Not So Fast: Corporate Fraud Investigations and Prosecutions Under Trump Will Not Grind to a Halt
Despite the rosiest (or most dire, depending on one’s perspective) predictions regarding an abandonment of enforcement of the Foreign Corrupt Practices Act, False Claims Act, and securities laws in the age of Trump, it appears that reports of the death of the government’s zeal to pursue corporate fraud were, to paraphrase Mark Twain, greatly exaggerated.
Although not particularly surprising to long-term legal practitioners, Deputy Attorney General Rosenstein’s Wednesday, October 25, 2017, address at the U.S. Chamber Institute for Legal Reform in Washington, DC, came as something of a welcome affirmation of normalcy regarding the Department of Justice’s traditional role in policing corporate wrongdoing.
The DAG noted the centrality of the rule of law to commerce and to this country. He made the usual statements that government’s role is not to unnecessarily interfere in law-abiding enterprises and that DOJ will continue its efforts to reduce regulation and control expenses where it makes sense to do so. And he noted efforts to increase efficiencies to free DOJ personnel time and resources for its central mission to fight crime.
The DAG repeated statements he had made previously about collecting outstanding policy memoranda (McNulty Memo, Filip Memo, Yates Memo, anyone?) and incorporating them into the DOJ’s operating manual in the interest of efficiency and clarity. Then he made a number of assertions about his views on implementing DOJ’s corporate fraud policies, all to the effect of sound application of evidence to the law, fairness to parties, rewarding prompt reporting of wrongdoing, and focusing on deterrence, which he noted is the primary goal of law enforcement.
He then turned to addressing future enforcement priorities.
The DAG noted the hot topic of cybercrime and the reluctance of some companies to report incidents or misconduct to law enforcement, despite the considerable resources and investigatory tools that can be applied to address root causes and attack the problem at its source—resources and tools not available to corporations.
The DAG then spoke extensively about corporate compliance programs. He noted that companies’ compliance efforts and the tone set by its leadership and other representatives reflect the corporation’s values and “carry collateral consequences.” He stated that a company’s willingness to self-report and remediate problems informs the DOJ’s evaluation of the company when its conduct is at issue. The DAG also admonished companies to think about the long-term when it comes to compliance measures and cooperation that may be beyond the minimum requirements of law because the DOJ will notice and “evaluate carefully whether a corporate compliance program is applied faithfully.” Importantly, the DAG asserted, “the Department will not flag in its commitment to investigating and pursuing corporate fraud, whether American companies are victims, or perpetrators.”
The DAG highlighted the three criminal trial convictions under the FCPA since May, civil recoveries under the FCA totaling $3.6 billion in the past year, and $5 billion in settlement related to securities fraud in the same period. He also noted that there are major ongoing investigations in the Antitrust Division, Tax Division, and other DOJ components.
Finally, the DAG stated that the DOJ has established a Working Group on Corporate Enforcement and Accountability, which will offer recommendations on promoting individual accountability and corporate cooperation.
All told, the DAG’s remarks should serve as a reminder to corporations and executives that the DOJ’s efforts to enforce laws and regulations governing corporate conduct will continue, and that individual accountability of corporate executives for the transgressions of their companies appears, if anything, to be more important than ever to the DOJ. Moreover, to the extent that corporate Boards and management have not yet understood the central importance of corporate compliance efforts in preventing misconduct and the collateral consequences of corporate fraud (or hoped that shortcomings in this area would no longer matter under the Trump administration), they should realize that the DOJ will take note of weak or “pro forma” compliance programs and evaluate corporate and individual actions in light of their efforts in this critical area.