Corporations can only commit crimes through flesh-and-blood people.  It’s only fair that

the people who are responsible for committing those crimes be held accountable.

Sally Q. Yates, Deputy Attorney General

The U.S. Department of Justice (DOJ) recently announced new rules tasking all department attorneys who investigate corporate wrongdoing to maintain a focus on the responsible individuals, not just on the corporations themselves.

“Corporate misconduct isn’t all that different from everything else DOJ investigates and prosecutes. Crime is crime. And it is our obligation at the Justice Department to ensure that we are holding lawbreakers accountable regardless of whether they commit their crimes on the street corner or in the boardroom. In the white-collar context, that means pursuing not just corporate entities, but also the individuals through which these corporations act,” said Sally Yates, Deputy Attorney General of the United States and author of a DOJ memorandum on the subject (Apuzzo and Protess, 2015).

In remarks at the New York University School of Law, she acknowledged the challenges the department faces in pursuing fraud cases against individuals, especially high-level executives who are, she said “often insulated from the day-to-day activity in which the misconduct occurs.”

Therefore, she said, the DOJ, in its recent memorandum, announced six specific steps it would take to hold individual corporate wrongdoers accountable (Yates, 2015).

1. To be eligible for any cooperation credit, corporations must provide to the Department all relevant facts about the individuals involved in corporate misconduct.

2. Both 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, no corporate resolution will provide protection from criminal or civil liability for any individuals.

5. 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.

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.

There is some question about exactly what impact the new rules will have and how corporations and their in-house attorneys will respond under the new guidelines when faced with a DOJ fraud investigation.

Nonetheless, corporate ethics and compliance officers and attorneys have been given notice. “We have revised our policy guidance to require that if a company wants any credit for cooperation, any credit at all,” said Yates in her NYU remarks, “it must identify all individuals involved in the wrongdoing, regardless of their position, status or seniority in the company and provide all relevant facts about their misconduct. It’s all or nothing. No more picking and choosing what gets disclosed. No more partial credit for cooperation that doesn’t include information about individuals.”

Ethical Advocate provides comprehensive ethics and compliance solutions, including confidential and anonymous hotlines and training on fraud awareness, business ethics, harassment and discrimination, and more. Contact us for more information.

References:

Apuzzo, Matt, and Ben Protess. “Justice Department Sets Sights on Wall Street Executives,” New York Times, September 9, 2015. http://www.nytimes.com/2015/09/10/us/politics/new-justice-dept-rules-aimed-at-prosecuting-corporate-executives.html

Yates, Sally Quillian. “Deputy Attorney General Sally Quillian Yates Delivers Remarks at New York University School of Law Announcing New Policy on Individual Liability in Matters of Corporate Wrongdoing,”September 10, 2015. http://www.justice.gov/opa/speech/deputy-attorney-general-sally-quillian-yates-delivers-remarks-new-york-university-school

U.S. Department of Justice. “Individual Accountability for Corporate Wrongdoing,” (memorandum), September 9, 2015. http://www.justice.gov/dag/file/769036/download