On September 9, 2015, the United States Department of Justice, Office of the Deputy Attorney General issued a memorandum outlining the Department’s new approach to investigations of corporate wrongdoing.
The memorandum is the product of a working group of senior attorneys within the Department of Justice and the United States attorney community and will apply to both civil and criminal corporate investigations. It gives specific guidance to government attorneys in six (6) areas, and smart businesses will take note of the Department’s new philosophy in each.
The six (6) areas of guidance in the memorandum are as follows:
1. Increased Threshold for Eligibility for Cooperation Credit
Under this point of guidance, corporations that are under investigation and desire to receive cooperation credit as a mitigating factor must “identify all individuals involved in, or responsible for the misconduct at issue, regardless of their position, status, or seniority, and provide to the department all facts relating to that misconduct.” The memorandum specifically states that anything less than complete cooperation will not be considered a mitigating factor.
This change is important because it will increase pressure on corporations significantly and shift the burden to decipher the chain of command away from the government and onto the corporation. However, the government is not relinquishing control of the investigation either. Rather, the guidance advises government attorneys to continue to investigate any information provided by corporations, in order to ensure that it is truthful and accurate, and not attempting to minimize the behavior of any particular individual who might be held accountable.
The obligation to cooperate with the government may not even end when a settlement or plea agreement is reached. The guidance states that, to the extent such agreements are reached before investigation of individuals is completed, they should include provisions requiring continued cooperation from the company and list specific consequences for failure to do so.
2. Individual Accountability for Corporate Wrongdoing Should Be the Focus of Investigations from the Inception
The guidance advises department attorneys to focus on individuals from the beginning of any investigation of corporate misconduct, reasoning that early focus maximizes the government’s ability to investigate corporate misconduct, increases the likelihood that knowledgeable individuals will cooperate, and ultimately results in more individuals being held accountable.
Thus, corporations should remember to consider individual liability when being investigated. High ranking individuals in companies under investigation should consider securing independent legal counsel, as the corporation’s general counsel may have a conflict of interest that cannot be waived.
3. Routine Communication Between Criminal and Civil Attorneys
The guidance instructs criminal and civil government attorneys who are investigating corporate wrongdoing to be in constant and early contact in order to maximize potential remedies. According to the guidance, this includes: incarceration, fines, penalties, damages, restitution, asset seizure, forfeiture, as well as exclusion, suspension, and debarment. The guidance goes on to note that criminal attorneys who decline to prosecute should be particularly mindful that their civil counterparts may have more success because elements like intent or burden of proof that are commonly difficult in criminal cases against corporations are much easier address in civil cases.
Accordingly, corporations under criminal investigation should keep in mind that civil implications may be percolating below the surface. This concern should remain, perhaps even grow, when the criminal investigation does not result in prosecution.
4. Resolution with Corporations Shall Not Provide Protection for Individuals Absent Extraordinary Circumstances
The guidance specifically states that government attorneys should take care to preserve any causes of action against individuals for corporate wrongdoing even when resolving investigations with the corporation itself.
“Extraordinary Circumstances” may be hard to come by. The memorandum specifically requires that such circumstances, in order to support a release of individual civil or criminal liability, must be approved in writing.
5. A Documented Plan to Resolve Individual Responsibility Must Be In Place Before Corporate Resolution
The guidance states that the documented plan must address which individuals are potentially liable, describe any investigation of those individuals to date, and detail what investigation remains, along with a plan for resolving those investigations before the statute of limitations has expired. When a decision is made not to pursue individual actions after the resolution of a corporate case, the reasons for that determination must also be documented and approved in writing.
These fourth and fifth areas of guidance taken together should signal to corporations that racing to a resolution will not foreclose the possibility of individual liability. Individuals who are potentially liable for misconduct a corporation has already resolved should nonetheless consider engaging independent counsel as exposure may remain. Moreover, all parties can anticipate resolutions will take additional time and effort, and may even require additional cooperation and disclosure.
6. An Individual’s Ability to Pay is Not the Only Factor in Considering Civil Action for Corporate Misconduct
The guidance recognizes that the Department’s two goals of returning government money and holding corporate wrongdoers accountable can be in opposition, under certain circumstances. However, the guidance states that civil attorneys should not dismiss the possibility of pursuing action against individual corporate wrongdoers based solely on the fact that such individuals may not have the resources to pay a significant judgment.
Accordingly, individuals in corporations who believe they are “small fish” because they do not have big money to pay fines and penalties should think again.
In summary, the government is officially targeting individuals within corporations to be held accountable for corporate wrongdoing. Policies are being changed and procedures amended in order to maximize this effort. Any company under investigation or any individual within such a company who may be personally liable should engage an attorney as soon as possible to assist in assessing the situation and safely and effectively cooperating with the government.