U.S. Clarifies Policy on Prosecutions of Executives for Fraud

By | November 17, 2015

The U.S. Justice Department renewed its push to charge executives in corporate fraud cases, encouraging companies to come to them early even if they can’t yet identify individual wrongdoers.

Deputy Attorney General Sally Quillian Yates clarified the department’s new policy requiring federal investigators to produce charges against individuals during corporate prosecutions in a speech to bankers and compliance officials in Washington Monday. That policy, which Yates announced in September, is now official.

“A company won’t be disqualified from receiving cooperation credit simply because it didn’t have all the facts lined up on the first day it began talking with us,” Yates said in remarks at a money laundering enforcement conference in Washington. “Rather, under those circumstances, we expect that cooperating companies will simply continue to turn over the information to the prosecutor as they receive it.”

‘All or Nothing’

In September, Yates said cooperation had to be “all or nothing” for companies to win credit for working with prosecutors. Her remarks Monday emphasized that the Justice Department doesn’t expect companies to come in with a full accounting of what went wrong and who’s responsible. Under the new policy, the Justice Department will give special weight to whether a company discloses possible wrongdoing early in evaluating whether the company should get any leniency. Companies that cooperate with government investigations may pay less in fines and could avoid charges.

The policy change is a response to criticism from lawmakers and public-interest groups that the department had relied too much on big-dollar settlements with companies without bringing cases against those responsible for the misconduct.

The new policy applies to corporate criminal and civil enforcement investigations nationwide. Decisions not to charge individuals involved in misconduct must be approved by the U.S. attorney or the top Justice Department official overseeing the investigation.

Since the policy was announced on Sept. 10, defense lawyers have questioned how it will change the way companies deal with the government. Some raised concerns that businesses may be reluctant to come forward if credit for cooperation becomes too difficult to obtain.

“I have a hard time imagining that it will truly be in a company’s best interest to forgo the substantial benefits accorded for cooperation solely to avoid having to provide all the facts about individual conduct,” Yates said.

–With assistance from David McLaughlin.

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