The US Department of Justice (DOJ) has vowed to crack down on corporate crime, and any individual – including corporate treasurers and chief financial officers – could find themselves being investigated, even if their role was minor in any alleged wrongdoing.
The increased scrutiny comes as part of plans under the Biden administration to crack down on white-collar crime and prosecute individuals. This in part addresses a popular perception after the global financial crisis that those deemed responsible were not held to account, and not enough people were jailed.
In a recent keynote address at the American Bar Association’s annual event on white collar crime, the Deputy Attorney-General, Lisa Monaco, laid out the new change in direction from the DOJ, which will involve a greater focus on individuals and individual accountability. She noted there would be a priority on prosecuting individuals who commit and profit from corporate wrongdoing.
As part of the reforms, the DOJ will want to know the entire “cast of characters” involved in any alleged misconduct, no matter how small their involvement. Monaco said, “To be clear, a company must identify all individuals involved in the misconduct, regardless of their position, status, or seniority. It will no longer be sufficient for companies to limit disclosures to those they assess to be ‘substantially involved’ in the misconduct,” she said in her speech.
For corporates, this requirement will increase the demands on internal investigations, notes law firm Skadden, Arps, Slate, Meagher & Flom. Also, for companies, it will increase the tension between cooperating with the authorities and protecting the rights of the employees concerned. The law firm suggests that companies should review their procedures for internal investigations and make sure they are following best practice.
Monaco also announced the DOJ would be considering a wider range of previous wrongdoing by a company. She explained, “Going forward, prosecutors can and should consider the full range of prior misconduct, not just a narrower subset of similar misconduct.” For example, if there was an alleged crime under the Foreign Corrupt Practices Act (FCPA), it previously would have only been considered under a subsequent FCPA investigation. Now, however, it may be considered as part of an unrelated tax investigation, for example. Monaco explained that it would be considered whether the company has been prosecuted in another country or state, and whether it has a “history of running afoul of regulators”.
In its analysis of Monaco’s speech, the law firm Latham & Watkins noted that it underscored a “continuing shift away from the more cooperation-focused tone of DOJ under the Trump Administration. It also signals an increased focus on individual liability, the importance of establishing a corporate culture of compliance, and accountability for repeat offenders.”
The law firm also noted that the DOJ has signalled it will be committing resources to the enforcement of corporate crimes, which in turn will lead to pressure on delivering results. This comes as the Financial Times quoted another senior DOJ official, John Carlin, as saying the department would be cracking down on corporate crime. A blog by Neill Blundell and Joe Gaffney at law firm Macfarlanes interpreted this as meaning that there would be an increase in deferred prosecution agreements, whereby criminal charges are suspended in return for an agreement for the company to take action and correct its behaviour.
While the US is gearing up for greater enforcement of corporate crime, the UK has been trying to push through corporate governance reforms. The initial proposals, however, have been diluted – according to the FT – such as plans to bring some of the UK’s accounting practices up to the stricter standards of the US. For example, the UK initially proposed that directors would be forced by a change in law to have greater responsibility for signing off company accounts. However, that reform has been dropped, according to the FT report.