US DOJ Priority: Individual Accountability for Corporate Wrongdoing
By GAN Integrity(Updated )
The US Department of Justice (DOJ) has faced growing criticism in recent years over the structure and prioritization of corporate settlements in financial crisis and corruption-related cases. Critics argue that corporate management have been allowed to use “shareholders’ money” (corporate funds) to settle DOJ cases, while the responsible corporate individuals usually have not been pursued.
On September 9, 2015 the DOJ communicated a significant policy change – to make individual accountability a priority in these “white collar” cases, in the form of a memo issued by Deputy Attorney General Sally Quillian Yates.
The memo identified six areas of policy emphasis (representing either policy shifts or clarifications – but expressed formally, in a single document, for the first time):
- All relevant facts relating to all individuals responsible for an instance of corporate misconduct must be provided to the DOJ for a company to obtain cooperation “credit” (and thereby avoid prosecution or face lesser charges);
- Criminal and civil corporate investigations should focus on individuals from the start of a given DOJ investigation;
- Criminal and civil attorneys handling corporate investigations within DOJ should be in routine communication with one another;
- The United States should generally not release culpable individuals from civil or criminal liability when resolving a matter with a corporation, absent extraordinary circumstances or significant policy reasons;
- Procedurally, within DOJ, the proposed resolution of matters with a company must also include a plan to resolve the related cases involving individuals; and
- Civil attorneys within DOJ should similarly focus on individuals as well as companies and should consider whether or not to bring suit on factors beyond a person’s ability to pay.
In a September 10, 2015 speech to the New York University School of Law, Deputy Attorney General Yates was direct when speaking about the identification of individuals and disclosure of facts necessary to obtain credit:
If a company wants any credit for cooperation, any credit at all, it must identify all individuals involved in the wrongdoing, regardless of their position, status or seniority in the company and provide all relevant facts about their misconduct. It’s all or nothing. No more picking and choosing what gets disclosed. No more partial credit for cooperation that doesn’t include information about individuals.
She also touched on a primary DOJ goal involved with making individuals a priority target – to change corporate cost/benefit analyses: “By holding individuals accountable, we can change corporate culture to appropriately recognize the full costs of wrongdoing, rather than treating liability as a cost of doing business.”
Substantively, the DOJ actions are significant. And the fact that they come from what has historically been the world’s single most aggressive anti-corruption law enforcement body makes them even more important for companies and individuals subject to the Foreign Corrupt Practices Act (FCPA).
Challenges ahead for general counsel and chief compliance officers
Challenges lie ahead for general counsel and chief compliance officers to educate appropriate company personnel about these new “rules of the road,” and to reflect the DOJ focus on individual liability in corporate policy and practice. Certain revisions may be necessary or appropriate to, among other areas, the corporate code of conduct (or equivalent); certain internal policies (e.g. the corporate anti-corruption policy, any separate investigations policy and other policies covering highly regulated sectors or lines of business); certain risk-shifting agreements (liability insurance policies for Directors and Officers); and programs (e.g. anti-corruption and other compliance programs), with particular emphasis on risk assessments, training and other forms of communication.
Similarly, with respect to internal investigations, the identification and management of actual or potential conflicts of interest will take on increased importance and complexity. It will likely take longer to reach settlements or otherwise resolve DOJ allegations connected to an instance of alleged malfeasance, because the individuals involved may choose to fight charges at trial rather than admit guilt, with the associated consequences.
The DOJ has responded strongly to its critics and the labels of “softness” and “favoritism” that have often been used to describe past DOJ settlements where individuals were not pursued. Corporate employees, officers and directors should take notice: the DOJ’s analysis of corporate behavior involving possible wrongdoing now formally includes a focus on the actions (and potential personal liability) of all persons involved.
Image credit: Ken Lund, Flickr. (Image has been edited.)
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