In a rather dramatic turn, the United States Department of Justice ("DOJ") recently released a new memorandum outlining policies instructing prosecutors to focus their efforts to secure evidence against individuals, as opposed to their corporate employers responsible for corporate wrongdoing. The memo comes in the face of criticism from a number of quarters that focusing enforcement against large corporations with deep pockets does little in terms of general deterrence in the marketplace, sending a clear signal that in conducting corporate investigations the DOJ is willing to pursue charges against both individual and corporate defendants, and emphasizing to leaders and corporate decision makers that wrongdoers will held accountable.
Six Steps To Pursue Individuals Engaged In Corporate Misconduct.
The memorandum, which also sets out broader policies for federal prosecutors and enforcement attorneys to follow, establishes six guidelines:
- To be eligible for any cooperation credit, corporations must provide to the Department all relevant facts about the individuals involved in corporate misconduct – Eligibility for any cooperation credit requires the company to identify all individuals involved in or responsible for the misconduct under investigation.
- Both criminal and civil investigations should focus on individuals from the inception of the investigation – The focus on individuals is intended to uncover corporate misconduct, obtain information against more senior individuals, and increase the likelihood of charges being laid not only against the corporation but also culpable individuals.
- Criminal and civil attorneys handling corporate investigations should be in routine communication with one another – Increased cooperation intended to allow the DOJ to more fully consider an array of potential remedies to promote the most appropriate resolution in each case.
- Absent extraordinary circumstances, no corporate resolution will provide protection from criminal or civil liability for any individuals – The DOJ when settling matters with a corporate defendant will preserve its ability to hold accountable culpable individuals through potential criminal and civil actions.
- Corporate cases should not be resolved without a clear plan to resolve related individual cases before the statute of limitations expires and declinations as to individuals in such cases must be memorialized – Individual investigations that have not concluded before the resolution of the corporate case will now be subject to an investigation plan.
- 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 – Whether a culpable individual has the ability to pay has been explicitly rejected by the DOJ as a grounds for not pursuing civil actions.
Implications for Canadian Corporations Operating In The United States.
The memorandum reflects an increasing trend toward enforcement activities against individuals in an effort to curtail illicit corporate activity.
The new guidelines also impose a significant burden on the corporate side, particularly in essentially requiring companies to provide information on individual wrongdoing in order to "cooperate" with regulators, and precluding corporate resolutions from providing protection for individuals. While corporations should always be live to the fact that their interests may not always align with those of individual executives in any regulatory activity, the new guidelines deepen the divide by creating certain scenarios where, in order to protect their own interests, companies are essentially forced to provide information on the wrongdoing of their employees.
In light of this, companies are reminded that affected employees may need to retain independent legal counsel at the outset of a relevant investigation if individual wrongdoing could be alleged. Investigations should be undertaken independent of implicated personnel in order to ensure that parties with adverse interests are not directly participating, and to the degree that information is shared between counsel, companies should ensure this is done under a common interest agreement so as to maintain privilege.
Companies should ensure to undertake thorough internal investigations into allegations of wrongdoing to ensure they have as much information as the authorities who are pursuing them or their employees. While it is unclear at this point what is necessary to satisfy the "all relevant facts" threshold to be eligible for any cooperation credit, the guidelines arguably impose an increased burden on companies to fully and independently investigate potential enforcement issues.
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