Caveat CEO: Let the Corporate Officer Beware

3 min

Reaffirming the old maxim that people commit crimes, not companies, the U.S. Department of Justice (DOJ) issued a policy memorandum this week that firmly gives top priority to holding individuals accountable for their roles in corporate misconduct. Though the maxim is old, the memorandum issued by DOJ contains new policies with significant implications for both companies and their officers and employees.

The new policies require that criminal and civil attorneys in DOJ and US Attorneys' Offices focus on individual responsibility at the outset of their investigations into corporate misconduct. The policies also require that, to be eligible for any cooperation credit, corporations must provide all relevant facts to DOJ about individuals involved in the misconduct, regardless of their position, status, or seniority. With this new guidance must come an awareness on the part of companies and their attorneys that the interests of individuals in management and the interests of the company are not always aligned and may, in fact, conflict. While the potential for such conflicts has always been present, the new guidance should sharpen counsel's attention to the potential for conflict from the very first moment the government comes knocking on a company's door with a subpoena. Awareness of potential conflicts will help prevent possible pitfalls such as efforts by management to put an overly narrow scope on an internal investigation or to interfere with the investigation's conclusions or to limit the extent of disclosures to the government. The renewed DOJ emphasis on potential individual liability also serves as a reminder that officers and employees may need separate counsel from the corporation, or that an internal investigation may need to be conducted independent of certain officers or employees.

The new policies also instruct DOJ civil and criminal attorneys to routinely communicate with each other regarding the possibility of parallel criminal and civil proceedings, and to do so at the outset of an investigation. This highlights the need for corporate counsel to be cognizant even in light of what appears to be a purely civil investigation that there is a potential criminal case in the offing as well. With that in mind, counsel should aggressively push the government for information to get the full picture of potential liability, including whether a parallel criminal or civil proceeding is present. Two potential dangers inherent in a heightened emphasis on communications between civil and criminal enforcement lawyers are the risks that civil proceedings will be used as a proxy for a parallel criminal investigation or that grand jury secrecy protections afforded by Rule 6(e) of the Criminal Rules of Procedure will be inadvertently eroded, to the detriment of the target of the investigation.

The memorandum setting out the new policies includes a number of other points. It cautions DOJ attorneys not to reach a corporate resolution without a clear plan for also resolving the investigations relating to relevant individuals and to memorialize and submit for approval decisions not to pursue criminal charges or civil claims against individuals. Practically speaking, this new policy may delay or block the closure of some cases that might have otherwise faded away without an affirmative decision to prosecute an individual or not. The memorandum also emphasizes that, absent extraordinary circumstances, a corporate resolution will not include an agreement not to prosecute individuals. The latter point is more a statement of existing policy than anything new.

If you have questions regarding the issues raised in this alert, please contact one of the authors.