DOJ Provides New Guidance to Prosecutors on “Individual Accountability for Corporate Wrongdoing”

On September 9, 2015, Deputy Attorney General Sally Quillan Yates issued a memo to all of DOJ regarding individual accountability for corporate wrongdoing.  It’s been a heavy issue for years – that executives in companies where frauds or misconduct have occurred don’t seem to get prosecuted – and according to this memo, DOJ formed a “working group of senior attorneys from Department components and the United States Attorney community with significant experience in this area” to examine “how the Department approaches corporate investigations, and identified areas in which it can amend its policies and practices in order to most effectively pursue the individuals responsible for corporate wrongs.”  This particular memo was stated as being a product of that working group.

I suppose that many may take this as a long-awaited admission that DOJ wasn’t focusing on individuals enough in corporate fraud matters (criminal and civil).  I don’t know that I believe that to be the case, but I do find it refreshing to see greater emphasis placed on holding individuals accountable.  Personally, when I was an FBI Agent, I was much more interested in putting people in jail than seeing my cases resolved with a settlement agreement of some sort.  We always pursued the people behind the crimes.  But like I said, the statistics and data do seem to indicate that some greater emphasis was needed in this area.

I haven’t analyzed the memo yet and may post some thoughts about it after I do so.  Though I am guessing that many will be doing so very soon, probably better than I, and I look forward to reading their thoughts.  Some of the repercussions that this memo will create are obvious, such as much more intense internal corporate investigations (which the external lawyers, compliance consultants and forensic accountants will welcome), while others are more subtle (e.g. how this will affect disclosures and negotiations).

Anyway, with no further commentary from me, here are the six (6) “key steps” that this memo says will provide guidance to “strengthen our pursuit of individual corporate wrongdoing“:

  1. In order to qualify for any cooperation credit, corporations must provide to the Department all relevant facts relating to the individuals responsible for the misconduct;
  2. Criminal and civil corporate investigations should focus on individuals from the inception of the investigation;
  3. Criminal and civil attorneys handling corporate investigations should be in routine communication with one another;
  4. Absent extraordinary circumstances or approved departmental policy, the Department will not release culpable individuals from civil or criminal liability when resolving a matter with a corporation;
  5. Department attorneys should not resolve matters with a corporation without a clear plan to resolve related individual cases, and should memorialize any declinations as to individuals in such cases; and
  6. 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 that individual’s ability to pay.

Here’s a copy of the Memo: DOJ Memo – Individual Accountability for Corporate Wrongdoing – Sept 2015 – I suppose it will become referred to eventually as the “Yates Memo”.

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The Fraud Guy

John has over 24 years of fraud investigations, forensic accounting, corporate compliance & ethics, and audit experience. He has applied his extensive experience in these areas across a wide array of areas and industries, frequently assisting counsel, government agencies and companies with internal corporate investigations and other matters arising from alleged fraud or misconduct. John is a thought leader and expert on Corporate Monitors/Compliance Monitors, a practice area involving the imposition of an independent third party by a gov't agency or department upon a corporation to verify that corporation’s compliance with the terms of a settlement agreement. John has previously served in a leadership role in a federal Monitorship and was involved in four other federal monitorships: two as the named Monitor, one as the "Independent Business Ethics Program Evaluator" and the other in support of the named Monitor. In these roles, John has reported to the Department of Justice, the Department of Interior, the Department of Transportation, the Small Business Administration, the Federal Highway Administration and the Massachusetts Department of Transportation. His practical experience as a Corporate Monitor and extensive knowledge in this area is currently being applied to the development of formalized Standards for Corporate Monitors, through John's Membership on the Task Force on Corporate Monitor Standards of the American Bar Association. John is a frequently sought speaker on the topic and has provided practical advice, ideas and strategies to lawyers, government officials, and corporate executives involved in such matters, as well as newly appointed Corporate Monitors. Prior to Artifice, John spent over 5 years as a leader in the fraud investigations and forensic accounting practice of a large publicly traded international financial consulting firm. Before that, he served for 10 years as an FBI Agent, specializing in complex fraud investigations.

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