DOJ’s New White-Collar Policy Directs Prosecutors to Focus on Individual Accountability

According to the Department, the new policy guidance will serve as a blueprint for prosecutors across the nation to hold individuals accountable for corporate crimes, in addition to continuing to pursue large corporate penalties. It will also erase some barriers to prosecuting officers and employees, thus injecting a new dynamic into high-profile corporate investigations.

Cooperation: All or Nothing

To be eligible for any cooperation credit, corporations must provide to the Department all relevant facts about the individuals involved in corporate misconduct.

Until now, companies involved in government investigations could cooperate with the government by voluntarily disclosing improper corporate practices without identifying individuals engaged in the wrongdoing and the extent of their misconduct. While such companies were not entitled to full credit for cooperation, they could nonetheless receive partial credit, potentially enough to avoid indictment, based on the extent of their investigative actions and disclosures. Effective last week, however, companies will not be able to receive credit for cooperating with the government unless they:

• Investigate who is responsible for the alleged wrongdoing;
• Identify such employees; and
• Turn over evidence against them “regardless of their position, status or seniority.”

A company’s willingness to identify all culpable individuals will be a threshold requirement, in addition to the usual factors laid out in the federal Sentencing Guidelines and the U.S. Attorney’s Manual, when the Department weighs whether to charge the company with federal crimes and the extent of the penalties that it will seek. This institutional policy shift is perhaps the most significant component of the new guidance, as credit for cooperation is a vital consideration for firms under government scrutiny. This credit can potentially save companies billions in fines, and may mean the difference between a civil settlement and a criminal charge. This heightened standard of complete cooperation as to individuals applies to both civil and criminal investigations.

Absent extraordinary circumstances, no corporate resolution will provide protection from criminal or civil liability for individuals.

The newly released memorandum provides that if the Department reaches a resolution with a company before resolving matters with responsible individuals, the Department should retain its ability to pursue these individuals. Thus, absent extraordinary circumstances, government attorneys are now directed not to agree to a corporate resolution that includes an agreement to dismiss charges against, or provide immunity for, individual officers or employees. Similarly, in a civil context and absent extraordinary circumstances, government attorneys are instructed not to release claims related to the liability of individuals based on corporate settlement releases.

Further, the policy guidance provides that any corporate plea agreement and settlement agreement will include a provision requiring the company to continue to provide relevant information to the government about any individuals implicated in the wrongdoing. According to the Department, a company’s failure to continue cooperating against individual employees will be considered a material breach of the agreement and grounds for revocation or stipulated penalties.

A Focus on Individual Prosecution

Both criminal and civil corporate investigations will focus on individuals from the inception of the investigation.

The new policy guidance further directs prosecutors to focus on individual employees from the start of an investigation, regardless of whether the investigation begins in the criminal or civil context. According to the Department, by focusing the investigation on individual employees, government attorneys can increase the likelihood that individuals with knowledge of the corporate misconduct will cooperate with the investigation and provide information against officers and employees higher up the corporate hierarchy.

Criminal and civil attorneys handling corporate investigations will be in routine communication with one another.

Under the Department’s new policy, civil and criminal government attorneys are directed to separate any corporate and individual evidence that they collect in the process of their corporate investigation and make early assessments as to individual culpability. Indeed, according to the policy guidance, if civil government attorneys identify individuals during their investigation that should be subject to criminal inquiry, the attorneys will be expected promptly to refer the matter to criminal prosecutors, regardless of the current status of the civil corporate investigation. Similarly, if the evidence collected is not enough to warrant criminal prosecution, criminal attorneys handling corporate investigations are directed to refer matters to civil attorneys as early as possible to explore potential civil liability.

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