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U.S. Department of JusticeU.S. Department of Justice (Photo by Diego M. Radzinschi)

A significant policy shift by the U.S. Department of Justice has produced both questions and dilemmas for companies trying to limit their potential exposure to criminal charges and substantial criminal fines. The change has redefined what it means to “cooperate” with the Justice Department in a criminal investigation. Cooperation, of course, is one of the key factors that DOJ uses in deciding whether to bring criminal charges against corporations for violations of federal law, and how large a penalty to seek from corporations. Now that the DOJ is seeking guilty pleas and billion-dollar fines from large companies on a semi-regular basis, the issue of cooperation is more important than ever.

The Shift

Over the last several months, in a series of well-coordinated speeches, senior DOJ officials have announced that companies are now being evaluated on whether they have produced evidence that can be used by prosecutors in criminal trials against culpable employees. In other words, if a company has not identified and produced evidence of a credible criminal case against individuals within the relevant statute of limitations (five years for many violations of federal law), the DOJ may conclude that the company has not cooperated and that it should be treated harshly—even if it otherwise voluntarily disclosed the misconduct and identified the culpable employees.

Marshall Miller, a senior official in the department’s Criminal Division, first described DOJ’s position in September 2014: “Even the identification of culpable individuals is not true cooperation, if the company fails to locate and provide facts and evidence at their disposal that implicate those individuals.” Two months later, Leslie Caldwell, the DOJ official in charge of the Criminal Division, suggested in a speech that the oil and gas company Petro-Tiger Ltd. was not charged with foreign bribery because it disclosed facts in time for the Justice Department to file charges against two of its former chief executive officers.

As recently as April 17, Caldwell observed that “[d]uring my first year in leading the Criminal Division, we have tried to make as clear as possible what we expect from those companies that choose to cooperate” and “[p]erhaps most critically, we expect cooperating companies to identify culpable individuals—including senior executives if they were involved—and provide the facts about their wrongdoing.”

DOJ’s policy change raises a number of important questions:

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