By Ben Bedell, From New York Law Journal

Announcing a new policy on white-collar crime, Deputy U.S. Attorney General Sally Yates vowed Thursday to pursue “not just corporate entities, but also the individuals through which these corporations act.”

In a speech at the New York University School of Law, Yates said targeting corporate executives meant “looking for a smoking gun that most financial criminals are far too savvy to leave behind.”

But she said federal prosecutors would no longer enter into settlement agreements with companies whose internal investigations do not disclose the “culpable individuals.”

“It’s all or nothing,” Yates told the audience of about 100, which included three U.S. attorneys from nearby districts—Kelly Currie from the Eastern District of New York, Paul Fishman from the District of New Jersey and Deirdre Daly from the District of Connecticut.

“No more picking and choosing what gets disclosed. No more partial credit for cooperation that doesn’t include information about individuals,” Yates said.

The speech outlined six policy changes Yates described in a Sept. 9 memo addressed to Justice Department staff.

She said the changes were designed to ensure that no “criminal activity will go unpunished simply because it was committed on behalf of a corporation.”

The Obama administration has been criticized for emphasizing multibillion dollar settlements by banks that profited from the 2008 financial crisis, rather than criminal prosecutions of corporate executives.

Washington, D.C. District Court Judge Emmet Sullivan characterized the settlements with banks as “sweetheart deals” in an interview with The National Law Journal, an affiliate of the New York Law Journal. The deals “essentially require stockholders to pay the criminal fines for individuals who are criminally culpable,” Sullivan said.

“I applaud the new policies” announced by Yates, Sullivan added.

Southern District Judge Jed Rakoff also welcomed the policy changes. “It seems to me to be a welcome improvement on past practices,” he told The National Law Journal. The department’s use of deferred prosecution agreements, but not criminal charges against senior officers, was “misguided for many reasons, but the most obvious being that it’s individuals who commit the crimes,” he said.

After the financial crisis in 2008, Rakoff pushed back against settlements presented for his approval by the U.S. Securities and Exchange Commission in cases involving Bank of America and Citigroup. The judge expressed concerns at the time that the dollar amounts in those agreements were too low and that the banks escaped having to provide a full accounting of what they did wrong and who within the companies were responsible.

Rakoff, a former federal prosecutor, told The National Law Journal that the Justice Department shifted its focus away from individuals to the institutions over the past 15 to 20 years.

“Many of us think, and I speak here more as a former prosecutor and former defense lawyer, but also as a judge, that by far the greatest deterrent to white-collar crime is prison time for high-level individuals,” he said.

A July study by Syracuse University’s Transactional Records Access Clearinghouse, based on documents obtained under the Freedom of Information Act, concluded that white-collar prosecutions were at their lowest level in 20 years.

“The available records show an overall decline that began during the Clinton Administration, with a steady downward trend—except for a three-year jump early in the Obama years—continuing into the current fiscal year,” the study said.

Southern District U.S. Attorney Preet Bharara brought the largest number of white-collar cases over the past three years, at a rate four times the national average, according to the clearinghouse study. A spokesman for Bharara declined to comment.

Anjan Sahni, who recently left the Southern District U.S. Attorney’s Office after serving as the chief of its white-collar crime unit, said Yates’ announcement was “the most emphatic statement to date of what the department means by corporate cooperation.”

“Now you must provide all relevant facts about individual misconduct, or you get nothing,” said Sahni, now a partner at Wilmer Cutler Pickering Hale and Dorr.

“Where I see problems in implementation is when the wrongdoing is not crystal clear,” Sahni said. “A company may say that while an executive’s actions may not have lived up to best practices, it was not criminal.”

See Wilmer Cutler Pickering Hale and Dorr memo

Another significant change in the Justice Department’s approach, Sahni said, was the requirement that when prosecutors submit charging memos—a statement of the charges a prosecutor recommends and those that should not be brought—they must now include an explanation as to why no individuals are being charged, if that is the recommendation.

Yates, who was confirmed by Congress in May to the department’s number two slot after spending 25 years as a prosecutor at the U.S. Attorney’s Office in Atlanta, said charging decisions will now be subject to review by senior level officials.

Yates said the new approach faced significant hurdles.

“Without an inside cooperating witness, preferably one identified early enough to wear a wire, investigators are left to reconstruct what happened based on a painstaking review of corporate documents” which often number in the millions, she said.

NYU Law School’s Program in Corporate Compliance and Enforcement hosted the event. Questions from the audience were not entertained.

IMAGE: Deputy Attorney General Sally Yates AP/Pablo Martinez Monsivais

For more on this story go to: http://www.newyorklawjournal.com/id=1202736903664/Probes-of-WhiteCollar-Crime-to-Target-Corporate-Leaders#ixzz3lRhUPad0

 

Related story:

Judges critical of DOJ praise new white-collar guidelines

By Zoe Tillman, From The National Law Journal

Two federal judges who have criticized the lack of prosecutions against senior executives in white-collar crime cases praised new U.S. Department of Justice guidelines announced on Thursday that target misconduct by individuals.

U.S. District Judge Jed Rakoff in New York and U.S. District Judge Emmet Sullivan in Washington have been vocal critics of how the Justice Department and other federal regulatory agencies prosecuted banks after the financial crisis in 2008. On Thursday, Rakoff and Sullivan called DOJ’s new focus on individual actors responsible for corporate wrongdoing a positive step.

“It seems to me to be a welcome improvement on past practices,” Rakoff told The National Law Journal in an interview. The department’s emphasis in recent years on banks and other companies, but not senior officers, was “misguided for many reasons, but the most obvious being that it’s individuals who commit the crimes,” he said.

Sullivan said in an email that, “from one who has often criticized deferred prosecution agreements for corporations as sweetheart deals that essentially require stockholders to pay the criminal fines for individuals who are criminally culpable, I applaud the new policies.”

The Justice Department on Wednesday sent a memo to U.S. attorneys nationwide outlining guidelines on “individual accountability for corporate wrongdoing.” Prosecutors were instructed to pay greater attention to senior executives and other individual actors during white-collar criminal and civil investigations. Corporations were admonished that they would not receive credit for cooperation if they did not turn over information on responsible persons.

Deputy Attorney General Sally Yates wrote in the memo that individuals responsible for wrongdoing would not escape liability under settlements with companies “absent extraordinary circumstances or approved departmental policy.”

Related: Probes of White-Collar Crime to Target Corporate Leaders

The Justice Department and other regulatory enforcement agencies faced public scrutiny over settlements reached with financial institutions that did not include charges against individuals in the aftermath of the financial crisis—including from members of the bench. Rakoff in February generally lamented the lack of individual prosecutions in white collar cases in a piece in The New York Review of Books.

It “seemed an astonishing act of faith,” Rakoff wrote, when the Justice Department entered into a $2.3 billion settlement with Pfizer Inc. in 2009 to resolve allegations of illegal off-label marketing of drugs that didn’t involve charges against individuals involved. He noted the government had entered into two previous agreements with Pfizer, neither of which involved charges against individuals, to resolve similar allegations.

After the financial crisis in 2008, Rakoff pushed back against settlements presented for his approval by the U.S. Securities and Exchange Commission in cases involving Bank of America and Citigroup. Rakoff expressed concerns at the time that the dollar amounts in those agreements were too low and that the banks escaped having to provide a full accounting of what they did wrong and who within the companies were responsible.

Rakoff, a former federal prosecutor, told the NLJ that the Justice Department shifted its focus away from individuals to the institutions over the past 15 to 20 years.

“Many of us think, and I speak here more as a former prosecutor and former defense lawyer, but also as a judge, that by far the greatest deterrent to white-collar crime is prison time for high level individuals,” he said.

‘No one ever goes to jail’

Earlier this summer at a meeting of D.C. federal judges, Sullivan criticized the lack of criminal prosecutions against individuals in white collar cases. “No one ever goes to jail,” he said. “I think it’s just unjust.”

Sullivan had previously criticized the Justice Department for agreeing to “sweetheart” deals with large financial institutions—offering deferred prosecution agreements, for instance, that delay criminal charges. Under these agreements, which were usually accompanied by multimillion-dollar financial settlements, if the corporation stayed out of trouble for a specified period of time and made internal reforms, the case were dropped.

At the judges’ meeting, Sullivan questioned why the Justice Department did not use deferred prosecution agreements as a tool to hold individuals accountable in these cases. In his email to the NLJ on Thursday, Sullivan said he thought these types of agreements could be used to hold individuals accountable in white collar cases without adding to “the country’s outrageous prison population.”

Sullivan in recent years pressed DOJ about the issue of individual accountability in court. In 2010, he reluctantly approved a $298 million settlement that included a deferred prosecution agreement between the Justice Department and Barclays Bank. The bank was accused of illegally facilitating transactions with countries subject to U.S. sanctions, including Cuba, Iran and Sudan.

Sullivan at the time questioned the Justice Department about why no individuals, especially no one from senior management at the bank, was held responsible. “Why isn’t the government getting rough with these banks?” the judge asked, according to news reports.

In 2014, in a case against Saena Tech Corp., which was accused of bribing a public official, Sullivan questioned why a company officer would receive immunity as part of a deferred prosecution agreement with the company.

“What about the fundamental fairness,though? I mean, he gets a free ride, and a lot of people have gone to jail arguably for lesser criminal culpability,” Sullivan asked during a hearing. The assistant U.S. attorney prosecuting the case, Bryan Seeley, replied that he didn’t think the officer would get a “free ride,” noting that the deal was contingent on cooperation and that it would have been difficult to charge the individual, who was based in South Korea

IMAGE: Emmet Sullivan, left, and Jed Rakoff, right. Credit: ALM

For more on this story go to: http://www.nationallawjournal.com/id=1202736885315/Judges-Critical-of-DOJ-Praise-New-WhiteCollar-Guidelines#ixzz3lRjDyCzc