AG Merrick Garland: DOJ Prioritizing Prosecution of Individuals in White Collar Crime
In remarks to the American Bar Association (ABA) Institute on White Collar Crime on March 3, 2022, Attorney General Merrick Garland underscored the U.S. Department of Justice's (DOJ) renewed emphasis on corporate prosecutions, noting that the Department's "first priority in corporate criminal cases" will be "to prosecute the individuals who commit and profit from corporate malfeasance."
Highlights of Garland's Remarks
Before an audience of mostly white collar criminal defense attorneys, Garland noted that pursuing individual prosecutions was fundamental to the Department's mission because, among other reasons, it ensures that penalties are "felt by ... wrongdoers, rather than by shareholders or inanimate organizations," and, in the Department's view, serves as the "best deterrent to corporate crime."
Recognizing that obtaining individual convictions is both "difficult and resource-intensive," Garland announced that the Biden Administration will seek significant budgetary increases for DOJ to fund the hiring of an additional 120 attorneys throughout the Department, including in U.S. Attorney's Offices and the DOJ's Criminal, Antitrust, Tax and Environment divisions. The administration is also seeking an additional $325 million to hire more than 900 Federal Bureau of Investigation (FBI) agents to support the Bureau's White Collar Crime program.
According to Garland, the DOJ is further "bolstering" its resources "by adding force-multipliers to [its] prosecutors and agents," which include 1) leveraging international enforcement partnerships, 2) using data analytics "to identify payment anomalies that are indicative of fraud" and embedding a new squad of FBI agents within the Criminal Division's Fraud Section "to bring data-driven corporate crime cases nationwide," and 3) leveraging self-disclosures of individual conduct submitted as part of a company's bid for cooperation credit.1
The latter is supported by a policy shift highlighted by Deputy Attorney General Lisa Monaco last year, when Monaco announced that to be eligible for any cooperation credit, companies must provide the Department with all non-privileged information about individuals involved in or responsible for the misconduct at issue, "regardless of their position, status or seniority."
"When we give a company the opportunity to come clean," Garland said, "it must come clean about everyone involved in the misconduct, at every level."
The DOJ and U.S. Securities and Exchange Commission (SEC) have long emphasized the importance of individual accountability in carrying out their public mandates, but Garland's speech represents one of the most direct, standalone statements to date about the government putting individual actors in the crosshairs. Garland's message is now being reinforced and reiterated by his deputies, including Assistant Attorney General for the Criminal Division Kenneth Polite, who, like Garland, spoke at length at the ABA event of the need to hold individuals accountable for their actions and of creating an ethical culture.2
Takeaways and Considerations
What does all this mean for the corporate and white collar criminal landscape? Here are some initial takeaways:
- Deputy Attorney General Monaco stressed last year that "companies serve their shareholders when they proactively put in place compliance functions and spend resources anticipating problems." In light of Garland's and Polite's recent comments, companies will need to ensure that such efforts to create a "culture of compliance and a sense of accountability" include a robust focus on individual employee compliance.
- DOJ's benchmark for companies obtaining cooperation credit — which is "broadly consistent" with the SEC's view — will be challenging. The policy will require companies to expend significant resources identifying all relevant facts and all persons "involved" in wrongdoing, even if that involvement is minimal or peripheral. This includes capture of relevant individuals' communications, whether housed in electronic mail systems, office messaging apps or text messages.
- Investigating counsel need to be vigilant about providing fulsome warnings to interviewees that interviewing counsel does not represent them in their individual capacity and any statements they make could be disclosed to government regulators (known as "Upjohn" warnings).
- If companies and their counsel decide to disclose such findings, they will face complex issues of attorney-client privilege as they determine what "non-privileged" information to provide DOJ to secure cooperation credit.
- Companies should expect increased requests from their external auditors regarding individual employee conduct; external counsel should be prepared for requests to discuss the nuances of their investigation with the auditors.
- Finally, DOJ's focused commitment to pursue individual bad actors and hold them accountable provides significant incentives for companies to obtain appropriate Side A D&O insurance coverage for its officers and directors.
1 As Holland & Knight previously covered, data analytics are already being used for government prosecutions. (See SECond Opinions Blog, "Betting on Technology: SEC's Reliance on Risk-Based Data Analytics to Detect Earnings Management," Feb. 4, 2022.)
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