DOJ Increases Focus on Individual Accountability in Corporate Wrongdoing

November 30, 2018

US Deputy Attorney General Rod J. Rosenstein recently announced that in every corporate investigation, the US Department of Justice will make it a top priority to pursue individuals responsible for corporate wrongdoing. This revised policy also modifies the expectations for corporate targets seeking cooperation credit in criminal and civil investigations. Cooperation credit for corporate targets of criminal investigations remains “all or nothing,” while cooperation credit will be available in degrees for corporate targets in civil investigations.

At the American Conference Institute’s 35th International Conference on the Foreign Corrupt Practices Act on November 29, US Deputy Attorney General Rod J. Rosenstein declared a revised policy concerning individual accountability in every corporate investigation—one that places “pursuing individuals responsible for wrongdoing” as a “top priority.”

The announcement comes little more than a year after the US Department of Justice (DOJ) initiated a review of its policies concerning individual accountability in corporate cases (see our September 2017 LawFlash) and laid out its bold new Foreign Corrupt Practices Act (FCPA) enforcement policy providing a “presumption” of non-prosecution for companies that self-report FCPA violations and meet other conditions, including the identification of individuals involved in the misconduct (see our November 2017 LawFlash).

At that time, DOJ was considering changes to the corporate prosecution policies articulated in former Deputy Attorney General Sally Yates’s September 2015 Memo (the Yates Memo), which set forth DOJ’s policies on investigating and prosecuting individuals suspected of involvement with corporate wrongdoing. Under the Yates Memo, DOJ attorneys were directed not to consider giving any cooperation credit to corporate targets unless those companies provided all relevant information about any individuals involved in potential misconduct.

Rosenstein’s remarks this week reemphasized DOJ’s focus on holding individuals accountable for corporate wrongdoing, but modified the expectations for corporate targets seeking cooperation credit in criminal and civil investigations.

Criminal Investigations

As to corporate targets of criminal investigations, Rosenstein reiterated that “[t]he most effective deterrent to corporate criminal misconduct is identifying and punishing the people who committed the crimes.” He stated that, at times, corporate criminal prosecutions do not have the intended deterrent impact because they “often penalize innocent employees and shareholders without effectively punishing the human beings responsible for making corrupt decisions.” To that end, Rosenstein reaffirmed that “a corporate resolution should not protect individuals from criminal liability” except in “extraordinary circumstances.”

To receive cooperation credit in criminal cases, Rosenstein made clear that corporations must undertake “good faith” efforts to identify “every individual who was substantially involved in or responsible for the criminal conduct.” Otherwise, Rosenstein cautioned, DOJ “will not award any cooperation credit.”

This is distinct from the position outlined in the Yates Memo that requires companies to identify every employee involved in alleged corporate misconduct regardless of relative culpability rather than “all individuals substantially involved in” the alleged misconduct. Rosenstein acknowledged that, in some circumstances, “it is not practical” to require a corporate target to “identify every employee who played any role in the [target] conduct,” especially if the alleged misconduct occurred over a long period of time and the company and government “want to resolve the matter even though they disagree about the scope of the misconduct.”

Cooperation credit for corporate targets of criminal investigations, therefore, remains “all or nothing.” But the eligibility threshold for such credit has shifted in light of Rosenstein’s recognition that DOJ’s “policies need to work in the real world of limited investigative resources.”

Civil Investigations

Notably, corporate targets of civil investigations do not face the same “binary” options for cooperation credit following Rosenstein’s announcement.

As Rosenstein put it, “[t]he primary goal of affirmative civil enforcement cases is to recover money.” That makes civil investigations “different” from their criminal counterparts.

Rosenstein explained that DOJ now accounts for this difference by allowing gradations in the amount of cooperation credit a corporate target of a civil investigation may receive.

For corporate civil defendants to earn any credit, a company “must identify all wrongdoing by senior officials, including members of senior management or the board of directors.” Rosenstein identified this as the most important aspect of the policy and emphasized that “[c]ompanies caught hiding misconduct by senior leaders . . . will not be eligible for any credit.” To receive maximum credit, companies must “identify every individual person who was substantially involved in or responsible for the misconduct.” But, unlike their colleagues in the criminal section, civil attorneys can offer “some credit” if a corporation’s efforts fall short of that standard, provided the corporate target still “meaningfully assist[s] the government’s civil investigation.”

Therefore, Rosenstein has restored “some of the discretion that civil attorneys traditionally exercised” to offer some credit to a corporate civil defendant, “even if the company does not qualify for maximum credit.” Rosenstein stated that, without this discretion, corporate resolutions are delayed and attorneys potentially pursue civil litigation that is “unlikely to yield any benefit.” In Rosenstein’s view, the False Claims Act defendant who makes a voluntary disclosure and provides valuable assistance to the government should receive some level of cooperation credit, even when the company is “unwilling to stipulate about which non-managerial employees are culpable [or] eager to resolve the case without conducting a costly investigation to identify every individual who might face civil liability in theory, but in reality would not be sued personally” by the government.

Rosenstein described the changes he announced as “commonsense reforms” that would enable civil attorneys to “accept settlements that remedy the harm and deter future violations, so they can move on to other important cases.” He did so while noting his preference for “realistic internal guidance that allows [DOJ] employees to reach just results while following the policy in good faith.” And he commented that those reforms respond to the “practical implications” of DOJ’s prior policies, which would “sometimes help—but sometimes inhibit—efforts to achieve [DOJ’s] goals.”

The remainder of Rosenstein’s comments addressed DOJ’s success in investigating and prosecuting cases under the FCPA, as well as its cooperative efforts across domestic and international agencies regarding the same. Those comments echoed Deputy Assistant Attorney General Matthew Miner’s September 2018 comments at the Global Investigations Review New York event (see our September 2018 LawFlash).

Read Deputy Attorney General Rosenstein’s full remarks.


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