Corporations facing a criminal investigation or federal prosecution are, first and foremost, concerned about minimizing risk to the corporate entity — a risk that is often mitigated through cooperation with the U.S. Department of Justice (DOJ). Cooperation may help a company avoid prosecution, forfeiture, and debarment or reduce financial penalties and the cost of monitors. However, how much cooperation there will be is inherently difficult for a corporate subject or target to gauge. This is problematic because cooperation is a significant factor prosecutors consider when making charging decisions.
Now, the DOJ is stepping up its efforts to prosecute corporate crime and is stiffening the requirements for a corporate target or subject to get credit for cooperation.
In remarks to the American Bar Association Institute on White Collar Crime on March 3, 2022, Attorney General Merrick Garland underscored the DOJ’s renewed emphasis on corporate prosecutions.
Much of Garland’s speech focused on the DOJ’s priority to prosecute individual wrongdoers “because corporations only act through individuals.” But, he also commented that the DOJ “will, of course, continue to hold companies accountable for their criminal conduct.” This comment echoes remarks made in October 2021 by Deputy Attorney General Lisa O. Monaco.
In that speech, Monaco outlined the DOJ’s enhanced policies for corporate criminal enforcement. Of special note were her comments about corporate cooperation: “To hold individuals accountable, prosecutors first need to know the cast of characters involved in any misconduct.”
These remarks acknowledge that traditional methods of investigations — interviews, grand jury subpoenas, forensic analyses, and the use of cooperating witness, undercover agents, and wiretaps — are costly and time-consuming means of building a case against an individual “bad actor” in the corporate context.
Indeed, complex corporate prosecutions can take years to investigate and involve multiples agencies, agents, analysts, and prosecutors. The corporate entity is often the easier target because of the seniority of the individuals who are under investigation or the systemic nature of the suspected criminal conduct. Consequently, the DOJ holds out the prospect of cooperation as a way to increase the efficacy of its prosecutorial efforts.
In her remarks, Monaco also announced three policies a prosecutor must use when considering a company for cooperation credit:
- First, companies must provide non-privileged material about all individuals involved in or responsible for the misconduct, regardless of their role or seniority. This is a significant change. In the past, cooperation credit was available based on disclosures by a company describing those who were “substantially involved.”
Key takeaway: This means that prosecutors, not general counsel, are evaluating criminal liability of the subjects and targets of their investigations.
- Second, Monaco directed prosecutors to consider prior misconduct of the corporate entity in the disposition of a pending prosecution. That prior conduct is not limited to actual state or federal convictions. It also includes past criminal or regulatory investigations and whether a company has “run afoul” of other regulators or DOJ components.Key takeaway: How this kind of information will be used by prosecutors is unclear. However, some companies may feel additional pressure to cooperate with the government if there is a history of regulatory issues.
- Lastly, Monaco rescinded any prior DOJ guidance indicating that independent monitors are “disfavored or the exception to the rule.” Instead, prosecutors are now free to use monitors to ensure “a company is living up to its compliance and disclosure obligations.”Key takeaway: The relationship between a company and the prosecution cannot help but influence whether, and to what extent, a monitor is imposed. This relationship is often forged during the process of cooperation with the government.
General counsel must handle a challenging set of problems when confronted with the reality of a federal investigation. Whether and how to cooperate with the government’s investigation and prosecution is merely one. An internal investigation conducted by experienced outside counsel provides situational awareness to general counsel about what, if any, misconduct has occurred. Outside counsel can also help navigate difficult waters when working with the prosecution.
Taft’s Compliance, Investigations, and White Collar Defense team includes many former federal and state prosecutors and has a depth of experience that is unique among Midwest law firms. Should you have questions about the impact of these policies on your business, please contact a member of the team or the Taft attorney with whom you regularly work.