New Justice Department rules target corporate executives for prosecution
Under the guidelines issued on Wednesday, the Justice Department (DOJ) told civil and criminal investigators to focus on individual employees, rather than the corporation as an entity, from the very beginning of a potential case, according to The New York Times, which was provided with a memo outlining the new policy.
The guidelines further state that in settlement negotiations, corporations won’t receive credit for cooperating with the government unless they turn over evidence against employees, “regardless of their position, status or seniority.”
“Corporations can only commit crimes through flesh-and-blood people,” Sally Yates, the deputy attorney general and author of the memo outlining guidelines, told the Times.
“It is only fair that the people who are responsible for committing those crimes be held accountable. The public needs to have confidence that there is one system of justice and it applies equally regardless of whether the crime occurs on a street corner or in a boardroom.”
The Times reported that during white-collar investigations, when a corporation is suspected of wrongdoing, companies hire lawyers to conduct an internal investigation and turn over their findings to the Justice Department. The findings “form the basis for the settlement discussions.” With the new guidelines, corporations “will be expected to name names.”
The guidelines are the first major policy announcement by new Attorney General Loretta Lynch, who took over in April from Eric Holder. They take effect immediately.
Holder came under heavy criticism by Congress and consumer advocates during his tenure for repeatedly negotiating settlement deals with banking corporations, such as JP Morgan Chase and Citigroup, as well as for the department’s failure to prosecute even a single Wall Street executive following the financial crisis of 2008.
Whether the DOJ under Lynch will pursue an aggressive prosecutorial policy with regard to corporations is yet unknown. As a federal prosecutor in Brooklyn, she was instrumental in two financial fraud settlements. In one case against Citigroup for mortgage-backed securities fraud which resulted in a settlement of $7 billion, shareholders paid the fines, but the perpetrators faced no jail time and investors received no compensation, according to Salon.
The other financial fraud case was a $1.9 billion, five-year deferred prosecution agreement with HSBC for facilitating money laundering for Mexican and Colombian drug cartels. The company was also found to have conducted millions of dollars in transactions with customers in countries sanctioned by the United States, including Cuba, Iran, Libya, Sudan and Burma, according to a report by non-profit group Public Citizen.
Under the DOJ agreement, the bank admitted it had violated the Bank Secrecy Act, the Trading with the Enemy Act, and federal anti-trust and money laundering regulations, among other violations. However, no one from the bank went to jail or paid any fines.