Justice Talks Tough on Prosecuting Crime in the Suites

September 10th, 2015 by Phil Mattera

averyThe Justice Department is trying to get more serious about prosecuting corporate crime. It has just taken what could be a significant step in that direction.

According to an internal memo written by Deputy Attorney General Sally Q. Yates and leaked to the New York Times, the department will now be pressing companies under investigation to identify the individuals involved in the misconduct, no matter how high they are in the firm’s organizational chart, and hand over evidence that may aid in the prosecution of those individuals.

Rejecting the all-too-frequent practice of treating business misconduct as an abstraction, Yates told The Times: “Corporations can only commit crimes through flesh-and-blood people.”

While it is likely, as The Times points out, that the memo is to some extent “an exercise in public messaging,” Yates does lay out some rigorous guidelines. For example, the provision of information on individuals is made a prerequisite for any company seeking “cooperation credit,” a kind of plea bargaining in which the firm gets lighter penalties for voluntarily disclosing relevant facts to prosecutors.

A company cannot, the memo says, pick and choose what facts to disclose, and those facts must relate to all individuals “involved in or responsible for the misconduct at issue, regardless of their position, status or seniority” (emphasis added). Depending on how strictly that phrase is interpreted, it could open the door to more charges against top-level executives.

Yates also orders criminal and civil attorneys at Justice to “focus on individuals from the inception of the investigation.” She rightly acknowledges the connection between the investigation of the company and the investigation of its executives. Focusing on individuals from the start, she writes, “will maximize the chances that the final resolution of an investigation uncovering the misconduct will include civil or criminal charges against not just the corporation but against culpable individuals as well.”

To prevent corporations from shielding their executives, the memo states that Department attorneys should preserve the ability to pursue individuals in those instances when it first reaches a resolution of charges against the company. Prosecutors may agree to immunity for executives in “extraordinary circumstances,” but these cases have to be approved by the relevant Assistant Attorney General or United States Attorney. It remains to be seen whether this provision gets abused.

It’s interesting that the Yates memo came to light right after United Airlines CEO Jeff Smisek was forced to resign amid a federal investigation of the Port Authority of New York and New Jersey that turned up evidence suggesting that United had maintained a money-losing flight from Newark Airport to Columbia, South Carolina to curry favor with then-Port Authority Chairman David Samson, who had a vacation home in the Palmetto State.

The circumstances in that case, which stemmed from Chris Christie’s George Washington Bridge scandal, may be unusual, but it was a pleasing change of pace to see the guy at the top being held responsible. Let’s hope that the Yates memo leads to more of the same amid heightened prosecution of both rogue corporations and the executives who run them.

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