is essential to preserving some higher value and that there is no less restrictive means of preserving that value than closing off the proceeding or preventing access to the record.”

“HSBC and the government start with the threshold argument that the monitor’s report is not a judicial record to begin with, so you don’t even need to get to the question of whether a First Amendment right of access attaches, let alone whether it is overcome.”

“They argue in part that the monitor’s report is informing the prosecutorial function, that the prosecutor is going to look at this report and decide either — HSBC has cleaned up its act, the Department has been satisfied and we can move to dismiss the charges, or HSBC is continuing in its ways, they are in breach and we are going to move forward and prosecute.”

“That’s their first argument. It’s a prosecutorial document and it’s not a judicial record and for the First Amendment right of access it can’t attach.”

“Then they argue even if it is a judicial record, the First Amendment right of access doesn’t attach to it because it doesn’t satisfy the experience and logic test. Deferred prosecution agreements are relatively new innovations in corporate criminal law and certainly corporate monitors are as well. They will say the experience is not there. On the logic side, they have expressed concerns whether the monitor will be effective and get the cooperation of HSBC employees and foreign regulators. They argue logic weighs against access to the report.”

“Thirdly they argue that even if the right of access attaches, a wholesale sealing of the report is necessary to preserve the government’s interest in having deferred prosecution agreements. They argue that monitorships will be less likely to be relied on if monitors are worried that their work is going to be made public and they won’t be able to secure the cooperation of foreign and regulatory partners. They worry that employees won’t be as forthcoming if they are worried that cooperation will become public.”

“That is roughly speaking the government’s and HSBC’s argument.”

“We disagree on all three points. We say the monitor report is a judicial record. The test is whether the record is relevant and useful to the judicial function. Here, the monitor’s report is relevant and useful in several ways. Necessarily, this deferred prosecution has to end in one of two ways. Either, the government will say that HSBC has complied with the deferred prosecution agreement and the government will file a motion to dismiss the information. Or the government will say that HSBC hasn’t complied with the agreement, hasn’t righted its ship and the prosecution has to move forward. They will hold HSBC in breach of the agreement.”

“The government cannot unilaterally say the charges are dismissed. The government has to comply with Rule 48 — and Rule 48 says the government can move to dismiss charges with leave of the court. The courts say that in ruling on a Rule 48 motion, the court should not grant the motion to dismiss if it is manifestly against the public interest.”

“The court has to conduct an analysis, look at the government’s reasons to dismiss charges. Having the monitor’s report will necessarily inform the court in that adjudication. On the flip side, if the government seeks to hold HSBC in breach, the court needs to determine whether the government is making that determination in good faith and not on the basis of any improper categories. The monitor’s report will help the court make sure that it is making an informed decision on a request to hold HSBC in breach. That’s one way the monitor report is a judicial record.”

“The other way is that even before you get to those end adjudications, the monitor’s report is helping the court monitor its own docket. The court has an inherent authority to supervise its own docket. One of the points that Judge Gleeson made in ordering the Department to provide these quarterly summaries is that the court needs to make sure it is properly fulfilling its own functions to make sure that there isn’t wrongdoing in the course of the agreement.”

“One example taken from the headlines is that the government could require, as a condition of the agreement, that the defendant endow a chair at the prosecutor’s law school. There are obvious and easy examples of how these agreements could give rise to mischief and the court plays a role in supervising its docket to make sure it is not a party to that.”

Is this a case of first impression?

“Other than Judge Gleeson’s order, there is not an order holding that these monitor reports are subject to the First Amendment right of access. Professor Garrett has found monitor reports that were made public. This is not settled law.”

“This is the first litigation directly focused on compliance monitors reports in deferred prosecution agreements. But we say in our briefs that while this may be a new issue in compliance monitors in deferred prosecution agreements, the principle of access to judicial records dealing with prosecutions in plea agreements are very well settled.”

“There is a Second Circuit case we cite a lot — Erie County — which is a case about access to compliance monitor reports in a consent decree. It’s not a deferred prosecution agreement. It’s part of a settlement that resulted in a monitorship that had compliance reports. The Second Circuit held that the right of access attached to it. It’s very closely analogous to this case.”

“In the Richmond Newspapers case, the Chief Justice Burger wrote ‘people in an open society do not demand infallibility from their institutions, but it is difficult for them to accept what they are prohibited from observing.’”

“The public will benefit from access to this report. And it will improve the judicial function — the courts, the prosecutors and the monitors will benefit from this transparency.”

[For the complete Interview with Max Mishkin, 30 Corporate Crime Reporter 44(13), Monday November 14, 2016, print edition only.]