Justice Department Increases Efforts to Hold Corporate Executives Accountable
September 2015
IN THIS ISSUE
— New Rules of the Road: Justice Department Pushes Companies to Police Their Own
— How to Respond to New Guidelines
GREETINGS!
Welcome to the September edition of our newsletter! In this issue, we’ll examine the U.S. Justice Department’s recent policy attempting to hold corporate executives accountable for fraud, and what you and your clients can do about it.
NEW RULES OF THE ROAD: JUSTICE DEPARTMENT PUSHES COMPANIES TO POLICE THEIR OWN
Since the financial crisis of 2007-2008, numerous banks and other investment entities have been fined and otherwise sanctioned, but one common complaint has arisen: few, if any, senior executives were criminally prosecuted for conduct that contributed to the crisis. Nearly a decade later, new policies may be changing that circumstance, to some degree.
Earlier in September 2015, the Justice Department issued a memorandum titled “individual accountability for corporate wrongdoing.” In it, the department acknowledged the challenges of holding individuals accountable in large organizations, where responsibilities are decentralized by design. The memorandum also states that to be eligible for any “cooperation credit,” the company must provide “all relevant facts of material misconduct.” This emphasis places the onus on the company, not prosecutors, to investigate itself and its employees to a greater degree than before. Yet companies which are also prosecuted will not be eligible for any leniency during sentencing, even if they cooperate.
HOW TO RESPOND TO NEW GUIDELINES
The result of a working group of Justice Department officials and U.S. Attorneys, the policy also notes that cooperation rules apply to civil enforcement matters, and emphasizes that prosecutors should not “merely accept what companies provide,” and should conduct their own inquiries. This creates a second challenge for a subject company: first, it must examine its conduct to provide evidence of cooperation; then it must answer inquiries from prosecutors or investigators seeking information as part of their own efforts.
The manpower and resources to accompany both tasks, sometimes simultaneously, can be daunting. Retaining an experienced fraud examiner to review phone or e-mail records and other internal company resources, as well as assembling a financial profile from public records and interviews, can be invaluable if concerns are raised and multi-faceted inquiries come swiftly to your company’s door.