President Joseph Biden is making the investigation and prosecution of corporate crimes one of his administration’s priorities. The National Law Review reports that in October 2021, Deputy Attorney General Lisa Monaco stated in a conference of the American Bar Association that the president had given the Department of Justice (DOJ) prosecutors greater powers in this regard. The changes decrease the restrictions on prosecutors and expand scrutiny on corporate offenders, especially those with repeat offenses.
The Deputy Attorney General called on companies to ensure that they are thoroughly reviewing all relevant compliance programs and adhering to these. They must also monitor any misconduct in their ranks and immediately address this. She noted that it is expensive to implement efficient systems that will aggressively prevent wrongdoing. However, failing to do this will result in even greater expenses and problems in the long run.
Officers’ Accountability
It is the responsibility of company leaders to clean up their ranks and prevent illegal practices. According to the Cornell Law School, the Responsible Corporate Officer (RCO) doctrine holds a corporate officer of high rank accountable for any crime of the company even if they are not aware of it. The assumption is that leadership has responsibility. This is also known as the responsible relation doctrine. The Supreme Court established the doctrine in the 1943 case of the United States versus Dotterweich, and the 1943 case of the United States versus Park.
The Supreme Court convicted Buffalo Pharmaceutical Company’s president and general manager, Dotterweich, because the company’s shipped products violated the Federal Food, Drug, and Cosmetic Act. He was prosecuted for not preventing his company from doing so. No evidence was provided to prove that he was personally responsible for the shipment.
The Supreme Court also upheld the conviction of Park, the president of a major food store chain nationwide, for rodent infestation in its food warehouse. The Supreme Court did not accept his defense that he had assigned the task of handling pest infestations to employees he trusted.
Even today, the RCO doctrine can be used by prosecutors against any corporate officer in cases of corporate white-collar crime. Corporations, therefore, usually retain a defense lawyer.
Corporate Crimes
Crimes committed by corporations are also called white-collar crimes. These include environmental law violations, phone and telemarketing fraud, computer and internet fraud, mail fraud, credit card fraud, intellectual property theft or piracy, economic espionage, trade secret theft, kickbacks, bribery, insider trading, financial institution fraud, securities fraud, antitrust violations, bankruptcy fraud, tax evasion, insurance fraud, healthcare fraud, government fraud, public corruption, embezzlement, money laundering, and counterfeiting.
Punishment for white-collar crimes can range from imprisonment to home detention, community confinement, and supervised release. It can also include fines, forfeitures, restitution payments, and legal costs. The corporation and the individuals involved can be sanctioned. According to the Federal Sentencing Guidelines, crimes that cause significant financial suffering for at least one victim are punished with long prison terms.
Federal Bureau of Investigation (FBI) data shows that the cost of white-collar crime to the country is over $300 billion per year. The FBI is assisted by other federal agencies such as the Securities and Exchange Commission (SEC) and the Internal Revenue Service (IRS) in enforcing the laws against corporate crime. States also have their own agencies.
New DOJ Measures
The DOJ is now empowered to require erring companies to disclose to the government all information considered non-privileged about persons responsible for the crime or involved in it. By doing so, the corporation will be eligible to receive cooperation credit. Such credit can lessen the degree of punishment for the company.
Previously, corporations and their counsel were given the discretion to disclose information only for individuals they considered significantly involved in the crime. The DOJ now states that its investigative teams are better qualified to establish individuals’ level of participation and accountability. Those with minimal participation will not be unfairly prosecuted.
The Principles of Federal Prosecution of Business Organizations has been amended. DOJ prosecutors will now also consider in their judgments the complete regulatory, civil, and criminal record of misconduct of a corporation with a criminal case. This includes any previous wrongdoing prosecuted in other states or even in other countries. Before, the DOJ only considered any past wrongdoing like the current criminal case.
The third change is to reverse the practice where a corporation that enters into a non-prosecution agreement with the DOJ does not need an independent monitor except in unusual situations. Now, DOJ prosecutors can once again make the requirement of an independent monitor the rule rather than the exception.
According to the Deputy Attorney General, more changes will still be coming in their handling of corporate criminal cases. An advisory group in the DOJ will study the other necessary changes.