Category Archives: Individual Liability

Corporate Executives and Criminal Justice Reform

By Amy J. Sepinwall

On September 19, Senator Chuck Grassley (R-IA) issued a press release stating that the bipartisan authors of a 2015 landmark criminal justice reform bill were preparing to reintroduce that legislation. The Sentencing Reform and Corrections Act of 2015, to which Sen. Grassley will grant new life, was part of a widespread effort at criminal justice reform that appeared to have died with the 2016 election. A centerpiece of the effort would have clarified and enhanced the mens rea (or mental state) necessary for conviction: in the House version, a defendant could be convicted only if she knew she was engaged in criminal activity; the Senate version was even more defendant-friendly, requiring willful participation.

Criminal justice reform has a laudable overarching ambition—to reduce sentences and incarceration rates, especially for minor drug and firearms offenses. As Yale Law Professor Gideon Yaffe writes, this would benefit “those who are especially ill-treated by the criminal justice system: the poor and racial minorities.” But these efforts are being championed by some unusual suspects: Republican members of Congress, who don’t ordinarily vie for more leniency when it comes to street crime, and the Koch brothers, who also are not usually poster boys for the plight of the underclass, who are over-represented in criminal prosecutions, convictions and America’s prisons. Continue reading

Sentencing Fraud

by Mihailis E. Diamantis

Imagine a class of criminals that is growing year over year, whose members have higher than average recidivism rates, and for whom the public has very little sympathy.[1]  They would seem an unlikely group for judges and scholars to think are punished too severely.  This, though, is the fortunate position of the white-collar fraudster.

To be sure, federal penalties for fraud can be quite burdensome.[2]  The base offense level for most frauds is 6, but this can climb as the loss caused by the fraud increases from $6,501 (add 2 levels) up to $550,000,001 (add 30 levels).  The number of victims can also have a significant impact, ranging from an additional 2 levels if there are at least ten victims to an additional 6 levels if there are more than twenty-five.  A first-time fraudster who causes more than $550,000,001 in losses to at least twenty-five victims is looking at a recommended sentence of thirty years to life.[3]  For most judges and scholars, that kind of punishment sounds disproportionate.[4] Continue reading

Do Compliance Officers Have A Growing Target On Their Backs?

by Patty P. Tehrani, Esq.

Have you noticed the number of articles and blogs covering the troubling trend of personal liability for compliance officers and Chief Compliance Officers (CCOs) in the financial services sector?  While anyone entering this industry knows it is highly regulated and replete with regulatory requirements, the growing liability of its compliance professionals is worrisome. Those responsible for overseeing their firm’s compliance program have many duties, and now more than ever find themselves on the receiving end of enforcement actions. This is evident in expanded corporate probes of compliance professionals or increasing regulatory expectations cited in speeches and proposed regulations.

Compliance professionals are concerned about facing personal liability especially when it is for non-rogue behavior.[1] As a result, I thought this trend warranted a closer review. Continue reading

Other People’s Money: SEC Disgorgement After Kokesh

by Daniel R. Walfish

Should individuals sued by the Securities and Exchange Commission (SEC) have to give up, or “disgorge,” corporate gains resulting from a fraud, or just their own direct gains? In an August 29 summary order, SEC v. Metter,[1] the Second Circuit avoided wrestling with this question, but it may be one of the next major battles in the wake of the Supreme Court’s June 5, 2017 decision in Kokesh v. SEC, 137 S. Ct. 1635. Kokesh held that the disgorgement remedy in SEC enforcement actions is a “penalty” for purposes of the five-year limitations period for the “enforcement of any civil fine, penalty, or forfeiture.” 28 U.S.C. § 2462. Many have assumed, on the basis of a footnote in Kokesh, that courts will soon be considering whether they have authority to order disgorgement at all in SEC enforcement actions. That issue certainly lurks, but I suspect that courts first will revisit the proper scope of the remedy, including whether a court may force a defendant to “disgorge” ill-gotten gains that the defendant did not personally receive but that went to third parties, such as individuals and entities associated with the defendant. Continue reading

How to Punish a Corporation: Insights from Social and Behavioral Science

by Benjamin van Rooij and Adam Fine

“Justice cannot mean a prison sentence for a teenager who steals a car, but nothing more than a sideways glance at a C.E.O. who quietly engineers the theft of billions of dollars,” wrote U.S. Senator Elizabeth Warren in a New York Times op-ed. When she calls for stronger action against corporate crime, she’s not alone. Calls resound, particularly on the political left. In 2015, the Department of Justice, under then-Deputy Attorney General Sally Q. Yates, issued a new policy prioritizing prosecuting corporate criminals.

Punishing corporate executives more strongly may be justified. Punishment rarely occurs, and, when it does, it is often too weak to constitute “justice.” But once we agree that more punishment is warranted, the next question is how we can make punishment more effective in preventing corporate crime? Continue reading

Yates Memo – Time for Reassessment?

by Sharon Oded

A year and a half ago, the DOJ changed the rules of the game with the introduction of a memorandum entitled “Individual Accountability for Corporate Wrongdoing” (known as the “Yates Memo”).[[i]] In a memorable announcement in September 2015 at the NYU School of Law, Sally Quillian Yates, then-Deputy Attorney General, decisively announced: “Effective today, if a company wants any consideration for its cooperation, it must give up the individuals, no matter where they sit within the company.”[[ii]]

The Yates Memo continued a steady trend of strengthening enforcement against individual perpetrators involved in corporate fraud. Realizing the significant challenges faced by the DOJ in establishing individual liability for corporate wrongdoing, Yates Memo sought to enlist culpable corporations to assist the DOJ in pursuing individual offenders. Continue reading

Practical Issues in Financial Services and Securities Law Enforcement: A UK Perspective

by Mark Steward

Keynote Speech at New York University School of Law Program on Corporate Compliance and Enforcement – 31 March 2017

Thank you very much for inviting me here today. It is a great privilege to be here, listening to and participating in today’s discussions. I congratulate the New York University Law School for convening today’s program.


Conduct issues give rise to competing tensions within firms. Everyone can feel hard done by, whether justifiably or not. Firms complain about having to shoulder responsibility for errant staff; staff complain about being scapegoated; regulators and other authorities are blamed for not holding to account those who are supposedly ‘really responsible’ with the public too often feeling the regulatory outcomes do not fully attribute blame.I want to speak to you about today’s theme, the expanding scope of individual liability for corporate misconduct, from a UK perspective with reference to recent developments in the UK, especially the Senior Manager’s Regime which commenced operation just over a year ago. Continue reading

A New Model for SEC Enforcement: Producing Bold and Unrelenting Results

by Chair Mary Jo White


Good morning and thank you, Dean [Trevor] Morrison for that very kind introduction. It is a pleasure to be here today and I want to thank the NYU Program on Corporate Compliance and Enforcement and the NYU Pollack Center for Law and Business for co-sponsoring this program. These programs provide important forums for sophisticated dialogue on critical white collar enforcement issues, which have an increased prominence post-financial crisis. I am honored to join your list of distinguished speakers.

Consistent with the core missions of these programs, I will talk to you today primarily about the SEC’s enforcement program, but also more broadly, about how best to punish and deter white-collar wrongdoing.As you know, the SEC is the primary regulator and enforcer of the federal securities laws. How we go about our job is thus critical to the protection of investors and the integrity of our capital markets. After nearly four years as Chair of the SEC, following almost nine years as U.S. Attorney for the Southern District of New York, where the criminal prosecution of white collar wrongdoing was – and still is – a major priority, this seemed like the right time to speak here about this important topic. And, as you might guess, after spending much of my career in law enforcement, I have strong views about the importance of strong enforcement in the white collar space and what it takes to achieve that. Continue reading

The Yates Memo: The Promise and Reality A Year Later

by Walt Pavlo

Since the financial crisis of 2008, government prosecutors have come under fire for not prosecuting some of the top bank executives who, many say, were responsible for the financial crisis.   To remedy that perception, Assistant Attorney General Sally Quillian Yates announced the DOJ’s new policy on “Individual Accountability For Corporate Wrongdoing” (Yates Memo) last year.   Its purpose was to hold individuals accountable for bad (illegal) behavior rather than just have corporations pay big fines.  In effect, corporations would be tasked with serving up their former employees if they had done something wrong.  The DOJ wanted to put a face on the criminal misconduct both to: 1) deter corporate bad behavior and; 2) show the general public that individuals were not getting away with criminal acts without punishment.  We were all optimistic.  Continue reading

The Stick that Never Was: Parsing the Yates Memo and the Revised Principles of Federal Prosecution of Business Organizations

by Miriam Baer

Addressing a full house of practitioners, scholars and government officials on September 10, 2015, Deputy Attorney General Sally Quillian Yates announced the Department of Justice’s latest efforts to pursue corporate executives who had violated the law.  “Crime is crime,” Yates told her audience, and the Department was committed to “holding lawbreakers accountable regardless of whether they commit their crimes on the street corner or in the boardroom.”

To demonstrate this renewed vigor, Yates summarized her September 9, 2015 Memorandum, entitled “Individual Accountability for Corporate Wrongdoing,” which instantaneously became known as the Yates Memo.  Several of its provisions were uncontroversial and were accepted without comment.  The measure attracting most attention was the Department’s stance on corporate offenders seeking prosecutorial leniency. Continue reading