On September 9, 2015, the Deputy Attorney General for the US Department of Justice (DOJ) issued new policy guidance to federal prosecutors identifying steps to prioritize and strengthen DOJ’s prosecution of individuals for corporate wrongdoing.  For companies facing government investigations – and their directors, officers, and employees – the new guidelines have significant implications.

What DOJ Said

The DOJ memo set forth six steps designed to strengthen DOJ’s efforts to prosecute individuals for corporate crime:

  • To be eligible for any cooperation credit, corporations must identify, and provide all relevant facts about, all individuals involved in corporate misconduct.
  • Prosecutors are required to focus on individuals from the inception of their investigations.
  • Other than in antitrust cases, no corporate resolution will protect individuals from criminal or civil liability absent extraordinary circumstances.
  • Prosecutors may not resolve corporate cases without a clear plan to resolve related individual cases, and declinations as to individuals must be approved by a high-level official.
  • Prosecutors and civil attorneys handling corporate investigations should be in routine communication with one another.
  • 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 the individual’s ability to pay.

According to DOJ, these steps – some of which are new, and some of which are not – reflect an effort to “fully leverage [DOJ] resources to identify culpable individuals at all levels in corporate cases” and to “ensure that all [DOJ] attorneys . . . are consistent in our best efforts to hold to account the individuals responsible for illegal corporate conduct.”  The full memo can be read here.

What It Means

The skilled and aggressive DOJ line prosecutors with whom we deal on a regular basis have never lacked the will, the resources, or the tools to prosecute corporate officers for criminal misconduct.  Corporations often plead guilty to crimes for business reasons in cases where no individual could be successfully prosecuted in a contested proceeding.  The generality of the new guidelines could be viewed as an effort to appease those who have criticized DOJ for not holding individuals accountable for the 2008 financial crisis or prosecuting more individuals in connection with corporate settlements.  However, if line prosecutors actually follow through and implement these new steps, ironically, the policies could well lead to a decrease in corporate criminal resolutions rather than an increase in individual prosecutions.

First, if the new guidelines forbid corporate criminal resolutions without accompanying individual prosecutions in all but rare situations approved by high-level DOJ officials, the end result will likely be to reduce the number of corporate criminal resolutions.  In a normal corporate criminal case, absent an attenuated theory of liability that bases criminal intent on a combination of actions and knowledge by diffuse corporate officers, a corporation can only be criminally liable if one or more individual corporate employees committed a crime attributable to the company.  Thus, if there is sufficient evidence to prove a corporation guilty beyond a reasonable doubt, there should be sufficient evidence to successfully prosecute individuals as well.  The reality, however, is that corporations often plead guilty for business reasons in cases with borderline, if any, evidence of individual criminal wrongdoing.  Prosecutors do not like to lose cases and as a general matter are unlikely to prosecute individuals without strong evidence of individual culpability.  Therefore, if prosecutors can no longer settle with a corporation alone, the number of corporate criminal resolutions should go down.  Moreover, armed with the knowledge that DOJ cannot settle a corporate case without prosecuting individuals, the new policy may also embolden corporations to resist settlement in borderline cases.

Second, if corporations must provide DOJ with all facts related to individual misconduct before receiving any cooperation credit, more corporations will choose to defend themselves.  Under existing policy, whether a corporation is charged or receives credit for cooperation already depends on its willingness to make “timely and voluntary disclosure of wrongdoing” and to “provide relevant information and evidence and identify relevant actors within and outside the corporation, including senior executives.”  USAM § 9-28.700.  Corporations have not been shielding guilty employees from government scrutiny under this policy.  On the contrary, corporations routinely conduct thorough internal investigations and provide the results of those investigations to the government in exchange for cooperation credit. 

But now, DOJ policy will be “all or nothing” – without identifying culpable individuals, companies will receive no credit for cooperation.  In our view, requiring corporations also to “name names” and make judgments about culpability is a bad idea.  Corporations should not be pressured to throw employees under the bus in order to get credit for cooperation.  It is the job of the prosecutor to make those culpability determinations based on all available information, including facts disclosed by a corporation attempting to cooperate.  To require corporations to make judgments about who is “responsible” for corporate misconduct goes a step too far.  Corporations have a natural and laudable desire to protect their employees from criminal prosecution, particularly in white-collar cases where the issues are often not black and white.  One way corporations have done so historically is to accept corporate criminal responsibility in order to avoid prosecutions of individual employees.  If the new policy prevents corporations from receiving any cooperation credit without naming all individual “wrongdoers,” many corporations may choose to defend themselves more vigorously in criminal investigations and resist negotiated resolutions.

Further, requiring corporations to provide “all relevant facts about individual misconduct” before receiving any credit has another potentially significant consequence:  it will make it difficult for corporations to do anything less than a full-scale investigation if they wish to cooperate.  A corporation that provides something less than “all relevant facts” – a highly subjective concept – could receive nothing for its attempted cooperation.  This mandate will pressure corporations to undertake more thorough investigations and disclosures or decide not to cooperate at all.  It may also reduce the number of voluntary disclosures to law enforcement as many companies will find it more attractive to investigate and remediate internally.

Finally, this policy may complicate the relationship between corporations and their employees and executives, as it places individuals more at risk.  With the knowledge the company must name individual wrongdoers to be eligible for cooperation credit, more corporate employees are likely to decline requests for interviews or seek individual counsel at an earlier stage of an internal investigation.  This policy will make it harder for corporations to conduct the kind of thorough internal investigations on which DOJ has come to rely so heavily. 


Time will tell whether this new policy pronouncement will have an impact in the courtroom, but it will have an immediate impact in the boardroom, as it affects the way corporations and their counsel approach investigations of potential wrongdoing.