About the DOJ’s Disappointing Corporate Crime Enforcement Update
Federal Policy Changes Inadequate for Reversing Plunging Corporate Prosecutions
Deputy Attorney General Lisa Monaco announced policy changes and shared a memo last week that the Department of Justice framed as strengthening the prosecution of corporate crime.
I’ll be blunt: The mixed bag of modest changes Monaco announced are woefully inadequate to the task.
As Public Citizen’s president, Robert Weissman, noted in a statement released following the DOJ announcement, “Abandoning the egregious, corporate-crime-enabling policies of the Trump administration is of course necessary, but it is hardly sufficient.”
Enforcement Abyss, the latest Public Citizen report on U.S. Sentencing Commission data, found that corporate prosecutions plunged to a record low of 90 during President Biden’s first full fiscal year in office. This is less than half of the average number of corporate prosecutions over the previous 25 years.
The Deputy Attorney General acknowledged this fact, noting “we cannot ignore the data showing overall decline in corporate criminal prosecutions over the last decade.”
But the policies the department is packaging as strengthening corporate enforcement will do little to reverse this trend.
Indeed, some may even make things worse.
The highlight of the memo is the department’s embrace of policies that encourage corporations to “claw back” compensation from executives and managers whose bonuses can balloon as a result of criminal profiteering. Executive compensation schemes that reward prioritizing short-term gains over all other considerations incentivize lawbreaking, as Public Citizen has shown. A countervailing disincentive for such misconduct is a welcome change.
More disappointing is the DOJ’s pledge to “disfavor” repeatedly rewarding big corporations that repeatedly break the law with leniency agreements (non-prosecution or deferred prosecution agreements). The Deputy Attorney General echoed Public Citizen’s report on the DOJ repeatedly entering these leniency deals – which enable big companies to avoid prosecution – by observing between 10% and 20% corporate crime resolutions involve repeat offenders. The crisis of corporate recidivism shows the DOJ should end the use of these leniency agreements for all corporate offenders, not merely disfavor them for recidivists.
But the most worrisome part of the new policy – the part that could actually accelerate the crisis of corporate impunity instead of addressing it – is its excessive faith in voluntary self-disclosure.
Essentially, the Justice Department has decided to place so much emphasis on rewarding corporations that come forward to confess that they are promising not to prosecute corporate criminals that confess.
From the announcement:
Absent aggravating factors, the Department will not seek a guilty plea when a company has voluntarily self-disclosed, cooperated, and remediated misconduct.
Simply put, the math is easy: voluntary self-disclosure can save a company hundreds of millions of dollars in fines, penalties, and costs. It can avoid reputational harms that arise from pleading guilty. And it can reduce the risk of collateral consequences like suspension and debarment in relevant industries.
If you look at recent cases, you can see the value proposition. Voluntary self-disclosure cases have resulted in declinations and non-prosecution agreements with no significant criminal penalties. By contrast, recent cases that did not involve self-disclosure have resulted in guilty pleas and billions of dollars in criminal penalties, this year alone.
The DOJ’s interest in giving corporate offenders an incentive to step forward and come clean is clear. But handing out get-out-of-jail-free cards for criminal corporations is a step too far, especially when one stops to consider the tremendous societal, economic, and environmental damage that corporate crime can cause. Reckless corporations cause terrible, widespread harms. The consequences in our criminal code of causing such harm should not be blithely or routinely waved away when the offenders are businesses. The DOJ can always offer more favorable plea deals with corporations that come forward.
This policy – which expands on policies instituted by the Obama and Trump administrations – places a great deal of emphasis on granting leniency agreements as rewards for corporations. Going forward, it might well increase their usage.
It should already be clear that closed-door deals between prosecutors and corporate defense lawyers are a poor deterrent for corporate crime. But this policy could mean this practice becomes even more firmly entrenched as “business as usual” for corporate offenders.
All that said, individual prosecutors are the ones who implement enforcement policy. The intention to strengthen enforcement appears sincere, and some prosecutors may find ways to use the new policy changes to bring tougher cases.
Marginal improvements are, nonetheless, improvements.
But after watching these enforcement trends worsen for years and years – and witnessing the catastrophic underenforcement against corporate crime, even as law enforcement against low-level offenders is increasingly weaponized – I can’t help but see this as another missed opportunity, one more time when a powerful institution has lacked the courage to meet the challenge before it.
(And when I say “lacked the courage,” there’s a specific synonym I have in mind.)
Big Business Blotter News Roundup
TOP NEWS
Johnson & Johnson and a New War on Consumer Protection - The New Yorker
Deploying a legal maneuver first used by Koch Industries, Johnson & Johnson, a company valued at nearly half a trillion dollars, with a credit rating higher than that of the United States government, declared bankruptcy. Because of that move, the fate of forty thousand current lawsuits and the possibility of future claims by cancer victims or their survivors now rests with a single bankruptcy judge in the company’s home state, New Jersey. If Johnson & Johnson prevails and, as Berg puts it, “weasels its way out of everything,” the case could usher in a new era in which the government has diminished power to enforce consumer-protection laws, citizens don’t get to make their case before a jury of their peers when those laws fail, and even corporations with long histories of documented harm will get to decide how much, if anything, they owe their victims.
How Deadly Bacteria Spread in a Similac Factory—and Caused the US Formula Shortage - Bloomberg
More than two dozen families have sued Abbott for product liability, fraud, and negligence. Abbott says it’s “very sympathetic” to the families but believes “these suits are without merit.” The FDA is under investigation by the Office of Inspector General for the US Department of Health and Human Services. At Sturgis, the company failed to prevent the spread of a pathogen that’s been known for decades to imperil infants, the regulator missed it, and the consequences are accumulating.
ENFORCEMENT POLICY
“We are not seeing any of the agencies bringing many cases. But the cases that the CFPB and the FTC have brought over the last eighteen months have been tougher. They are pursuing more complex or novel theories. And that’s a result of both new leadership, but also the FTC’s AMG Supreme Court decision limiting how it can bring its cases.”
US Gets Bolder in Probing Companies for Defrauding Government - Bloomberg
Big Law attorneys defending cases under the Civil War-era False Claims Act say enforcers are less sympathetic to pandemic-era concerns that penalties could drive health-care providers and other employers out of business. Justice Department attorneys, in collaboration with private whistleblowers who file most false claims litigation, are also pursuing sophisticated FCA cases that rely on advanced data analysis and novel legal theories while gaining leverage with the threat of parallel criminal probes.
Fake 'Made in the USA' cases have increased dramatically since 2016. Here's why. - USA Today
The $200,000 fine levied against a Utah clothing company for ripping out "Made in China" tags and replacing them with "Made in the USA" labels is just the latest example of the Federal Trade Commission's stepped-up enforcement efforts that started during President Donald Trump's administration.
Enforcement: The Untapped Resource - Democracy Journal
[W]e have ample evidence to suggest that arguments resting on popularity or principle alone are rarely enough to sway the likes of Joe Manchin or Kyrsten Sinema. And while neither has admittedly proven a particularly good faith negotiator, both senators have consistently made at least one thing clear: they want to cut the deficit. To win over these stubborn gatekeepers, those who support funding a corporate crackdown should not shy away from making their case in language that the senators will understand: Increasing enforcement budgets is the fiscally responsible choice.
CORRUPTION
Five years after a Siskiyou County measure that would have required companies to get permits to bottle water was voted down in an election, Crystal Geyser Water Co. has been fined $67,508 for not disclosing its role in helping to defeat the measure.
POLLUTION
In a settlement announced this week, BP agreed to pay nearly $3 million dollars in penalties and for environmental projects to resolve a 2019 lawsuit that charged the company with repeatedly releasing illegal levels of dangerous air pollution at its Whiting refinery.
TECH
DOJ Is Preparing to Sue Google Over Ad Market as Soon as September - Bloomberg
The US Justice Department is preparing to sue Google as soon as next month, according to people familiar with the matter, capping years of work to build a case that the Alphabet Inc. unit illegally dominates the digital advertising market.
FTC threatens to sue firm allegedly revealing abortion clinic visits - The Washington Post
The agency’s proposed complaint, against Idaho-based Kochava, argues the company violates laws that prohibit “unfair or deceptive practices” by allowing its customers to license data collected from mobile devices that can identify people and track their visits to health-care providers.
Banks Nearing $1 Billion Settlement Over Traders’ Use of Banned Messaging Apps - WSJ
The total amount of fines will likely top $1 billion, the people said, and will be announced by the end of September. The roster of banks poised to pay $200 million each includes Bank of America Corp.,Barclays PLC, Citigroup Inc., Deutsche Bank AG, Goldman Sachs Group Inc., and Morgan Stanley and UBS Group AG, the people said. Jefferies Financial Group Inc. and Nomura Holdings Inc. are nearing settlements with regulators but will pay lower fines, reflecting their smaller size, the people said.
Instacart to Pay DC $2.5 Million in Lawsuit for Misued Consumer Tips - The DC Post
Racine filed the lawsuit in 2020, alleging that Instacart falsely led consumers to believe that service fees charged on orders would be tips intended for delivery staff from 2016 to 2018. However, the company used the tips to support its operations, and also failed to pay sales taxes, according to the lawsuit.
SAFETY
Lawsuit alleges utility company responsible for deadly McKinney fire - LA Times
Residents whose homes and property were destroyed or damaged in the fire claim the utility company “negligently, recklessly, and willfully failed” to inspect and maintain its equipment in dry vegetation, according to their complaint filed on Monday in Sacramento Superior Court. They argue PacifiCorp should have been aware that the conditions surrounding its equipment and the strong winds and low humidity created a hazard that led to the wildfire.
Federal indictment: Black Diamond Coal accused of violating health and safety standards - Lex18
Black Diamond Coal is accused of certifying false statements and knowingly submitting CPDM data representing valid shift samples when the CPDM had not been worn by the designated miner in the mine as required by regulations, according to the indictment. If convicted, Black Diamond Coal could face a fine of up to $250,000 on the charge of willfully violating health and safety standards and a fine of up to $200,000 on the charge of certifying a false record. Each count could also carry up to five years of probation. Perkins faces three charges, two counts of making a false statement and one count of knowingly violating health and safety standards.
EXECUTIVE ACCOUNTABILITY
Allen Weisselberg, a Trump Org employee for decades, pleads guilty to felony charges - NPR
The Trump Organization remains a defendant, charged with 14 felonies including conspiracy, grand larceny, and fraud. Last week, the judge in the case scheduled jury selection to begin Oct. 24. If convicted at trial, Trump's company could face steep financial penalties.
Federal conspiracy, fraud case against former Blue Bell executive ends in mistrial - NPR
Jurors earlier this week could not come to a consensus regarding the former CEO’s role in the deadly outbreak. The Brenham-based creamery previously pleaded guilty to distributing adulterated products and agreed to pay millions in fines, forfeitures and civil settlement payments.