|
 The Department of Justice, after years of criticism from lawmakers
and the general public that people responsible for the 2008-09
financial crisis had not been held accountable, on Wednesday advised
prosecutors to take a tougher stand against high-level executives
and other employees for wrongdoing under their watch.
In future investigations, corporations will be required to give up
all potential evidence against officers and other employees if the
business itself hopes to get leniency for cooperating with
authorities, the department said in a memo.
The policy will be incorporated into the US Attorneys' Manual, which
federal prosecutors look to for guidance.
Corporations put a high value on obtaining leniency, which comes in
the form of lower fines or less serious charges, so they often try
to cooperate fully with authorities. They frequently hire law firms
to conduct internal investigations, with the results later turned
over to the government.
Putting into the mix an expectation that some individuals will be
charged criminally is a recipe for increased internal conflict in
the corporate world, lawyers said on Thursday as they sorted through
the implications of the guidelines.
"They are taking an approach of pitting the individuals against the
corporations," said Ellen Podgor, a professor at Stetson University
College of Law in Gulfport, Florida, who specializes in white-collar
crime.
Podgor and others said the result might be that executives or other
corporate employees would be less willing to cooperate with an
internal investigation or to report possible wrongdoing to their
bosses or compliance office.
Executives "should be nervous. They should probably have their own
counsel, separate from the corporate counsel," she said.
The law firm Cleary Gottlieb Steen & Hamilton said in a client alert
that it expects more corporate officers and employees to seek their
own attorneys at early stages of a probe.
The No. 2 official at the Justice Department, Deputy Attorney
General Sally Quillian Yates, explained the revision of the
guidelines in a speech on Thursday at New York University School of
Law.
Yates wrote the guidelines but acknowledged challenges, including
the possibility that some corporations may decide "that the benefits
of consideration for cooperation with DOJ are not worth the costs of
coughing up the high-level executives who perpetrated the
misconduct."
Less corporate cooperation could mean fewer settlements, but "if
that's what happens, so be it," Yates said, adding that
accountability for individuals was the only way to truly deter
corporate wrongdoing.
[to top of second column] |
A Justice Department spokeswoman declined to comment beyond Yates'
speech.
The interests of a business and its employees can diverge quickly
during a criminal investigation, especially if the corporation's
lawyers determine that wrongdoing was limited to a few people and
that the corporation itself should not be liable.
The Justice Department's memo adds to the incentive for a
corporation to toss its own people into the government's arms for a
better chance to save itself, lawyers said.
"They are saying they want to know who is doing what all the way
from the most powerful person in the company down to the janitor,"
said Paula Junghans, a partner at Zuckerman Spaeder in Washington
who has represented corporate defendants and individuals. "Maybe the
most senior person will be able to defend himself, but the janitor
or the middle manager won't. Those are the ones that are really
going to get hurt."
For corporate board members who may ultimately decide whether to
report allegations to the Justice Department, there is also a
complicating "human factor" if they are serving up people they know
well for prosecution, said Timothy Treanor, a partner at Sidley
Austin in New York.
"When it becomes about turning in individuals you know and have had
good relationships with, it is perhaps a tougher mental hurdle to
get over," he said.
(Reporting by David Ingram and Mica Rosenberg; Editing by Noeleen
Walder and Grant McCool)
[© 2015 Thomson Reuters. All rights
reserved.] Copyright 2015 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed. |
