Earlier this month the Department of Justice (DOJ) issued a memorandum from the Deputy Attorney General announcing the Department’s intention to pursue aggressively any individuals involved in corporate crimes.
According to the memorandum, the DOJ believes that seeking to hold individuals to account for perpetrating illegal misconduct is one of the most effective ways of combating white-collar crimes. Such accountability, the Department believes, will deter future illegal activity, incentivise change in corporate behaviour, ensure that the proper parties are held responsible and promote public trust in the justice system.
The memorandum, known as the Yates Memo, has identified six ‘key steps’ that will enable DOJ attorneys to do this.
o Corporations must provide the DOJ with all relevant facts relating to the individuals responsible for the misconduct in order to qualify for any co-operation credit
o Criminal AND civil corporate investigations should focus on individuals from the outset
o Civil and criminal attorneys handling corporate investigations should be in routine communication to notify each other of any conduct that would give rise to potential liability
o The DOJ must not agree to a corporate resolution that would protect any potentially culpable individuals from prosecution
o The DOJ must not resolve a case with a corporation without a clear plan to resolve any open investigations with individuals before the statute of limitations expires
o Civil attorneys should focus on prosecuting individuals as well as companies, taking accountability and deterrence into account in addition to the individual’s ability to pay any fine
Although positioned as a new approach, commentators have pointed out that this merely continues DOJ rhetoric and has long been part of its operating procedures in white-collar cases. It is however, a response to the criticism that the Department is more effective at prosecuting companies rather than individuals: between 2008 and 2014 only one in four DOJ corporate enforcement actions resulted in any charges against company employees.
While it has been said that this may lead to some withholding of evidence for use as a bargaining chip or to the DOJ receiving what it wants to hear, which may not necessarily be the truth, it is clear that the DOJ is expecting this approach to encourage businesses to “cough up” their miscreants.
So what will this mean globally? With the greater focus on international cooperation between prosecuting bodies, the pursuit of individuals in corporate cases is likely to have an impact beyond the US border. Businesses that come under DOJ scrutiny will need to show higher levels of co-operation. This in turn, reinforces what many companies already understand, that the best defence is a proactive approach to preventing wrongdoing. Businesses need to ensure they have a robust compliance and ethics programme in place. This should involve identifying the compliance risks, setting a clear tone from the top about expected behaviour, implementing specific policies and procedures, deploying communication and training programmes and establishing appropriate whistleblowing and investigation systems.
Such efforts must be supported at senior management level and backed up by sufficient resources. There should also be regular monitoring of implementation, with a recorded measurement system and KPIs to demonstrate the adequacy of procedures.
Published October 2015
At a debate organised by GoodCorporation at the House of Lords on 20 May 2009 Will Hutton, Vice-Chair of the Work Foundation spoke on corporate governance and corporate responsibility. Will said that companies need to have a much clearer statement…