Category Archives: Corporate Criminal Liability and Enforcement

Scapegoating: A Structural Risk in Current U.S. Cross-Border Corporate Crime Enforcement

by Laurent Cohen-Tanugi

The interaction of corporate and individual liability in cases of corporate misconduct raises complex issues for prosecutors, management, and employees alike. Such issues, however, are generally discussed in connection with situations where corporate wrongdoing can be attributed to one or more individuals. Yet those “rogue employee” situations are neither the most difficult ones to address, nor the most frequent to arise.

More common, as evidenced by the numerous DPAs acknowledging wrongdoing entered into by corporate entities, and more problematic from a fairness standpoint, are situations where wrongdoing is instructed more or less overtly by senior management, and/or imbedded in a company’s business model and corporate culture, and implemented by lower level executives as part of their duties. The fairness issue stems from the pressure on both prosecutors and the company’s senior management to identify sanctionable individuals who may not be those ultimately responsible. And this problem is compounded in cross-border enforcement situations. Continue reading

DOJ Updates Guidance on Evaluating Corporate Compliance Programs

by Matthew L. Biben, Kara Brockmeyer, Helen V. Cantwell, Andrew J. Ceresney, Andrew M. Levine, David A. O’Neil, David Sarratt, Jonathan R. Tuttle, Mary Jo White, Bruce E. Yannett, Lisa Zornberg, Ryan M. Kusmin, Jil Simon

On April 30, 2019, Assistant Attorney General Brian Benczkowski announced an updated version of the Evaluation of Corporate Compliance Programs (the “Updated Guidance”).[1] This Updated Guidance supersedes a document of the same name that the Fraud Section of DOJ’s Criminal Division published online in February 2017 without any formal announcement (the “2017 Guidance”). Although not breaking much new ground, we believe the Updated Guidance can serve as a valuable resource for those grappling with how best to design, implement, and monitor an effective corporate compliance program.

In contrast to the 2017 Guidance—which listed dozens of questions to consider in evaluating a compliance program without providing much context—the Updated Guidance employs a more holistic approach. It focuses on three fundamental questions drawn from the Justice Manual:

  • Is the corporation’s compliance program well designed?
  • Is the program implemented effectively?
  • Does the program work in practice?[2]

Continue reading

How are non-trial enforcement mechanisms facilitating the resolution of foreign bribery cases?

by Sandrine Hannedouche-Leric, Elisabeth Danon, and Brooks Hickman

A new Study on Resolving Foreign Bribery Cases with Non-Trial Resolutions builds a typology of non-trial resolutions available to the Parties to the OECD Anti-Bribery Convention and takes stock of how these resolutions have been used to resolve foreign bribery cases in recent years.

The Study focuses on key legal, procedural and institutional challenges attached to the use of non-trial resolutions to conclude foreign bribery cases. It provides data demonstrating a clear trend to resolve these cases outside the court room. In particular, it shows that nearly 80% of foreign bribery cases concluded since the OECD Anti-Bribery Convention entered into force 20 years ago have been resolved with a non-trial enforcement vehicle. Relying on data and case examples, it analyses how these instruments have driven the enforcement of foreign bribery laws. In some countries, non-trial resolutions have provided the exclusive means for sanctioning legal persons, while other countries have used non-trial resolutions to impose sanctions in their first-ever foreign bribery resolutions. Continue reading

DOJ Updates FCPA Corporate Enforcement Policy

By Jonathan S. Kolodner, Lisa Vicens, and Lorena Michelen

In a recent speech at the annual ABA White Collar Crime Conference in New Orleans, Assistant Attorney General Brian Benczkowski of the Criminal Division of the Department of Justice (“DOJ”) announced certain changes to the FCPA Corporate Enforcement Policy (“the Enforcement Policy” or “Policy”) to address issues that the DOJ had identified since its implementation.[1]  These and other recent updates have since been codified in a revised Enforcement Policy in the Justice Manual.[2] 

The Enforcement Policy, first announced by the DOJ in November 2017, was initially applicable only to violations of the FCPA, but was subsequently extended to all white collar matters handled by the Criminal Division.[3]  The Policy was designed to encourage companies to voluntary self-disclose misconduct by providing more transparency as to the credit a company could receive for self-reporting and fully cooperating with the DOJ.  Among other things, the Enforcement Policy provides a presumption that the DOJ will decline to prosecute companies that meet the DOJ’s requirement of “voluntary self-disclosure,” “full cooperation,” and “timely and appropriate remediation,” absent “aggravating circumstances” – i.e. relating to the seriousness or frequency of the violation.  For more information on the Enforcement Policy, read our blog post explaining it

The most significant recent changes to the Enforcement Policy include eliminating the prohibition on a company’s usage of ephemeral instant messaging applications to receive full credit for “timely and appropriate remediation.”  Additionally, the modified Enforcement Policy (1) now makes clear that one requirement of cooperation, de-confliction of witness interviews, should not interfere with a company’s internal investigation; (2) confirms based on an earlier announcement, that the Policy applies in the context of a merger and acquisition (“M&A”), if an acquiring company discovers and self-discloses misconduct in a target; and (3) implements a change announced months before by the Deputy Attorney General that a company only needed to provide information about individuals “substantially involved” in the offense.  These changes are discussed in greater detail below. Continue reading

In Precedent-Setting Case, Two Senior Corporate Executives Indicted for Failure to Report Under the Consumer Product Safety Act

by Jonathan J. Rusch

On March 29, the U.S. Department of Justice announced that on March 28, a federal grand jury in the Central District of California indicted two senior corporate executives with two corporations on multiple counts for their roles in a scheme involving defective and dangerous dehumidifiers made in China.  Simon Chu and Charley Loh, who served respectively as part owners, chief administrative officer, and chief executive officer of the same two corporations in California, were charged with (1) conspiracy (a) to commit wire fraud, (b) to fail to furnish information under the Consumer Product Safety Act (CPSA), and (c) to defraud the U.S. Consumer Product Safety Commission (CPSC); (2) wire fraud; and (3) failure to furnish information under the CPSA.  The Department indicated this was the first time that any individual had been criminally charged for failure to report under the CPSA. Continue reading

The Enforcement of Financial Market Crimes: A Comparative Case Study of Canada and the United Kingdom

by Anita Indira Anand

Strong enforcement of the law governing financial markets improves investment, reduces information asymmetries among corporations and investors, and prevents adverse selection. It has proven to be a deterrent, signaling to potential wrongdoers that criminal activity has serious consequences. It can also provide victims of crime with compensation for their losses. Despite these benefits, developed market economies struggle to develop comprehensive systems which allow for the successful prosecution of financial crimes. Indeed, the law of financial market crime is perhaps the most poorly-enforced branch of criminal law.

While there is no universally-accepted definition of “financial market crime,” the term typically refers to “any non-violent crime that generally results in a financial loss.”[1] In my comparative analysis of the enforcement of financial market crimes in Canada and the United Kingdom (UK), I argue that financial market crimes have low enforcement rates for a multiplicity of reasons common to both jurisdictions. To begin, financial market crimes have historically been relatively low priority for law enforcement officials who are required to devote increasing resources to violent crimes. In addition, and perhaps relatedly, law enforcement infrastructure lacks financial resources, which undermines the investigation and prosecution of financial market crime and fraud cases. Furthermore, technology, especially the prevalence of social media, has allowed new types of fraud to develop, with insufficient tools and financial resources to deal with them. Finally, past treatment of financial market criminals as pillars of the community who have merely had a fall from grace has weakened public perceptions of the harm caused by these crimes.

In both the UK and Canada, there is a lack of coordination among enforcement agencies when these crimes are investigated and prosecuted. While market regulation is more centralized in the UK, both countries rely on multiple agencies – and require those agencies to work together for the system to properly function. Theoretically, this integrated approach to financial market crime enforcement should work. Yet, in both countries, problems have arisen as regulators struggle to determine which agency (or agencies) should be responsible for tackling a specific financial crime, and handle issues of information sharing between national and local law enforcement teams. This lack of proper coordination has hampered officials in both countries as they attempt to prosecute and prevent financial market crime. In light of these issues, I propose three main reforms. Continue reading

CFTC Enters the Market for Anti-Corruption Enforcement

by Alice S. Fisher, Douglas K. Yatter, William R. Baker III, Douglas N. Greenburg, Robyn J. Greenberg, and Benjamin A. Dozier

New enforcement advisory encourages reporting of foreign corrupt practices that the agency intends to pursue under the Commodity Exchange Act.

On March 6, 2019, the Division of Enforcement (Division) of the US Commodity Futures Trading Commission (CFTC or Commission) announced that it will work alongside the US Department of Justice (DOJ) and the US Securities and Exchange Commission (SEC) to investigate foreign bribery and corruption relating to commodities markets.[1] CFTC Enforcement Director James McDonald announced the agency’s new interest in this area as the Division issued an enforcement advisory on self-reporting and cooperation for violations of the Commodity Exchange Act (CEA) involving foreign corrupt practices.[2]

For companies and individuals who participate in the markets for commodities and derivatives — or whose activities may impact those markets — the CFTC announcement adds a new dimension to an already crowded and complex landscape for anti-corruption enforcement. A range of industries, including energy, agriculture, metals, financial services, cryptocurrencies, and beyond, must now consider the CFTC and the CEA when assessing global compliance and enforcement risks relating to bribery and corruption. This article summarizes the new developments and outlines key considerations for industry participants and their legal and compliance teams. Continue reading

Strong Whistleblower Protections Reflect a Positive Compliance Culture

By Maria T. Vullo

In a recent submission (PDF: 2.36 MB) to Congress, the U.S. Securities & Exchange Commission (SEC) reported that, for fiscal year 2018, the SEC paid the largest whistleblower awards since the institution of its program in 2012 following the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank).  Specifically, in FY 2018, the SEC awarded 13 individuals over $168 million collectively for tips that led to actions by the SEC to protect investors.[1]

Other statutes likewise provide financial incentives to whistleblowing.  Under the False Claims Act (FCA), for example, persons who report fraud in government contracting can receive up to 30 percent of the government’s recovery in an action.  Many states, including New York, have enacted state-level equivalents of the FCA.  For many decades, the FCA has contributed to large recoveries to the U.S. Treasury, with an expansion of recoveries in part due to the reporting of violations by whistleblowers. Continue reading

Canadian Corporate Criminal Liability

by Lincoln Caylor and Nathan Shaheen

Introduction

In Canada, corporate criminal liability is increasingly becoming an area of focus for regulators, law enforcement officers, and the public. As stories of corporate wrongdoing have generated media and public interest, key stakeholders have been trying to develop various tools and mechanisms to properly apportion fault and determine liability in often complex and highly public scandals. One merely has to read about the SNC-Lavalin matter that has generated controversy and the calls for a public inquiry in the highest echelons of the Canadian executive branch to understand the importance of carefully managing corporate criminal liability. This blog posts reviews Canadian corporate criminal liability, setting out some new developments in the law and highlighting key areas of concern for corporations undertaking either an internal investigation or being investigated by a regulator.

Overview Of Canadian Corporate Liability Doctrine

In Canada, corporate criminal liability is narrow in scope. Unlike in the United States, Canada does not apportion criminal liability under the doctrine of respondeat superior. Rather, corporate liability is generally apportioned to the employees or individuals involved in the wrongdoing, instead of the actual corporations themselves.[1]

Unlike American precedent, Canadian jurisprudence has historically upheld the ‘identification doctrine’, an organizing principle of corporate liability wherein an “identity” is established “between the directing mind and the corporation, which results in the corporation being found guilty for the act or the natural person, the employee”.[2] The identification doctrine will only be used in narrow circumstances to hold the corporation accountable. It will not be engaged if the employee/individual who committed the alleged acts is not a ‘directing mind’ of the corporation, or if there was fraud on the corporation. Additionally, judges retain the residual right to not apply the doctrine depending on the circumstances of the case. Continue reading

Protecting Attorney-Client Privilege and Respecting Fifth Amendment Rights While Cooperating with the Government

by John F. Savarese and Carol Miller

In 2018, two cases illustrated the potential hazards that can arise when companies’ efforts to cooperate with the government later provide a basis for individuals questioned during internal investigations to claim that their Fifth Amendment rights against self-incrimination were compromised.  While these cases, which we summarize below, have the greatest impact in connection with the representation of individuals in such investigations, companies responding to white collar inquiries need to keep these new developments in mind, particularly in conducting internal investigations and working in a cooperative mode with the government.  Companies and their counsel must be mindful of these issues both to insure that individual employee rights are protected and to protect as much as possible the confidentiality and integrity of the company’s review. Continue reading