Get With the Program: New Compliance Measures Add Personal Liability for Corporate Fraud

Welcome to the March 2023 edition of our newsletter!  In this issue, we’ll examine new efforts by the U.S Justice Department to attach personal liability of executives to corporate misdeeds.

Stricter Compliance Measures Include Individual Liability for Company Actions

Earlier this month, the DOJ announced updates to its existing compliance program meant to create a “culture of compliance” by leveraging incentives for companies to cooperate – while adding new penalties, such as withholding bonus payments, for executives who do not meet various compliance requirements.  More significantly from a corporation’s perspective, incentives have been added – such as fine reductions in the event of non-compliance — for the company to claw back compensation from executives found to have committed wrongdoing, and / or their supervisors who were responsible for detecting it.

This places corporations in a difficult position, balancing their duties to their employees, customers and investors with seeking to navigate more stringent compliance requirements.  Prevention being the best medicine, screening for any bad acts in a candidate’s past prior to hiring them is always the best move, but if fraud is detected and becomes a compliance concern, a thorough public records-driven background check is an essential complement to any internal investigations, as the results may help you understand a person’s motives or identify other context for their actions.  By demonstrating a comprehensive understanding of the situation and its principals, your company can also demonstrate a greater willingness to cooperate with an inquiry, which can bear fruit in the longer term.