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DOJ announces incentives for companies to deter corporate crime

The Justice Department said the guidance would encourage employees to quickly turn in any wrongdoers in their companies

Deputy Attorney General Lisa O. Monaco speaks at an event in Washington on May 6. (Sarah Silbiger/Pool via Reuters)

NEW YORK — The Justice Department said it plans to fight corporate crime and more rigorously enforce existing laws that many American businesses have long flouted with relatively few consequences by incentivizing them to be better corporate actors.

It’s a pledge that previous Justice Department officials have made before, even as overall data shows a nationwide decline in corporate criminal prosecutions over the past decade. At an event at NYU law school with professors, corporate lawyers and federal prosecutors Thursday evening, Deputy Attorney General Lisa O. Monaco outlined an extensive plan that she said would hold companies accountable and deter future wrongdoing by encouraging them to do the right thing.

Monaco — the number two official at the Justice Department — said her new guidance would better encourage corporate employees to quickly turn in any wrongdoers in their companies and to “claw back” money paid to executives who violate laws.

Under the guidance, prosecutors would not grant companies “cooperation credit” — which refers to giving people or companies leniency for cooperating — if they intentionally delay an investigation by, for example, stalling in producing necessary documents. Prosecutors also would consider whether companies have previously broken laws when determining whether they should be granted leniency — something that is regularly ignored in corporate crimes.

Ultimately, she said, “absent aggravating factors,” the Justice Department would not pursue indictments or seek guilty pleas from companies that self-disclose wrongdoings, cooperate with investigators and fix what went wrong in their organizations.

“In short, we’re empowering companies to do the right thing,” Monaco said, “and empowering our prosecutors to hold accountable those that don’t.”

Last October, Monaco delivered her broad priorities to tackle corporate crime, which including restoring Obama-era guidance that said corporations would only receive credit for cooperating during investigations if they identify all individuals responsible for the misconduct in question, not just those who are “substantially involved.”

Monaco also established a Corporate Crime Advisory Group that would propose revisions to the Justice Department’s criminal enforcement policies. The announcement Thursday marked the culmination of that group’s year-long meetings. Much of Thursday’s speech mirrored October’s broad pledges, but it provided more details on the new rules and how they would be implemented.

Relevant Justice Department divisions must develop plans by the end of the year that reward businesses that report internal wrongdoing and have “claw back” clauses for their employees.

Monaco also said that the Justice Department requested $250 million from Congress for its corporate crime initiatives next year.

Prosecutors will now consider whether companies have strong compliance systems in place, or whether negligence contributed to the criminal conduct.

“Our goal is simple: to reward those companies whose historical investments in compliance enable voluntary self-disclosure and to incentivize other companies to make the same investments going forward,” she said.

Robert Weissman, president of Public Citizen, a consumer rights advocacy group, called Monaco’s updated policies a “modest step” when a “great leap is required.” The group wants the Justice Department to eliminate leniency deals to repeat corporate offenders instead of just “disfavoring” them, which Monaco said the department would do.

“Corporations are the ultimate rational actors,” Weissman said. “If they know the costs of breaking the law are worth it for expected monetary gain, then they will break the law — irrespective of the societal damage.”

In her speech, Monaco noted several corporate convictions this year, including convictions of J.P. Morgan traders for commodities manipulation and the conviction of a former Theranos executive on 12 counts of fraud.

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