In a speech last week before the New York City Bar White Collar Crime Institute, Rod Rosenstein, Deputy Attorney General of the United States, announced a new Department of Justice policy to better coordinate among law enforcement and regulatory agencies the potential assessment of penalties against corporate wrong-doers in order to minimize “piling on.”

Mr. Rosenstein observed that, in significantly regulated industries there is a risk that a corporation “may be accountable to multiple regulatory bodies [creating] …a risk of repeated punishments that may exceed what is necessary to rectify the harm and deter future violations.” Moreover, said Mr. Rosenstein, “piling on” can deny a company the benefit of certainty that ordinarily is derived from a complete settlement. This uncertainty harms employees, customers and investors, noted Mr. Rosenstein, and raises questions whether  expending additional resources for “additional enforcement against an old scheme is more valuable than fighting a new one.”

Under the DOJ’s new policy:

  • criminal enforcement should not be used for purposes unrelated to the investigation and prosecution of a possible crime. For example, said Mr. Rosenstein, the threat of criminal prosecution should not be used to encourage a corporation to pay a higher civil fine. This, in itself, he said is not a new policy; “it is a reminder of and commitment to principles of fairness and rule of law;”
  • within the DOJ, different sections are directed to better coordinate to effectuate an overall “equitable result;”
  • where possible, DOJ attorneys should coordinate with other federal, state, local and foreign law enforcement and regulatory agencies to resolve matters with a company involving the same conduct; and
  • factors that should guide the DOJ in determining whether penalties might be duplicative are the seriousness of the wrongdoing, the risk of delay in coming to a resolution, statutory directives regarding penalties, and the “adequacy and timeliness of a company’s disclosures and cooperation with the Department.” Mr. Rosenstein said that sometimes penalties that appear to be “duplicative” are in fact “essential to achieve justice and protect the public." 

​The DOJ's new policy on corporate resolution penalties was officially included in the U.S. Attorneys' Manual as of May 9. (Click here to access the Manual; see Sections 1-12.100 and 9-28.1200.)

Legal Weeds: Last October, James McDonald the Director of Enforcement for the Commodity Futures Trading Commission, announced that potential wrongdoers who voluntarily self-report their violations; fully cooperate in any subsequent CFTC investigation; and fix the cause of their wrongdoing to prevent a re-occurrence will receive “substantial benefits” in the form of significantly lesser sanctions in any enforcement proceeding and “in truly extraordinary circumstances,” no prosecution at all. (Click here for details in the article, “New Math: Come Forward + Come Clean + Remediate = Substantial Settlement Benefits Says CFTC Enforcement Chief” in the October 1, 2017 edition of Bridging the Week.)

In recent settlements against Deutsche Bank AG and its wholly owned subsidiary Deutsche Bank Securities Inc., as well as UBS AG, the CFTC may have given an indication of how the CFTC’s new settlement math may work in practice. There, where both the Deutsche Bank entities and UBS appear to have uncovered incidents of spoofing within their organizations, both organizations appear to have fully cooperated with the CFTC’s investigation. However, UBS self-disclosed its issues prior to the CFTC discovering them. In the end, UBS paid a fine of US $15 million for its employees’ spoofing activities, while the Deutsche Bank entities paid $30 million for commensurate conduct. It appears that all things being equal, in this circumstance, pro-active, voluntary disclosure of potential wrongdoing was worth 50% off a settlement that was already likely reduced for full cooperation. (Click here for further details and analysis of these enforcement actions in the article, “CFTC Names Four Banking Organization Companies, a Trading Software Design Company and Six Individuals in Spoofing-Related Cases; the Same Six Individuals Criminally Charged Plus Two More” in the February 5, 2018 edition of Bridging the Week.)