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According to the Department of Justice, more and more white-collar criminal defendants are being prosecuted every year. At the same time, the DOJ has decreased the frequency with which it prosecutes corporations. Obviously, you cannot put a company in jail, so this is largely a decision to refrain from seeking monetary penalties against large entities that are alleged to have engaged in some illegal practice. (Note, the DOJ does not consider the paying back of illegitimate proceeds, or “disgorgement,” to be a financial penalty.) DOJ officials have stated on the record that it is often unfair to punish innocent employees, shareholders and customers by imposing monetary penalties on the company that was involved in the wrongdoing.
In an effort to be transparent about this practice, the DOJ Fraud Section has again started making their written declinations to prosecute corporations publicly available. To date, I was able to locate six such declinations on the Fraud Section’s web page from 2018 through February 2019. Five of the six were directed toward Foreign Corrupt Practices Act violations, and the sixth was to a financial marketing company that engaged in clever accounting in order to conceal losses from its investors. Not all of the companies got a clean pass; the financial marketing company had to pay a significant monetary penalty to avoid prosecution. The declinations generally addressed the same criteria, namely, whether the company identified and self-disclosed the misconduct to the government, whether the company thoroughly investigated the misconduct, whether the company identified the individuals involved in and responsible for the misconduct and provided that information along with relevant facts to the government, and the steps the company has taken to remediate the misconduct (including disgorging any ill-gotten profits) and ensure that it will not happen again. There will undoubtedly still be nonwritten declinations to prosecute corporations, which is certainly what those companies will prefer. However, as more and more declinations become public, they will serve as a reference point for defense attorneys to evaluate the sort of facts and arguments that are likely to persuade DOJ attorneys into declining to prosecute.
Relatedly, the Antitrust Division of the Department of Justice published further guidance on the criteria federal prosecutors are supposed to consider when deciding whether and what actions to pursue against corporations. Specifically, in deciding whether to pursue federal action against antitrust violations, a prosecutor should evaluate a corporation’s antitrust compliance program for the formality of the program (considering the size of the corporation), whether the program was applied in good faith or, relatedly, whether the corporation’s senior management was involved in the violation. This is another example of a shift toward a more flexible approach employed by the DOJ for evaluating whether to prosecute a company. In November of last year, then-Deputy Attorney General Rod Rosenstein announced modifications to the “Yates Memo” policy of requiring corporations to provide a complete account of relevant facts about all individuals involved in criminal wrongdoing in order to receive cooperation credit. Instead, the DOJ now recognizes that some relevant information will be beyond the reach of some companies and that these companies should be given cooperation credit reflective of their best efforts and identification of individuals who were substantially involved in the misconduct.
It is probably not a coincidence that the DOJ is offering more cooperation credit to companies and, at the same time, prosecuting more individuals for white collar crimes. Larger companies have the resources and the increased incentives from the DOJ to investigate employee wrongdoing and report it to law enforcement. Further, companies have access to directors and employees who may (or are about to) be under investigation. As long as the company gives the proper disclosures, it is fine to interview employees about conduct that may very well be incriminating. It is often the case that the only thing left that may be of value to an individual employee in that situation is his or her explanation of the conduct being investigated. Emails, texts and phone call records using the company’s computer or cellphone are already outside their control. So, the employee really needs to think twice before walking into an “internal” interview without his or her own counsel.•
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• Jonathan Bont practices in the areas of criminal defense, business litigation and government compliance at Paganelli Law Group. Opinions expressed are those of the author.
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