Thursday, May 10, 2018
In June 2017, AG Sessions ended payments to third parties as a condition of settlement. (see here). In one document, the Attorney General made it difficult for companies entering into deferred prosecution and non-prosecution agreements, as well as plea agreements, to provide as part of their corporate settlement, payments to outsiders who could benefit from the corporate wrongdoing. It was good that agreements such as the agreement signed by former US Attorney Chris Christie would no longer allow the endowment of an ethics chair to a law school attended by Christie. But it was not so good to see that it might now be difficult for environmental-related groups to receive funding as part of an agreement following an oil spill. AG Sessions said that "[u]nder the last Administration, the Department repeatedly required settling parties to pay settlement funds to third party community organizations that were not directly involved in the litigation or harmed by the defendant's conduct." His memo put an end to this third party payment practice.
Now we have more changes, issued in a new policy of May 9, 2018. Deputy Attorney General Rod Rosenstein calls for "coordination of corporate resolution penalties." (see here). The policy states that "[i]n reaching corporate resolutions, the Department should consider the totality of the fines, penalties, and/or forfeiture imposed by all Department components as well as other law enforcement agencies and regulators in an effort to achieve an equitable result." So what does this mean? Here are some thoughts -
- Corporate investors, directors, and officers should be drinking champagne to toast this policy change. Having a coordinated payment will lift the multiple agencies and parallel proceeding payments that currently exists.
- Some agencies, uncertain which ones right now, should be getting nervous as they may be shrinking when there are less "results" to show for their investigations.
- If there is coordination, will it mean that the company will pay less to the government? This will be difficult to measure, but statistics may assist somewhat here as we have a measure of past amounts paid and can compare it with future amounts, factoring in inflation.
- Larger conference rooms may be needed at the Justice Department so that all the players can be in the same room as they try to coordinate global settlements with all applicable agencies, including state and international partners.
- Centralization of actions against companies certainly benefits the company, but is this policy really streamlining the process or is it just placing a tighter control over agencies by main justice.
- And who will be the arbitrator when the agencies cannot reach an agreement on the settlement?
- Will this mean less billable hours for some law firms, and which ones - the criminal defense attorneys or agency related attorneys? Should this be factored in, or is nothing more than a third party payment?
- From a fairness perspective this policy does have some beneficial components.
Perhaps the most bothersome aspect of this policy is that there is a lumping together here of civil and criminal resolutions. What if a corporation has not paid the appropriate tax, but has not done this with a criminal intent. If the government is not convinced of this and wants to prosecute criminally and the IRS has a civil action, how will this get resolved? You may now wind up not resolving the matter civilly, because the corporation may wish to challenge the possible criminal penalties. Or is the government just assuming in a post-Arthur Andersen world, companies would never dare to challenge the government for fear of the collateral consequences (e.g. bankruptcy). Clearly, the policy is aiming to secure greater cooperation from the company, but have they failed to factor in the innocent company that may wish to challenge claims of criminality?
Deputy Attorney General Rod Rosenstein's explanation of this policy in his remarks to the NYC Bar White Collar Crime Institute, includes a sports reference of "piling on," noting that this new policy will provide greater "fairness." Although I am not a fan of using sports analogies, one should praise the DOJ for this new policy. If the concern, as stated by Rosenstein, is to consider "the impact on innocent employees, customers, and investors who seek to resolve problems and move on," the applause definitely go to Deputy AG Rosenstein for recognizing the collateral consequences inherent in white collar prosecutions of entities. And finally, I agree with DAG Rosenstein's statement in his speech that "[m]ost American companies are serious about engaging in lawful business practices. They want to do the right thing. They need and deserve our support to help protect them from criminals who seek unfair advantages." So overall, this policy appears to be a move in the correct direction.
DAG Rosenstein says that to "promote consistency" they have established a "new Working Group on Corporate Enforcement and Accountability within the Justice Department." The group includes government representatives from a variety of places, who "will make internal recommendations about white collar crime, corporate compliance, and related issues." But I call on DAG Rosenstein to make this working group more representative, like including defense counsel, corporate monitors, corporate officers, and educators as part of the discussion. Maybe having everyone at the table will assist in finding the best way to curtail corporate misconduct.
Addendum - See also Sue Reisinger, Champagne Anyone? Celebrating an End to "Piling On" White Collar Enforcement