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DOJ’s Focus on Prosecution of White Collar Criminals

Well, we all know the familiar repetitive life experiences from the movie Groundhog Day, or as I like to say it, Déjà vu All Over Again.  DOJ emphasizes over and over the importance of prosecuting individuals for criminal conduct as the key means to deter future misconduct and ensure corporate accountability. 

Corporations argue that imposing significant fines against them only punishes shareholders and other stakeholders who had nothing to do with the misconduct.  To avoid this skewed enforcement system, DOJ argues that aggressively prosecuting individuals is the most effective way to deter future misconduct and deter like-minded individuals from engaging in misconduct.

In a recent speech, Attorney General Garland re-committed to this approach in prosecuting white collar crime, citing the impact that fraud, theft, corruption, bribery, environmental crime, market manipulation and anticompetitive agreements on free and fair markets.  As noted by AG Garland, “Corporate crime weakens our economic institutions by undermining public trust in the fairness of those institutions.”

AG Garland noted that DOJ will continue to hold companies accountable for their criminal conduct.  But he explained that “I have made it clear that [DOJ’s] first priority in corporate criminal cases is to prosecute the individuals who commit and profit from corporate malfeasance. It is our first priority because corporations only act through individuals.  It is our first priority because penalties imposed on individual wrongdoers are felt by those wrongdoers, rather than by shareholders or inanimate organizations.”

DOJ’s performance over the last 20 years in this area has been questionable at best. As I have noted on numerous occasions, DOJ’s failure to prosecute individuals arising from the 2008 financial crisis, and subsequent corporate scandals (e.g. GM safety scandal, Boeing 737 MAX safety scandal, BP Deepwater Horizon) has reflected poorly on our system of justice.  The low point of this process may have been the Yates Memorandum, which was a fancy restatement of what every prosecutor should have already been doing – identifying culpable individuals and building criminal cases against them.

AG Garland’s speech brings us full circle again – and now we have to wait and see if anything will really be any different.  The bar is relatively low and this should not be a real issue.

Prosecutors have relied on corporate counsel to conduct and report on major internal investigations. By outsourcing these important investigations, prosecutors no longer do the groundwork and step-by-step investigation needed to build a criminal case against individuals.  It takes hard work, requiring prosecutors to build cases, to secure cooperation of individuals and develop a case against senior level executives.

In recognition of this reality, AG Garland commented on the difficulty and resource-intensive effort needed to prosecute individuals rather than accepting big-dollar corporate dispositions.  To implement this approach, AG Garland noted that DOJ is seeking budget increase to increase corporate criminal prosecutions.

We will see – the proof will be in the results.

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