September 11th, 2015
A Spirit of “Cooperation”: What You Need to Know About the DOJ’s New Enforcement Policies
On Wednesday the U.S. Department of Justice (DOJ) issued a memorandum outlining new policies and procedures for United States Attorneys in corporate investigations (the "Memo"). As the media was quick to point out, the DOJ has drawn a great deal of criticism in the last several years for its failure to prosecute individuals in connection with major corporate investigations. The Memo responds to these concerns by providing guidelines to prosecutors that are purportedly intended to "seek accountability from the individuals" who are responsible for wrongdoing. The DOJ's directive seeks to achieve this goal primarily by using its prosecutorial leverage over corporations under investigation to force corporations to identify potentially culpable individuals at the company and to separate any resolution of potential charges against the corporation from resolving potential claims against individuals.
The new policies take effect immediately and apply to all future investigations as well as any pending investigation "to the extent it is practicable to do so." The takeaway points from the Memo are:
Increased pressure on corporations to cooperate against individuals. It is common for a corporation under investigation to seek "cooperation credit" from the government after the corporation discloses information about suspected wrongdoing within the company. The DOJ considers cooperation credit as mitigation during plea and settlement negotiations. Under the new DOJ guidelines, it will no longer suffice for the corporation to investigate suspected wrongdoing and provide the results of its investigation to the DOJ. Instead, under the new guidelines, companies will only receive credit if they "identify all individuals involved in or responsible for the misconduct at issue...and provide...all facts relating to that misconduct." Additionally, the Memo encourages prosecutors to target individuals in order to get them to cooperate against those "higher up" in the corporation. It remains to be seen whether this guideline will induce prosecutors to focus on corporate employees at lower levels of responsibility in order to enable them to move up the chain. It is, however, likely that the heightened standard for cooperation credit will require internal investigations by corporations to be broader and may lead them to err on the side of reporting conduct by employees that might otherwise have been omitted because the conduct was insubstantial or lacked criminal intent. It also raises concerns that corporations will now feel compelled to turn employees against each other in order to satisfy the DOJ. The risk of false accusations by people looking to save their jobs should be a real concern.
Policies to prevent corporations from insulating employees. The Memo makes clear that prosecutors may not, "absent extraordinary circumstances or approved departmental policy," strike a deal with a corporation that would result in immunity for or the dismissal of charges against individual employees. As with the requirement that corporations identify wrongdoers as a condition to receiving cooperation credit, this new policy pits the interests of the corporation against the interests of its own employees in ways that could undermine the level of trust that exists between employer and employee and a corporate culture that is supportive of open dialogue.
Increased civil enforcement against individuals. Finally, the Memo encourages DOJ attorneys to pursue individuals civilly even if the individual may not be able to pay the resulting judgment. The goal of this policy, according to the Memo, is to achieve "long-term deterrence." This may be particularly troublesome to individuals given the lower standard of proof in civil proceedings and the clear intent by DOJ to send a message through enforcement.
It is impossible to know at this point whether these new policies will enhance the investigation and prosecution of white collar crime. However, it seems clear that the requirement that corporations identify wrongdoers as part of an internal investigation will affect the way in which investigations are conducted and will impact the decision making of attorneys for corporate employees and executives who are involved in investigations. At minimum, corporate counsel conducting an investigation may need to advise employees before interviewing them without counsel of the enhanced potential for adversity between the corporation and the employee.
If you have questions about the DOJ's new investigation and enforcement policies or about other white collar criminal defense matters, please contact Brian Maas at (212) 705 4836 or email@example.com, John Harris at (212) 705 4823 or firstname.lastname@example.org, Caren Decter at (212) 705 4833 or email@example.com, Tyler Maulsby at (212) 705 4893 or firstname.lastname@example.org, or any other member of the Securities Fraud and White Collar Defense group.
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