A non-prosecution agreement is a private deal between a federal agency and a company or individual under investigation: the government agrees not to file charges, and in exchange the target cooperates, pays financial penalties, admits to specific conduct, and reforms its practices. The arrangement never goes before a judge. If the target meets every condition through the end of the term, the matter closes with no indictment, no conviction, and no court record.
These agreements are the Department of Justice’s and Securities and Exchange Commission’s main tool for resolving corporate white-collar investigations without prosecution. They give the government leverage and admissions it would otherwise need a trial to secure, and they give the company a path to avoid the reputational and regulatory damage of being formally charged.
How a Non-Prosecution Agreement Works
An NPA is a contract. The DOJ uses it to resolve potential criminal matters; the SEC uses it for civil securities violations. In both cases the agency promises not to bring charges as long as every condition in the agreement is met.
What sets the NPA apart from almost every other enforcement tool is that it never touches a courtroom. No charges are filed. No judge reviews the terms. No public docket exists. The agreement lives entirely between the government and the target, which is why it attracts both criticism (no independent check on fairness) and demand (no public indictment to explain to shareholders, regulators, or customers).
NPA vs. Deferred Prosecution Agreement
The tool most often confused with an NPA is the deferred prosecution agreement, or DPA. Both resolve investigations without a trial and both require cooperation and reform. The difference is the courthouse.
With a DPA, prosecutors actually file criminal charges and then ask the court to defer the proceedings while the company behaves. The Speedy Trial Act requires a judge to approve that deferral.1Office of the Law Revision Counsel. 18 USC Ch. 208 – Speedy Trial A DPA creates a public record of the charges even though the case is later dismissed.
With an NPA, no charges are ever filed and no judge is ever involved. If the target complies, the government simply walks away and nothing was ever on a docket. For a company weighing which outcome it prefers, the NPA is cleaner. For the public, the DPA offers more transparency.
How the DOJ and SEC Use NPAs Differently
DOJ NPAs resolve potential criminal exposure. They almost always include substantial financial penalties, a detailed statement of facts admitting wrongdoing, compliance monitors in many cases, and terms that typically run up to three years.2United States Department of Justice. Justice Manual 9-28.000 – Principles of Federal Prosecution of Business Organizations They are built to punish and reform at the same time.
SEC NPAs look more like formal declinations with cooperation strings attached. The SEC uses them when securing cooperation is more valuable than imposing punishment, and reserves them for what its enforcement manual calls “exceptional circumstances” built around self-policing, self-reporting, remediation, and investigator assistance.3Securities and Exchange Commission. Enforcement Manual The SEC’s NPA with Ralph Lauren Corporation, entered after the company self-reported bribery by a foreign subsidiary, focused on cooperation and compliance improvements rather than heavy financial punishment.4SEC.gov. Ralph Lauren Corp Non-Prosecution Agreement
What a Company Needs to Qualify
Whether a company receives an NPA or an indictment is governed by the factors in the Justice Manual’s Principles of Federal Prosecution of Business Organizations. Prosecutors evaluate not just the seriousness of the offense but how the company behaved before, during, and after the misconduct came to light.
Voluntary Self-Disclosure
The single most important factor is voluntary self-disclosure. A company that uncovers wrongdoing internally and reports it before the government finds out on its own is in the strongest possible position.2United States Department of Justice. Justice Manual 9-28.000 – Principles of Federal Prosecution of Business Organizations Under the DOJ’s current voluntary self-disclosure policy, absent aggravating factors the Department will not seek a guilty plea from a corporation that self-reported, fully cooperated, and remediated the conduct.5U.S. Department of Justice. Voluntary Self Disclosure and Monitor Selection Policies
Full Cooperation
Cooperation means more than responding to subpoenas. To receive full credit, a corporation must identify every individual involved in the misconduct, regardless of seniority, and turn over the relevant facts on a timeline that lets prosecutors effectively investigate those individuals.6U.S. Department of Justice. Further Revisions to Corporate Criminal Enforcement Policies Companies that slow-walk documents bearing on individual culpability risk losing cooperation credit entirely.
Compliance and Remediation
Prosecutors look at whether the company had an effective compliance program before the misconduct, not just one that existed on paper. They also look at what the company did after discovering the problem: whether it fired the people responsible, overhauled internal controls, and paid restitution to victims.2United States Department of Justice. Justice Manual 9-28.000 – Principles of Federal Prosecution of Business Organizations
Collateral Consequences
The final major consideration is who gets hurt by prosecution. Prosecutors weigh whether an indictment would disproportionately harm employees, shareholders, pensioners, or customers who had nothing to do with the misconduct.2United States Department of Justice. Justice Manual 9-28.000 – Principles of Federal Prosecution of Business Organizations That is why NPAs are especially common with large financial institutions and publicly traded companies, where a conviction could trigger regulatory consequences far beyond the wrongdoers.
What an NPA Requires
NPAs are not free passes. The obligations are substantial, and they are designed to restructure the company while making the misconduct expensive to have engaged in.
A Statement of Facts
Every DOJ NPA includes a detailed statement of facts in which the company acknowledges specific conduct. This is not a vague expression of regret. It lays out what happened, who was involved, and how the law was violated, and the company agrees not to contradict it publicly.7Department of Justice. Non-Prosecution Agreement (Uber) These admissions matter because they become weapons if the company later breaches.
Financial Penalties and Disgorgement
DOJ penalties routinely reach hundreds of millions of dollars. UBS paid a $500 million penalty under its NPA related to the LIBOR rate-rigging investigation.8U.S. Department of Justice. United States v. The Royal Bank of Scotland PLC SEC NPAs often require disgorgement of profits connected to the misconduct, calculated on net profits: revenue tied to the violations, minus legitimate business expenses that had value independent of the wrongdoing. Costs that furthered the fraud are not deductible.
Compliance Monitors and Ongoing Cooperation
Many NPAs require the company to accept an independent compliance monitor who oversees operations and reports directly to the government. Monitors are expensive and disruptive by design. Under current DOJ policy, companies in “near miss” cases, those that just barely missed qualifying for a full declination, will not be required to accept a monitor.5U.S. Department of Justice. Voluntary Self Disclosure and Monitor Selection Policies The company must also cooperate with any ongoing or related investigations throughout the agreement, including making employees available for interviews and in some cases helping build cases against individual executives.4SEC.gov. Ralph Lauren Corp Non-Prosecution Agreement
Attorney-Client Privilege
Companies often worry that cooperating means waiving privilege. The Justice Manual is explicit that it does not. Waiving attorney-client privilege has never been a prerequisite for cooperation credit, and prosecutors cannot condition an NPA on waiver of core attorney-client communications or work product.2United States Department of Justice. Justice Manual 9-28.000 – Principles of Federal Prosecution of Business Organizations Two narrow exceptions apply: when a company asserts an advice-of-counsel defense, and when communications were made in furtherance of a crime or fraud. Prosecutors are also barred from pressuring companies to stop paying legal fees for employees under investigation.
Tax Treatment of NPA Payments
Most payments made under an NPA are not tax-deductible. Under federal tax law, any amount paid to the government in connection with a legal violation, whether through a lawsuit, settlement, or agreement, is generally non-deductible, and that rule covers penalties, disgorgement, and reimbursement of investigation costs.9Federal Register. Denial of Deduction for Certain Fines, Penalties, and Other Amounts
A narrow exception exists for payments classified as restitution to victims or amounts paid to come into compliance with a law. To qualify, the agreement itself must specifically identify the payment as restitution and state the dollar amount, and the company must retain documentation of the obligation, amount, and payment date. Government entities report these payments to the IRS on Form 1098-F when the total under the agreement equals or exceeds $50,000.10Internal Revenue Service. Instructions for Form 1098-F (Rev. April 2025) Any portion designated as disgorgement or paid in lieu of a fine does not qualify, even if the money ultimately reaches victims.
When the Term Ends
Most DOJ NPAs run three years or less. Current DOJ policy caps corporate resolutions at three years except in rare cases, and NPAs granted in “near miss” voluntary self-disclosure scenarios must run shorter than three years. When the company satisfies every condition through the end of the term, penalties paid, monitor reports clean, cooperation complete, the government’s promise not to prosecute becomes permanent. No charges are ever filed, no criminal record exists, and the investigation closes.
Unlike a DPA, where charges were filed and later dismissed, a completed NPA leaves no judicial record at all. For many corporations, preserving that clean record is what makes the penalties, the monitor, and the years of oversight worth accepting.
What Happens If the Company Breaches
A breach is where the NPA’s structure turns against the company. Because it already admitted to specific criminal conduct and agreed those admissions could be used against it, there is very little left to defend with.
How Breach Is Determined
The DOJ keeps sole discretion to decide whether a breach has occurred, but the Department’s corporate enforcement policy requires written notification to the company specifying the nature of the suspected breach, with an opportunity to respond and cure within a timeframe the DOJ sets.11U.S. Department of Justice. Corporate Enforcement Policy The government controls the timeline and decides whether the response is adequate.
Consequences
If the DOJ concludes a breach has occurred, the statement of facts becomes immediately admissible as evidence of guilt. The company stipulated to this when it signed, and it is barred from contradicting those facts.7Department of Justice. Non-Prosecution Agreement (Uber) Prosecutors can then move forward with an indictment, and for wire fraud, one of the most common corporate charges, the maximum sentence is 20 years, or 30 years if the fraud affected a financial institution.12Office of the Law Revision Counsel. 18 U.S. Code 1343 – Fraud by Wire, Radio, or Television Financial penalties can reach twice the gross gain from the offense or twice the gross loss to victims, whichever is greater.13Office of the Law Revision Counsel. 18 U.S. Code 3571 – Sentence of Fine
A conviction following a breached NPA can also trigger debarment from federal government contracts. Federal procurement rules allow debarment for fraud in connection with a government contract, antitrust violations, and other offenses indicating a lack of business integrity.14eCFR. 48 CFR 9.406-2 – Causes for Debarment For companies that depend on government business, losing contract eligibility can rival the criminal exposure itself.
What an NPA Does Not Protect Against
Signing an NPA does not insulate a company from private lawsuits. The statement of facts creates real exposure in civil litigation. While the admissions may not be directly admissible in a follow-on private suit under the federal rules governing compromise negotiations, they still shape the case in ways that are hard to overcome.
Plaintiffs’ lawyers can reference the admissions in briefs and pleadings. A company that admitted to the government that it engaged in fraud will have a much harder time winning a motion to dismiss a shareholder class action alleging the same fraud. Corporate officers sitting for depositions cannot credibly deny conduct the company has already formally acknowledged. The admissions do not establish civil liability on their own, but they make defending against related claims substantially harder at every stage.