Stronger Focus On Targeting Corporate Executives In DoJ Manual Update

The updated US Attorney’s Manual instructs government lawyers to focus on individuals from the launch of civil or criminal investigations into a company, and not to consider individual’s ability to pay a judgment in deciding whether to pursue charges.

Recent revisions to the US Attorney’s Manual that Deputy Attorney General Sally Quillian Yates says will bolster Department of Justice efforts to bring charges against individuals in corporate cases could increase the agency’s enforcement against firms violating FDA’s dietary supplement regulations.

The manual is important as a document explaining how decisions are made within DOJ, as well as detailing DOJ policies and procedures. In September, DoJ issued a seven-page memo announcing revisions to the manual to promote department policies of pursuing civil and criminal charges against individuals involved in corporate misbehaviors, as well as against the company itself.

Yates drew attention to the recent revisions during a Nov. 16 speech at an American Banking Association conference, saying the policy fit with DoJ goals in several ways.

From the start of a civil or criminal investigation, it should focus on individuals to “maximize our ability to ferret out the full extent of corporate misconduct.” – DoJ manual

“Crime is crime, and lawbreakers must be held responsible regardless of whether they violate the law on the street corner or in the corner office. We also know that in the white-collar context, one of the most effective ways to ensure this accountability and to deter future misconduct is by pursuing not just corporate entities, but also the individuals through which these corporations act,” she said.

DoJ recently announced indictments on criminal charges against executives with firms manufacturing and marketing violative dietary supplements. The agency included that case in its announcement of a federal “sweep” of 40 criminal and civil actions dating from November 2014 against firms linked to supplements spiked with drug ingredients or to unsubstantiated claims (Also see "Federal Sweep Nets 40 Criminal, Civil Cases For Spiked Supplements, Disease Claims" - Pink Sheet, 23 Nov, 2015.).

Earlier in 2015, Sens. Orrin Hatch, R-Utah, and Martin Heinrich, D-NM, urged Park Doctrine prosecutions by DoJ against marketers of spiked products, saying convictions leading to jail time would “incapacitate current criminal endeavors and deter new criminality.” The Park Doctrine allows federal agencies to hold executives and others responsible for misdemeanor violations even if they had no prior knowledge of the violative conduct (Also see "Senators Push Park Doctrine Prosecution For Spiked Supplement ‘Criminal Endeavors’" - Pink Sheet, 20 May, 2015.).

In the September memo on the USAM changes, Yates’ comments align with the senators’ thinking on the impact of holding executives accountable.

“One of the most effective ways to combat corporate misconduct is by seeking accountability from the individuals who perpetrated the wrongdoing. Such accountability is important for several reasons: it deters future illegal activity, it incentivizes changes in corporate behavior, it ensures that the proper parties are held responsible for their actions, and it promotes the public's confidence in our justice system,” she said.

However, Yates also noted “many substantial challenges unique to pursuing individuals for corporate misdeeds.”

Those include determining whether an executive “possessed the knowledge and criminal intent necessary to establish their guilt beyond a reasonable doubt” when those persons “may be insulated from the day-to-day activity in which the misconduct occurs,” according to the memo.

Parallel Civil, Criminal Cases

Specifically, the manual was updated to identify a “policy statement” that emphasizes the importance of parallel civil and criminal investigations seeking to hold individuals accountable. The document now instructs DoJ employees to coordinate civil and criminal investigations in almost every case, with exceptions only if secrecy is “paramount to the success of the investigation” or if compliance with the policy is “impractical.”

However, government attorneys following this policy should take care to protect the integrity of the civil process and grand jury materials, the USAM states.

Another new section says that from the start of a civil or criminal investigation, it should focus on individuals to “maximize our ability to ferret out the full extent of corporate misconduct.”

The passage also instructs government attorneys not to make an individual’s ability to pay a judgment a primary concern in determining whether to bring charges. Instead, attorneys should look at the seriousness of and circumstances surrounding the misconduct, as well as any prior history of misbehavior.

No corporate settlement should protect individuals from criminal or civil liability “absent extraordinary circumstances,” the USAM states.

The document also notes that resolutions in cases against companies should include a plan to resolve related charges against individuals. The individuals should be pursued even if the larger corporate case is delayed, it says.

Another revision states that to receive any credit for cooperating with the government to reduce possible charges, firms must release all non-privileged information on individual wrongdoing.

“Companies seeking cooperation credit are expected to do investigations that are timely, appropriately thorough and independent and report to the government all relevant facts about all individuals involved, no matter where they fall in the corporate hierarchy,” Yates said.

[Editor's note: “The Gray Sheet” published a different version of this article. "The Tan Sheet" brings selected complementary coverage from our sister publications to our subscribers.]