DOJ Wants Entities to Give Up Wrongdoers

WASHINGTON (CN) - If corporations investigated for fraud want credit for cooperating, they must give up the people involved, under new U.S. Department of Justice policies.

Deputy Attorney General Sally Quillian Yates announced new policies for dealing with corporate fraud in a New York University School of Law speech, Sept. 10. The speech followed a six-point memorandum sent to the department's prosecutors and civil litigators, the director of the Federal Bureau of Investigation, and the director of the Executive Office for United States Trustees, Sept. 9.

Yates' 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 is important for several reasons: it deters future illegal activity, it incentivizes changes in corporate behavior, it ensures that the proper parties are held responsible for their actions, and it promotes the public's confidence in our justice system."

Yates noted substantial challenges unique to pursuing people for corporate misdeeds, in her speech, "In modern corporations, where responsibility is often diffuse, it can be extremely difficult to identify the single person or group of people who possessed the knowledge or criminal intent necessary to establish proof beyond a reasonable doubt. This is particularly true of high-level executives, who are often insulated from the day-to-day activity in which the misconduct occurs. Without an inside cooperating witness, preferably one identified early enough to wear a wire, investigators are left to reconstruct what happened based on a painstaking review of corporate documents, looking for a smoking gun that most financial criminals are far too savvy to leave behind. And since virtually all of these corporations operate worldwide, restrictive foreign data privacy laws and a limited ability to compel the testimony of witnesses abroad make it even more challenging to obtain the necessary evidence to bring individuals to justice."

These challenges make it all the more important that the department fully leverage its resources to identify culpable individuals at all levels in corporate cases, her memo states.

To this end, her speech continues, "The rules have just changed. Effective [Sept. 9], if a company wants any consideration for its cooperation, it must give up the individuals, no matter where they sit within the company. And we're not going to let corporations plead ignorance. If they don't know who is responsible, they will need to find out. If they want any cooperation credit, they will need to investigate and identify the responsible parties, then provide all non-privileged evidence implicating those individuals."

According to the memo, the remaining five points are: both criminal and civil attorneys should focus on individual wrongdoing from the beginning of an investigation of corporate misconduct; they should also be in routine contact with each other, even if they are not sure a civil or criminal disposition will be the end result of their investigations; civil attorneys should evaluate whether to bring suit against a person based on considerations beyond that person's ability to pay; absent extraordinary circumstances, the department will not release culpable people from civil or criminal liability when resolving a matter with a corporation; and department attorneys should not resolve matters with a corporation without a clear plan to resolve related individual cases, and should memorialize any declinations as to people in such cases.

The guidance in the department memo will apply to all future investigations of corporate wrongdoing and to matters pending as of Sept. 9, to the extent it is practicable to do so.

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