When it comes to alleged terrorists, drug cartels, so-called illegal aliens, and purported fraudulent voters, Trump’s Justice Department is quick to adopt an aggressive prosecutorial posture. The DOJ is eager to throw the book at defendants.
Yet when it comes to cases involving corporate misconduct, DOJ changes from a lion to a lamb. The focus shifts to leniency and the desire to avoid putting an undue burden on companies. Restraint seems to be the primary objective.
The latest expression of the latter approach can be seen in the DOJ’s announcement of the first Department-wide policy on how corporations should be criminally prosecuted. Actually, it is a policy on how they shouldn’t be prosecuted, since the emphasis is on rewarding companies that cooperate with investigations by declining to bring charges against them.
Declinations are not a new policy. They are part of a long-term trend toward decriminalizing corporate misbehavior by using devices such as deferred prosecution and non-prosecution agreements.
Proponents of these policies argue that the emphasis should be on prosecuting individuals within corporations rather than the companies themselves. The Trump DOJ embraces this approach, putting its focus on getting corporations to self-report.
As Deputy Attorney General Todd Blanche put it: “This policy draws on decades of experience across the Department and creates incentives for companies to come forward and do the right thing when misconduct occurs so that we may hold accountable the individual wrongdoers. Well-intentioned businesses know that, across the Department, they will be rewarded when they self-disclose wrongdoing, cooperate with our investigations, and remediate the misconduct.”
The new policy formalizes the incentives, laying them out in a detailed flow chart that creates a degree of clarity sorely missing from the way in which immigration cases, for example, are being handled.
Putting more emphasis on prosecuting individuals is not a bad thing, assuming they are high up on the corporate ladder, but the DOJ policy seems to be based on the assumption that misconduct is mainly initiated by lower-level employees acting on their own accord and for their own benefit. In reality, most corporate criminality is initiated to serve the needs of the company and is often encouraged, at least implicitly, by policies emanating from the c-suite. A prime example occurred at Wells Fargo, where lower-level employees facing unrealistic demands from top management to increase revenue created large numbers of bogus fee-generating add-on accounts without the knowledge of the bank’s customers.
The only positive things to say about DOJ’s policy is that it still requires companies benefiting from a declination to pay a penalty, usually the amount of profit it received from the illicit activity, and that the declination is supposed to be made public.
There is also a provision that declinations are not to be offered in cases of corporate recidivism, “specifically, a criminal adjudication or resolution either within the last five years or otherwise based on similar misconduct by the entity engaged in the current misconduct.” This should not be taken too seriously. The history of non-prosecution and deferred prosecution agreements is filled with instances of companies getting a leniency agreement, committing more offenses, and then, instead of being prosecuted, getting another leniency agreement. It is likely the Trump DOJ’s policy will produce similar results.
Requiring companies to make penalty payments, which are usually not terribly onerous, does not begin to outweigh the benefits of completely avoiding a prosecution that could result in consequences such as being debarred from receiving federal contracts.
The DOJ’s new policy is nothing more than a continuation of the Trump Administration’s inclination to coddle rogue corporations.
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