After a year of conjecture about the Trump administration’s approach to white-collar crime, the Justice Department has reinforced speculation of a relatively hands-off approach to corporate prosecutions. While asserting that it will hold individuals accountable for corporate criminal behavior, Justice Department leaders have stated that they will not “employ the hammer of criminal enforcement to extract unfair settlements” from corporate entities. In pursuit of that strategy, at the end of last year, federal prosecutors announced an initiative for leniency in Foreign Corrupt Practices Act cases where a corporation voluntarily discloses conduct in violation of the FCPA and cooperates with the government. Recently, the government displayed an intention to apply this policy outside of the FCPA context as well.

Rather than just being a gift to big business, the Justice Department’s approach to the investigation and prosecution of criminal wrongdoing by corporate entities makes sense. First, corporations cannot go to jail. Second, numerous regulations and enforcement avenues exist to sufficiently insure that corporate entities that engage in wrongdoing are punished. Accordingly, Justice Department resources and manpower need not always be expended on the pursuit of a criminal case against a corporation, particularly given that a criminal conviction more often punishes the shareholders and innocent employees.

The idea that individuals and corporate entities should be held liable for misconduct in different ways is embraced by some major industrialized countries outside the United States. In Germany, for example, criminal liability, which requires “fault” on the part of the offender, extends only to individuals. Although criminal liability cannot exist on the part of a corporate entity itself, companies do face administrative liability. Although this approach is not without its critics, it serves as an example of a system in which resources are spent indicting and prosecuting individual actors rather than business entities and holding companies accountable in alternative ways.

FCPA Corporate Enforcement Policy – A Potential Model for a Broader Approach

The FCPA Corporate Enforcement Policy creates a presumption that companies will receive a declination of prosecution for misconduct if they voluntarily self-disclose misconduct and cooperate in a timely manner. The policy was given the imprimatur of permanence in FCPA cases by being incorporated into the United States Attorneys’ Manual at the end of last year. The government’s reliance on the policy in the recent resolution of a high-profile securities trading case against a large financial institution signals that the policy’s dictates also serve as non-binding guidance to federal prosecutors in non-FCPA cases. Consequently, companies faced with all types of potential federal criminal matters should be familiar with its process so they may fashion a similar approach.

Under the FCPA Corporate Enforcement Policy, no guarantee of non-prosecution exists. The government retains significant discretion in making this decision even where the policy’s criteria appear to have been met. The language of the policy leaves significant room for interpretation. The policy requires “timely and appropriate remediation” as well as the “implementation of an effective compliance and ethics program” and “appropriate discipline of employees” (emphasis added). How these terms are defined by the government may not be clear until the policy has been implemented and applied in multiple cases. Further, when the policy’s dictates have been satisfied, federal prosecutors may opt not to exercise the presumption of non-prosecution if they determine that “aggravating circumstances,” such as participation by management, excessive profits, or pervasive misconduct, exist.

The policy requires the company to pay disgorgement, forfeiture, and/or restitution in order to qualify for a non-prosecution. Therefore, corporations may continue to face significant financial penalties and legal fees even if they are not charged criminally. Finally, the Justice Department’s policy, which now seemingly extends beyond FCPA cases to encompass all potential criminal cases, does not extend to possible action from the Securities and Exchange Commission or other government regulators.