Fighting corporate fraud and misconduct depends on effective enforcement of the civil and criminal laws in the financial system. Recently, the Department of Justice released an enforcement policy with a new direction for prosecuting corporate misconduct: focusing on officers and individual employees. In a prepared statement Deputy Attorney General Sally Yates delivered to New York University, she emphasized six steps to “hold individual corporate wrongdoers accountable.”

These six guidelines apply equally to both prosecutors and civil litigators, and will also apply to currently pending matters “to the extent it is practicable to do so.”

1.  A corporation must provide the DOJ with any and all relevant facts about individuals involved in corporate misconduct to be eligible for any cooperative credit.

In order for a corporation to receive any credit for consideration for cooperation, the company must identify all individuals responsible for or involved in corporate misconduct regardless of seniority or position. Only once a corporation meets its burden of providing all relevant facts with respect to individuals will it be eligible for consideration for cooperative credit. Cooperative credit will depend on the various factors typically applied, such as timeliness of cooperation, speed of internal investigation, and thoroughness. Furthermore, DOJ attorneys will also proactively investigate individuals “before, during, and after any corporate cooperation.”

2.  From the beginning of an investigation, both criminal and civil corporate investigators should focus on individuals. 

Yates states that “corporations only act through individuals, investigating the conduct of individuals is the most efficient and effective way to determine the facts and extent of any corporate misconduct.”  By focusing on individuals, the DOJ anticipates that those with knowledge of corporate misconduct will cooperate with the investigation to provide information on higher ups within the organization. Additionally, the DOJ will try to maximize the chances that the final resolution not only brings criminal or civil charges against the corporation, but also culpable individuals.

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

Early and regular communication will be routine between civil attorneys and criminal prosecutors. By doing so, Yates expects that regular consultation will permit consideration of the full range of the government’s potential remedies. She further explains that “[d]epartment attorneys should be alert for circumstances where concurrent criminal and civil investigations of individual misconduct should be pursued.”

4.  Absent extraordinary circumstances, no corporate resolutions will provide protection from criminal or civil liability for any individuals.

DOJ attorneys will “take care to preserve” the ability to pursue liable individuals even after the Department reaches a resolution with the company. Department lawyers have been instructed to reject agreements where corporations seek to dismiss charges or provide immunity for individuals “absent extraordinary circumstances.” The same standard applies to civil matters. Furthermore, any release of liability due to extraordinary matters must be personally approved by the relevant Assistant Attorney General or United States Attorney.

5.  Corporate cases should not be resolved without a clear plan to resolve individual cases before the statute of limitations expires

If an investigation of individual misconduct has not been resolved by the time authorization to resolve the corporate case is sought, the prosecution’s authorization memo will include: a description of the current status of the investigation of potentially liable individuals, the remaining work to be completed, and “an investigation plan to bring the matter to a resolution prior to the end of any statute of limitation period.” Furthermore, the DOJ will make all efforts to resolve cases against liable individuals before the expiration of the limitation period or will endeavor to preserve the ability to charge an individual by agreement or court order.

6.  Civil attorneys should consistently focus on individuals as well as the company and evaluate whether to bring suit against an individual regardless of the individual’s ability to pay a fine.

Yates indicates that “actions against culpable individuals should not be governed solely by those individuals’ ability to pay.” In other words, the DOJ’s efforts to impose a significant judgment is equally as important as holding wrongdoers accountable and deterring future wrongdoings. The DOJ anticipates that by bringing certain cases against individuals in the short term, which may not provide a monetary return on the Department’s investment, “will result in significant long-term deterrence.”

Overall, the DOJ is instituting these guidelines to maximize its ability to deter corporate misconduct.  Furthermore, Yates wants to turn the above policies “into everyday practice.”

This blog is for informational purposes only and does not constitute a legal opinion or advice.

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