- In recent remarks, top DOJ officials stated that DOJ will “surge resources” and “redouble efforts” for corporate enforcement.
- Areas of particular concern include Foreign Corrupt Practices Act, government contracting fraud, financial fraud, tax issues, and energy pricing benchmark manipulation.
- Strong compliance programs must be top-down, with C-suite executives enforcing the importance of compliance. Should problems occur, the first call always should be to legal counsel.
In this Opportunity Economy conversation, two Department of Justice alumni—Womble Bond Dickinson attorneys Luke Cass and Joe Whitley—discuss enforcement trends in corporate crime with Womble Bond Dickinson attorney Mark Henriques. The discussion took place on an episode of the “In-house Roundhouse” podcast, and the article below is based on that conversation. Cass spent 11 years at DOJ, serving as an Assistant U.S. Attorney and Senior Trial Attorney with the Criminal Division’s Public Integrity Section. In those roles, he handled financial fraud and public corruption investigations and prosecutions of public officials. Whitley served as Acting Associate Attorney General, the third-ranking position at Main Justice during the Ronald Reagan and George H.W. Bush administrations. He was also appointed by Presidents Reagan and Bush, respectively, to serve as the U.S. Attorney in the Middle (Macon) and Northern (Atlanta) Districts of Georgia and appointed to be the first General Counsel for the United States Department of Homeland Security by President George W. Bush.
Nothing keeps corporate executives up at night quite like the threat of white-collar criminal charges. While other forms of wrongdoing or mistakes can cost the company money, white-collar charges can result in actual jail time for company leaders. DOJ has renewed its focus on prosecuting individuals for corporate crimes.
Federal white-collar enforcement priorities typically change when there is a new administration in Washington, and that certainly is the case in 2021, with the Biden Administration implementing its own set of compliance priorities and enforcement emphases.
New Sheriff in Town: What to Expect from the Biden Administration DOJ
“The last administration was focused on immigration and violent crimes, primarily. Under the Biden Administration, you’ve seen a renewed focus on white-collar enforcement. There’s a lot of tough talk and they’re getting ready for task forces and investigations in a number of areas,” Cass said.
The first such task force addresses Foreign Corrupt Practices Act (FCPA) violations, with an eye on Latin America. Of the DOJ’s four FCPA actions in 2020, three involved parties based in Latin America.
“Apart from FCPA, I think you’ll see financial fraud continue to be a priority,” Cass said. "When you flood the system with capital, like with the PPP and CARES Act funds, fraud will follow. I think you’ll see those prosecutions for years to come.” He said the amount of money on the table in the proposed infrastructure bill could also lead to more opportunities for bad actors to commit fraud—which, in turn, could lead to an increase in investigations related to government contracts.
"Under the Biden Administration, you’ve seen a renewed focus on white-collar enforcement. There’s a lot of tough talk and they’re getting ready for task forces and investigations in a number of areas."
Whitley said he also expects to see more tax prosecutions of high-wealth individuals and corporations, as well as more antitrust enforcement and more environmental enforcement regarding pollution.
Ransomware is another topic on the minds of corporate executives, particularly given the recent high-profile attacks on Colonial Pipeline and Sinclair Broadcast Group. But paying certain parties could actually be illegal under federal law.
“It’s an unknown path ahead. Sometimes, the bad actors are foreign governments," Whitley said, noting that companies must take a cooperative approach with the federal government.
“The compliance programs have to be broad enough to cover all of these areas, but specific enough to handle any challenges that come up," Cass said. "That’s difficult to manage, but that is the challenge corporate compliance programs are facing.”
Return to Normal Means Renewed Focus on White-Collar Crime
Whitley said he expects the Biden Administration’s approach to white-collar enforcement to be more in line with administrations before Trump—both Democratic and Republican.
“What I think we’ll see a return to is more international cooperation,” Whitley said. “(Former U.S. Attorney General) Jeff Sessions focused more on immigration and street crime enforcement, but many of us who worked in the DOJ feel that is more of a state and local area of enforcement. When I was in the Reagan and first Bush administrations, we were focused on what was going on in the boardroom, and I think we will see a return to that.”
For example, Whitley said price-fixing in commodities is one area he expects to see increased enforcement.
“I believe the business community wants to see this happen. It’s an unfair disadvantage to see your competitor engaging in fraudulent activity when you are trying to do the right thing,” Whitley said.
"When I was in the Reagan and first Bush administrations, we were focused on what was going on in the boardroom, and I think we will see a return to that."
While specific areas of emphasis continue to evolve, the Biden DOJ already has shown an interest in investigating alleged pricing benchmark fraud in the energy industry.
“It comes from a Reuters report and according to the report, investigators are focused on alleged wrongdoing surrounding Platts reports supplied by traders to calculate oil and energy benchmarks. The allegedly fraudulent information then influences the price of these benchmarks” Cass said. “If the allegations are true, and the fraud is as widespread as the report seems to indicate, it could be a massive case similar to Libor.”
Henriques said that with energy costs rising and supply chains stretched, it makes sense that energy pricing benchmarks will remain under federal scrutiny.
Setting the Tone for Compliance
Not everything is changing, however. In some situations, the new administration is building on work started in the previous administration.
In June 2020, the DOJ issued a memo on corporate compliance meant to be a guide as to what is expected in a company’s compliance program, and Cass and Whitley said that memo still serves as a good primer. The memo asks three key compliance questions:
- Is your compliance program well designed?
- Is it applied in good faith?
- Does it actually work in practice?
Cass said some compliance departments were downsized in the pandemic, which is something the DOJ frowns upon.
And Whitley said the responsibility for compliance can’t just fall on a company’s compliance committee or the GC’s office.
“The tone at the top is so critical. CEOs have a different mission today, and part of that is to set a moral tone at the top of the organization. I think it’s important that companies redouble their compliance efforts and make sure this is priority one. The compliance officer should have a direct line to the auditor committee, the CEO and/or the GC. There has to be some value in the compliance officer – that he or she matters in the organization,” he said.
I think it’s important that companies redouble their compliance efforts and make sure this is priority one.
Following the taping of this podcast, at the American Bar Association’s 36th National Institute on White Collar Crime, Deputy Attorney General Lisa Monaco announced several priorities and Department of Justice policies for corporate criminal enforcement. A copy of Deputy Attorney General Monaco’s address may be accessed here.
Deputy Attorney General Monaco’s speech can be summarized as follows:
- Companies need to actively review their compliance programs to ensure they adequately monitor for and remediate misconduct — or else it’s going to cost them down the line.
- For clients facing investigations, as of today, the department will review their whole criminal, civil and regulatory record — not just a sliver of that record.
- For clients cooperating with the government, they need to identify all individuals involved in the misconduct — not just those substantially involved — and produce all non-privileged information about those individuals’ involvement.
- For clients negotiating resolutions, there is no default presumption against corporate monitors. That decision about a monitor will be made by the facts and circumstances of each case.
Deputy Attorney General Monaco stated, “Looking to the future, this is a start — and not the end — of this administration’s actions to better combat corporate crime.”
What to do if You Are Subpoenaed?
Obviously, compliance programs are intended to keep a company out of trouble. But no prevention system is infallible, and even well-run companies can make mistakes. So what happens when the feds knock at the door?
“This is where lawyers get frustrated. Often, the first call is not made to outside counsel or general counsel. Having a plan in place to deal with the government in an enforcement capacity is critical,” Whitley said. “So much can happen in a matter of just a few minutes during the first stage of the investigation.”
He said the point isn’t to hide information from the government, but make sure that information is correct and accurate. Sometimes, investigators get bad information that puts the company at a disadvantage. “We might spend hours trying to correct that impression,” Whitley said.
Cass said such prior planning is particularly important in an environment where many employees may be working remotely, adding that legal counsel should be involved from the very beginning of all government investigations.
“You need someone who has been through the process before to serve as a guide,” Henriques said.