In running a Foreign Corrupt Practices Act news source for seven years running, there is a “been there, done that” aspect to some of the writing.
For instance, every late November FCPA Professor highlights speeches by DOJ and SEC enforcement officials at a certain FCPA conference run by a for-profit conference company which engages in the disgraceful practice of marketing our public officials to draw attendance to its paid event as if the public officials are a commodity they own. (See here, here, and here for prior posts regarding this practice).
Why DOJ and SEC officials allow themselves to be used in such a way is beyond me.
In any event, yesterday Deputy Attorney General Sally Yates delivered this speech at an FCPA conference and like prior DOJ speeches at this same conference every year, Yates talked about the importance of individual FCPA prosecutions.
Yet, as highlighted in this post, it is once again difficult to reconcile the DOJ’s rhetoric about the importance of individual FCPA prosecutions with the reality of facts.
First the facts.
Since the DOJ released the so-called “Yates Memo” in September 2015, a policy which supposedly renewed the DOJ’s focus on prosecuting individuals not just collecting corporate fines, the DOJ has brought 10 corporate FCPA enforcement actions. However, not one (0%) corporate enforcement action has resulted (at least yet) in any related DOJ charges against company employees. In fact, since 2008 approximately 80% of corporate FCPA enforcement actions have not resulted in any DOJ charges against company employees.
Yet, here is what Yates stated yesterday about individual FCPA prosecutions.
“[W]hen we’re talking about Foreign Corrupt Practices Act (FCPA) enforcement, it’s very easy to slip into broad, general terms about the alleged conduct. We often hear that “Company X is under investigation” or that “Corporation Y engaged in illegal activity abroad.” And it’s true that when a company’s employees violate the FCPA, they’re usually doing it at least in part because they think it will benefit their employer. But we cannot forget that behind every bribe and illegal payment is one or more individuals who knew what they were doing was wrong and nonetheless broke the law. Sometimes it’s a rogue employee or third-party agent operating without the knowledge of his or her supervisors. Sometimes it’s a CEO or CFO authorizing illicit payments. And sometimes it’s corporate executives who turn a blind eye and disregard their obligations to maintain appropriate internal controls. But we must do our best to ensure that whoever is responsible is held accountable. As I’ve seen over and over again during my career, the best way to deter individual conduct is the threat of going to jail. That’s what truly changes behavior. That’s what changes the calculus as employees and executives decide whether to participate in an illegal scheme.
The threat of going to jail doesn’t just deter individual behavior, it also raises the stakes for an individual defendant once he or she has actually been charged with a crime. Cases against individuals typically result in trials, often against experienced and well-resourced defense counsel, some of whom are here in the audience today. I have extraordinary respect for the prosecutors and agents who are willing to bring those tough cases in the attempt to hold accountable individuals who break the law on behalf of a corporation. It’s exactly what our folks should be doing, and I have no doubt that our career attorneys will continue to aggressively pursue individual wrongdoers in foreign bribery cases so long as the facts and the law support it.”
Elsewhere in her speech Yates stated:
“Our [anti-corruption] prosecutions demonstrate to the world that the United States won’t allow its companies – or companies listed on its exchanges – to engage in corrosive conduct abroad. The damage caused by corruption is just as real in Angola and Azerbaijan as it is in Atlanta and Albuquerque, and it’s our obligation to advance the rule of law wherever our laws apply. Particularly when it comes to developing countries around the world, or those where the rule of law is not yet firmly established, it is essential that the United States continue to send the firm and unshakable message that corrupt conduct will not be tolerated.”
On this issue, I invite you to read the article “The Uncomfortable Truths and Double Standards of Bribery Enforcement” and come to your own conclusion about whether the U.S. sends “the firm and unshakable message that corrupt conduct will not be tolerated.”
The remainder of Yates’s speech focused on her name-sake “Yates Memo” as well as the future of the DOJ under a new administration.
As to the Yates Memo, Yates stated:
“The department’s heightened focus on individuals extends beyond the FCPA arena. Across our corporate enforcement work, department attorneys are identifying ways to ensure that individuals are held accountable for their conduct, regardless of where those individuals appear on a company’s organizational chart. The same basic principle applies: to deter wrongdoing, we need to change the risk-reward calculus for corporate decision-makers, and we do that by punishing decision-makers when they decide to break the law. But it’s about more than just deterrence. It’s also about making clear to everyone that there’s a single system of justice in our country and that no one gets a pass just because of their power or wealth. At the Justice Department, we have no greater obligation than ensuring all people are treated equally under the law, and Americans must know that we will vigorously pursue criminal activity regardless of whether the crime is committed on a street corner or in a corner office.
It was this sense of obligation that prompted us to reevaluate how the department pursues individual wrongdoing in corporate cases. As most of you know, we issued a new policy last year describing additional steps the department was taking to ensure we’re doing everything we can to hold individual wrongdoers accountable. The department has always recognized how important it was that we pursue not just corporations that break the law but also the individuals who make those crimes possible. But consulting with a wide range of criminal prosecutors and civil attorneys in the department, we decided that there was more we could do to uphold that principle.
I suspect that everyone in this room is familiar with what’s now known – for better or for worse – as the Yates Memo. I don’t need to recount the six specific policy steps we outlined in the Memo, although I think it’s helpful to discuss generally what we hoped to accomplish and what results we’re seeing so far.
The purpose of the Memo was never to increase individual prosecutions by a certain number or percentage, or to instruct our prosecutors to bring us the heads of certain corporate executives. From the beginning, our goal was to develop and institutionalize mechanisms to ensure that, across the department, we consistently investigate and prosecute corporate cases as effectively as possible. And that’s exactly what we’ve done.
Our effort took several forms, but a common thread throughout all the policy steps is ensuring that our lawyers, both criminal and civil, are focused on individuals from the very beginning of an investigation. First, we made clear that providing information about individual wrongdoers is a threshold requirement for any corporate cooperation – without it, no cooperation credit is available. Second, we changed the way that we approach civil enforcement against individuals, especially by encouraging our attorneys to pursue civil charges where warranted even if a defendant may not have full ability to pay a judgment. And, third, we increased the difference between the credit a corporation receives for voluntary self-disclosure and the credit it gets if the company was aware of wrongdoing but failed to cooperate until after the government came knocking. We did this by adding a 10th factor to the principles of federal prosecution of business organizations, more commonly known as the “Filip factors,” focused exclusively on the question of whether a company has or has not made a voluntary self-disclosure to the department of its potentially unlawful conduct. We did this, in part, because of a perception in the defense bar – not entirely unfounded – that companies lacked significant incentive to disclose misconduct voluntarily. The perception was that the credit received for a self-disclosure was not meaningfully different from the credit a company received if it began fully cooperating only after it knew it was on the department’s radar. By breaking out voluntary self-disclosure into a 10th, standalone factor, we are aiming to change that perception, and the reality behind it. Now, companies that voluntarily self-disclose can be assured they will be treated differently from those that do not. Or, put the other way round, companies that fail to self-disclose can be assured they will be treated differently from those that choose to make a disclosure.
All of these mechanisms were designed to help our agents and attorneys develop information about individual wrongdoers as early as possible during an investigation, which allows them to review the evidence and make a well-informed decision about whether to bring charges long before the statute of limitations runs. These efforts have been supplemented by a number of other recent initiatives within the department, including the Fraud Section’s FCPA pilot program and the national security division’s export control and sanctions program. In addition Principal Deputy Associate Attorney General Bill Baer described in a speech this September, the department is clarifying and refining its approach to cooperation in civil enforcement matters.
So how are things going? So far, we’re pleased with what we’ve accomplished. Across the department, our prosecutors and civil attorneys are focusing more concretely on individuals and doing so earlier in the investigation. They know that their supervisors – whether it’s their section chief or the deputy attorney general – will ask, “what about the individuals?” We’re placing the focus and emphasis where it needs to be. And while that doesn’t, and shouldn’t, mean that every case will result in an indictment of the CEO, it does mean that our people are reviewing evidence against individuals up and down the corporate ladder, looking for those who may have violated the law. And if we determine that we have a case that merits prosecution, you can be sure that we are ready to go.
It’s also clear that some people’s worst fears haven’t borne out. The sky hasn’t fallen. Despite predictions to the contrary, companies are still cooperating. Internal compliance programs continue to function properly. No one’s been forced to waive the privilege. Instead, we’re getting exactly what we wanted – companies showing up to their first meeting with the government with information about who did what, and our prosecutors are using that information both to build cases against individuals and to ensure that the companies are being properly credited for their cooperation at the end of the investigation.
Some people still have questions, and we’ve tried our best to be transparent about the new policies. Today, I’m pleased to announce that we’re launching a new website, which is posted at www.justice.gov/individual-accountability. It includes links to the September 2015 Memo, as well as the changes we made last year to the Filip factors. In addition, we have posted answers to a number of the most frequently asked questions, which will hopefully provide all of you with helpful guidance. But, as I said last September when we first rolled out the Memo, there’s always a simpler option when you have a question: pick up the phone and call. You should always feel comfortable calling the Assistant U.S. Attorneys (AUSAs) or trial attorney handling your case, and they will do what they can to answer questions you have.”
As to the future, Yates stated:
“[W]hat comes next? In 51 days, a new team will be running the department, and it will be up to them to decide whether they want to continue the policies that we’ve implemented in recent years. But I’m optimistic. Holding individuals accountable for corporate wrongdoing isn’t ideological; it’s good law enforcement. Just as the Filip factors endured a change in administration, we expect this approach to endure as well. During my 27 years at the Justice Department, I’ve worked under attorneys general appointed by presidents who were republicans and those who were democrats. I was nominated to serve as Deputy Attorney General by this president, but I joined the department as a line prosecutor during one republican administration and I served as Acting U.S. Attorney under another. And I know – because I’ve witnessed it myself – that individual accountability isn’t a democratic principle or a republican principle, but is instead a core value of our criminal justice system that perseveres regardless of which party is in power.
There are, of course, a significant number of corporate investigations that began after we issued the Memo last September and won’t result in public filings until well into the next administration. And in those cases, we know that the agents and prosecutors are hard at work determining which, if any, individuals should be subject to criminal or civil penalties. I expect that, in coming months and years, when companies enter into high-dollar resolutions with the Justice Department, you’ll see a higher percentage of those cases accompanied by criminal or civil actions against the responsible individuals. It won’t be every case, but the investments we’re making now are likely to yield a real increase in the years ahead.
At the Justice Department, we are committed to ensuring that individuals and corporations in the marketplace are operating on a level playing field. Deceit, fraud and corruption distort that balance, and so it is important that we all do our part to keep the scales evenly weighted. In the days ahead, this institution – and those who lead it – will continue the hard work of rooting out corruption here and abroad. And we will remain determined to protecting and strengthening our values of justice, fairness, and the rule of law. That has always been, and will always be, at the core of the Department of Justice.”