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From Banking and Finance Law Daily, September 10, 2015

DOJ to go after individuals for corporate wrongdoing

By J. Preston Carter, J.D., LL.M.

The Department of Justice has released a memo providing guidance to federal prosecutors to strengthen the “pursuit of individual corporate wrongdoing.” The memo states, “One of the most effective ways to combat corporate misconduct is by seeking accountability from the individuals who perpetrated the wrongdoing.” Such accountability, according to the memo, deters future illegal activity, incentivizes changes in corporate behavior, ensures that the proper parties are held responsible for their actions, and promotes the public’s confidence in the justice system.

Challenges. There are “many substantial challenges unique to pursuing individuals for corporate misdeeds,” the memo states. Who knew what can be difficult to determine in large corporations where responsibility is diffuse and decisions are made at various levels. This is particularly true, according to the memo, when determining the culpability of high-level executives, who may be insulated from the day-to-day activity in which the misconduct occurs. As a result, investigators must often reconstruct the events based on a review of corporate documents, which can number in the millions, and which may be difficult to collect due to legal restrictions.

To address these challenges, the DOJ convened a working group of senior attorneys to identify areas in which the Department can change its policies and practices in order to “most effectively pursue the individuals responsible for corporate wrongs.

Guidance. The guidance provides six key steps that should be taken in any investigation of corporate misconduct:

  1. In order to qualify for any cooperation credit, corporations must provide to the DOJ all relevant facts relating to the individuals responsible for the misconduct.

  2. Criminal and civil corporate investigations should focus on individuals from the inception of the investigation.

  3. Criminal and civil attorneys handling corporate investigations should be in routine communication with one another.

  4. Absent extraordinary circumstances or approved departmental policy, the DOJ will not release culpable individuals from civil or criminal liability when resolving a matter with a corporation.

  5. DOJ attorneys should not resolve matters with a corporation without a clear plan to resolve related individual cases, and should memorialize any declinations as to individuals in such cases.

  6. Civil attorneys should consistently focus on individuals as well as the company and evaluate whether to bring suit against an individual based on considerations beyond that individual’s ability to pay.

Timing. The guidance applies to all future investigations of corporate wrongdoing, as well as to those matters pending as of the date of the memo, Sept. 9, 2015.

Yates remarks. In remarks on Sept. 10, 2015, at New York University School of Law, announcing the new policy, Deputy Attorney General Sally Quillian Yates said, “[R]egardless of how challenging it may be to make a case against individuals in a corporate fraud case, it’s our responsibility at the Department of Justice to overcome these challenges and do everything we can to develop the evidence and bring these cases.” Yates added that “Americans should never believe, even incorrectly, that one’s criminal activity will go unpunished simply because it was committed on behalf of a corporation.”

“Effective today,” Yates said, “if a company wants any consideration for its cooperation, it must give up the individuals, no matter where they sit within the company.” Ignorance is no excuse, she added. If corporations want any cooperation credit, “they will need to investigate and identify the responsible parties, then provide all non-privileged evidence implicating those individuals.”

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