In a March report titled “Declining Corporate Prosecutions”, Brandon Garrett, a law professor at Duke University, warned that corporate enforcement has taken a hit under the Trump administration and that individual prosecutions are also suffering.
Garrett’s report argued that a 2015 policy by former deputy attorney general Sally Yates, which encouraged individual accountability, was ineffective. Instead, the report said that individuals committing crimes within companies have increasingly been let off the hook in recent years. It gets worse, the report said, as the memo has since been softened under the Trump administration. In November, the US Department of Justice relaxed the Yates Memo, by requiring companies to turn over information only on those “substantially involved in” criminal conduct, rather any individual even partially tied to the scheme.
As a result, Garrett told GIR in an interview, he remains unconvinced by the government’s claims that it’s hotly pursuing white-collar criminals.
The Yates Memo flop
In one of his last speeches as deputy attorney general in March, Rod Rosenstein said that the goal of criminal enforcement should not be to “set a new record each year for the largest cheque extracted from shareholders”, but rather to pursue individuals. Rosenstein said critics who think the Justice Department is going soft on corporate crime “completely miss the point”.
However, in an interview with GIR, Garrett says that if prioritising individual accountability is the government’s goal, it hasn’t been successful.
Garrett laid out statistics in his report to demonstrate that individual prosecutions are slowing down.
His report cited that from 2001 to 2014, out of 306 deferred prosecution and non-prosecution agreements, 104 companies had officers or employees prosecuted. In total, 414 individuals from those companies were prosecuted.
Post-Yates memo, however, the report shows the numbers are declining. Out of 191 deferred and non-prosecution agreements from 2015 to 2018, there have been 30 agreements in which individuals were prosecuted alongside the firm. In total, only 59 individuals were charged accompanying those agreements.
In an interview, Garrett highlighted cases where he believes individuals have unfairly escaped prosecution. “Why hasn’t anyone been charged at Wells Fargo?” he exclaimed, referring generally to the banking giant, which has faced a long list of government investigations and scandals.
In March, critics including Democratic Senator Elizabeth Warren called for authorities to investigate Wells Fargo’s former CEO Tim Sloan for his alleged role in a series of “scams”. Sloan stepped down from his role in March, reportedly stating that the departure wasn’t related to any “newly discovered issues” but that it would be best for the company. The senator and 2020 presidential candidate has since proposed legislation that would make it easier to charge and jail executives for corporate wrongdoing.
Management may think “why should we be worried when there’s no cop on the beat?” Garrett said in an interview.
The government hasn’t shied away from the fact that its priorities have shifted to lower-level crimes under the Trump administration, Garrett emphasised in the interview. “That’s why it matters who the president and the attorney general are – priorities can change,” he told GIR.
He argued in his report that the bold focus on bringing large quantities of individual cases relating to immigration, drugs and violence “may have made it more difficult to muster resources for resource intensive white-collar and corporate matters”.
“Anecdotally, it [the DOJ] just doesn’t have the bandwidth to handle all of these complex cases,” Garrett told GIR, emphasising that lower-level crimes are clogging up the workload and resources of federal prosecutors when they could be handled by state level prosecutors.
But Garrett also said that one well-resourced arm of the Justice Department in Washington, DC, the Foreign Corrupt Practices Act unit, has been relatively immune from the enforcement decline. Practitioners agree that foreign bribery enforcement hasn’t changed significantlyunder Trump, even though the president previously said it is “a horrible law and it should be changed”.
The FCPA unit has about 30 prosecutors, who are teamed up with approximately 30 dedicated agents at the FBI. Typically, in white-collar cases FBI agents are more scarce. The FBI added a new international corruption squad in Miami in March by re-allocating its resources from the team in Los Angeles.
The FCPA unit has had a relatively good record on individual prosecutions lately. While New Jersey-based Cognizant Technology Solutions received a declination in February, its former president and chief legal officer were charged for their alleged roles in a scheme to bribe officials in India; both executives deny wrongdoing. The DOJ also charged two former Goldman Sachs bankers, Tim Leissner and Roger Ng, over a foreign bribery scheme in relation to the multi-billion dollar scandal at Malaysia’s development fund 1MDB. Leissner has pleaded guilty while Ng has yet to travel to the US to address the charges.
This article was originally published on Global Investigations Review, the leading publication for competition law and regulation insight, intelligence and news. Subscribe now
