The U.S. Department of Justice (“Department”) has now formalized its strategy of prosecuting people, in addition to corporations, for all sorts of wrongdoing. Corporations can be fined, or maybe debarred from some federal program like Medicare, but now people are at risk of going to jail and being fined, too. Effective September 9, 2015, all Department attorneys and the FBI received a directive outlining six (6) steps they must take in all civil and criminal corporate enforcement matters in order for the government to hold accountable all persons responsible for corporate wrongs. This memorandum represents a marked shift in policy from focusing mainly on corporate misconduct to requiring corporations and individually culpable employees to be fully investigated and, wherever possible, prosecuted or civilly punished.
Under the new policy, the Department will target employees as well as companies, in order to recover assets, to redress past wrongdoing, to deter future illegal activity, and to change corporate behavior concerning cooperation with government investigations. Undoubtedly, the policy also is intended to address criticisms leveled following the 2008 financial crisis, when only companies were sanctioned for wrongdoing and the Department prosecuted only one corporate executive.
Corporations and their employees should take note of these six (6) major guidelines, which instruct Department attorneys handling investigations that:
- To be eligible for any cooperation credit in criminal or civil enforcement matters, corporations must provide to the Department all relevant facts about the individuals involved in corporate misconduct;
- Both criminal and civil corporate investigations should focus on individuals from the inception of the investigation;
- Criminal and civil attorneys handling corporate investigations should be in routine communication with one another;
- Absent extraordinary circumstances, no corporate resolution [of an investigation] will provide protection from criminal or civil liability for any individuals;
- Corporate cases should not be resolved without a clear plan to resolve related individual cases before the statute of limitations expires and declinations as to individuals in such cases must be memorialized; and
- 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.
Significantly, an employee’s inability to pay for breaking the law no longer means that the Department will look to punish only the corporation thought to have the “deep pocket.” Rather, the Department still may proceed against a responsible employee, if its attorneys find that the person’s misconduct is serious and actionable, and if the government has sufficient evidence to prove its case.
Going forward, companies under Department investigation should recognize immediately that conflicts may arise between themselves (and their desire to demonstrate cooperation) and their employees (who now may be less willing to cooperate with internal investigations if they view themselves at risk of prosecution and/or at risk of the corporation identifying them to the Department). Further, corporations should consider the need to seek guidance from counsel concerning whether and/or how much to disclose to the Department concerning the results of internal investigations, particularly if those investigations occurred before this substantial policy change.
The new policy applies not only to all future investigations of corporate wrongdoing but also to pending matters, to the extent the government feasibly can identify employees to pursue. Although the Department immediately implemented the policy, conducting a training conference for some of its attorneys and investigators on September 16, 2015 in Washington, D.C., it does not appear to have allocated yet the significant governmental resources that will be needed to fulfill these objectives.