Last week U.S. Attorney General Eric Holder delivered this speech at New York University School of Law. While focusing on financial fraud issues, the speech also touched upon several issues of general interest such as Holder’s statement that “the buck needs to stop somewhere where corporate misconduct is concerned.” (emphasis in original). Holder spoke of corporate structures that “blur lines of authority and prevent responsibility for individual business decisions from residing with a single person.” Holder also highlighted that:
“[A]t some institutions that engaged in inappropriate conduct before, and may yet again, the buck still stops nowhere. Responsibility remains so diffuse, and top executives so insulated, that any misconduct could again be considered more a symptom of the institution’s culture than a result of the willful actions of single individual.”
Recognizing that there are obvious differences between a government department and a business organization, the fact remains there are many similarities between the two when it comes to internal behavior, diffusion of responsibility and insulation of top leadership.
For instance and to borrow corporate analogies, Attorney General Holder is the CEO of DOJ Inc. and even the DOJ describes itself as the “world’s largest law office, employing more than 10,000 attorneys nationwide.” That employee headcount (obviously the DOJ also employs non-attorneys as well) is rather small compared to a typical corporation doing business in the global marketplace through employees and hundreds, if not thousands, of third parties.
Returning to an issue previously highlighted here and here, if the DOJ was a business organization and subject to the same legal principles its uses to prosecute business organizations, the DOJ would constantly be under scrutiny and the subject of numerous enforcement actions.
Because as highlighted in this recent report by the Project on Government Oversight (“POGO”) titled “Hundreds of Justice Department Attorneys Violated Professional Rules, Laws, or Ethical Standards:”
“An internal affairs office at the Justice Department has found that, over the last decade, hundreds of federal prosecutors and other Justice employees violated rules, laws, or ethical standards governing their work.”
“From fiscal year 2002 through fiscal year 2013, the Justice Department’s Office of Professional Responsibility (OPR) documented more than 650 infractions … In the majority of the matters – more than 400 – OPR categorized the violations as being at the more severe end of the scale: recklessness or intentional misconduct, as distinct from error or poor judgment.”
Although not specifically discussed in the POGO report, Foreign Corrupt Practices Act enforcement actions have seen instances of prosecutorial misconduct. For instance, as highlighted in this post, in the DOJ’s enforcement action against Lindsey Manufacturing and two of its executives, the judge in dismissing the case, stated that the instances of misconduct were “so varied, and occurr[ed] over so lengthy a period … that they add up to an unusual and extreme picture of a prosecution gone badly awry.” In the failed Africa Sting case, the judge in dismissing the cases, stated that certain of the DOJ’s conduct had “no place in a federal courtroom.” (See here).
The DOJ’s Principles of Prosecution of Business Organizations state, among the factors prosecutors should consider in deciding whether – and how – to charge a business organization as follows.
“Among the factors prosecutors should consider and weigh are whether the corporation appropriately disciplined wrongdoers, once those employees are identified by the corporation as culpable for the misconduct.”
Against this backdrop, the POGO report stated that several “examples of misconduct” within the DOJ often result in lenient sanctions such as a 10, 14 or 30 day suspensions. Moreover, if I am not mistaken, certain of the DOJ prosecutors in the above FCPA enforcement actions – far from being disciplined – were promoted after their conduct was called into question by the federal judiciary.
The policy question needs to be asked: as a matter of principle should not the prosecutor / regulator and the prosecuted / regulated be held to the same general standards?
As a matter of principle and borrowing Holder’s policy pronouncements, should not the buck somewhere in the DOJ when improper conduct occurs within its ranks? Is responsibility so diffuse in the DOJ that top leaders are insulated from accountability?
As noted in the POGO report, “high-level DOJ officials have said in the past that given the context – tens of thousands of its attorneys working on tens of thousands of cases each year – the amount of misconduct is small.” (See here).
Could not the same be said of a typical business organization doing business in the global marketplace? After all, dig into the details of many corporate FCPA enforcement actions and you will quickly learn that the conduct at issue was engaged in by a “small fraction” of the company’s global workforce to borrow the phrase the DOJ used in the HP enforcement action.
To be clear, the point of this post is not to call (as some actually have) for Holder’s resignation or to insist that Holder ought to be personally responsible, legally or ethically, for the improper conduct that has taken place in the DOJ under his leadership.
Rather, the point of this post is to highlight from a policy perspective the similarities between the DOJ and a business organization when it comes to compliance, internal behavior, diffusion of responsibility and insulation of top leadership.
These similarities ought to make top government enforcement officials less confident and less sweeping in their policy statements and simplistic views of legal and ethical culpability. And if not, the similarities should at least cause top government enforcement officials to recognize that the same statements and views can be appropriately used to shine a light on the organizations they are tasked with running.
For additional views of Holder’s recent speech, see here from Debevoise & Plimpton and here from Professor Peter Henning at his White Collar Crime Watch column in the New York Times.