Closed-door corporate enforcement
Why are white-collar defense lawyers getting policy updates that are withheld from the public?
An unhappy-looking architectural detail on the outside of the DOJ in Washington, D.C., via Mr.TinDC.
One major problem with the Justice Department’s obsession with resolving criminal cases against corporations with leniency agreements is the lack of transparency these agreements engender.
Leniency agreements — i.e., deferred and nonprosecution agreements — are the outcome of nonpublic negotiations between DOJ prosecutors and corporate defense attorneys.
That the strongest form of accountability most Big Businesses that break the law must confront is a collegial closed-door chat with prospective (or former) employees is among the grossest inequities in the U.S. legal system, which, to be sure, is rife with gross inequities.
The lack of transparency means that corporate criminals get to avoid the embarrassment, public scrutiny, and moral condemnation that comes with facing a judge and jury at trial.
It also means that, despite recent noble efforts of some judges, these agreements allow corporate criminals to avoid all but the most cursory court supervision.
Absent legislative action (such as the Accountability in Deferred Prosecution Act Rep. Bill Pascrell, Jr., introduced in 2014), the outcome of a 2016 D.C. Circuit ruling is that judges have no practical authority to challenge the leniency agreements prosecutors submit for their approval.
It means when it comes to leniency agreements — the DOJ’s default method for resolving corporate criminal cases — the appropriate consequences for corporate crime are whatever the prosecutors and corporate lawyers privately agree they are (and if your view on appropriate consequences differs from theirs, well, you might as well go start a Substack!).
This history of opacity and lack of oversight is part of why the optics behind the Biden DOJ’s corporate enforcement policy announcement last week were bad.
Senior DOJ official John Carlin appeared (virtually) before a private audience of white-collar defense lawyers to make a new corporate enforcement policy announcement. The Wall Street Journal’s Dylan Tokar covered the announcement, quoting Carlin on DOJ’s plans to “surge resources for corporate enforcement” (good news!) and relaying the department’s intention to emphasize corporate compliance (meh).
That the policy announcement was made before an audience of white-collar defense lawyers was irritating, but typical of recent DOJ practice. What was unusual about the announcement is that the DOJ has not made the full text of the speech available to the public, as it has for innumerable speeches on the section of its website designated for speeches.
Speeches like Carlin’s are one of the most important windows the public has into DOJ policy. That they are routinely delivered before private audiences is frustrating. That their actual news-making contents would be withheld from the general public — i.e., anyone not subscribed to either the Wall Street Journal or Global Investigations Review, which hosted the event — is unacceptable.
If Attorney General Merrick Garland’s DOJ is truly going to “surge” corporate enforcement resources in a way that results in renewed corporate accountability, that’s excellent news and a welcome shift from the previous administration.
But if the surge the DOJ is planning is one that only white-collar defense attorneys and corporate enforcement policy geeks like me are going to notice — well, I’m not so sure that counts as much of a surge at all.
Big Business Blotter news roundup:
BIDEN ADMIN ENFORCEMENT POLICY
Justice Department to Redouble Efforts in Combating White-Collar Crime, Official Says - WSJ
Although Mr. Carlin highlighted the ways in which the Biden administration’s approach to white-collar crime enforcement would be consistent with the past administrations, he also signaled the Justice Department’s current leadership could make corporate misconduct a higher priority than in recent years.
US to resume enforcement of unlawful bird deaths by industry - AP
The Biden administration said Wednesday it will draft rules to govern the killing of wild birds by industry and resume enforcement actions against companies responsible for deaths that could have been prevented, a longstanding practice that ended under President Donald Trump. The move came as North American bird numbers have plummeted in recent decades.
More on SEC Penalties Policy Shift - Radical Compliance
The bottom line: Grewal, like other senior officials at the agency, wants to see penalties actually deter corporate misconduct — which could well mean larger penalties than we’ve seen before.
SEC Digs Deeper Into Companies’ EPS Manipulation - WSJ
The SEC’s ongoing effort to scrutinize these companies falls in line with Chairman Gary Gensler’s far-reaching policy agenda bent on requiring stronger corporate disclosures and overhauling some Wall Street firms’ business models to better protect investors.
Where CFPB will focus fair-lending probes under new chief - American Banker
Acting CFPB Director Dave Uejio has been fast-tracking investigations for Chopra to review to ensure the CFPB has a healthy docket of cases dealing with racial equity.
FTC Targets False Claims by For-Profit Colleges - FTC
The Federal Trade Commission put 70 for-profit higher education institutions on notice that the agency is cracking down on any false promises they make about their graduates’ job and earnings prospects and other outcomes and will hit violators with significant financial penalties. The Commission is resurrecting its Penalty Offense Authority, found in Section 5 of the FTC Act, to ensure that bad actors pay a price when they break the law.
Biden Ends Workplace Immigration Raids, Reversing Trump Policy - NYT
The Biden administration announced on Tuesday that it would not conduct mass arrests of undocumented workers during enforcement operations at U.S. businesses, a reversal from Trump administration policies and the latest signal to millions of immigrants that they were not priorities for deportation. Known as work-site raids, such arrests have long been criticized by immigration advocates for spreading fear and dissuading workers from reporting labor violations out of concern that they would be arrested.
“Don’t take the recent slack in enforcement actions as a sign that this will continue. Everyone expects an uptick in scrutiny."
FRAUD / DECEPTION
FTC Orders “Made in USA” Repeat Offender to Pay Funds - FTC
Resident Home LLC and owner Ran Reske, will pay $753,000 to settle FTC charges that they made false, misleading, or unsupported advertising claims that their imported DreamCloud mattresses were made from 100% USA-made materials.
$20M lawsuit claims Altice reneged on its Keep Americans Connected pledge - FierceTelecom
The owner of a New York City barber shop has filed a $20 million class-action lawsuit against Altice, claiming that Altice reneged on its Keep Americans Connected pledge, which it signed in the early days of the pandemic. Artem Shalomayev, owner of 3715 Barber Shop in the Bronx, is suing on behalf of potentially thousands of other similarly-situated small business owners, according to Jon Norinsberg, the lawyer for the plaintiff.
WORKER SAFETY
In response to a complaint of unsafe working conditions and the employee’s death, the U.S. Department of Labor’s Occupational Safety and Health Administration initiated an investigation on April 21, 2021, and found Fred Loya Insurance Agency Inc. did not safely distance employees, failed to implement a health and safety plan and allowed symptomatic workers to remain on site. The company faces $23,406 in proposed penalties.
Trustworthy LLC, d/b/a “Trustworthy Roofing and Siding,” (Trustworthy) via its owner, Derico Ferreira, previously pleaded guilty before U.S. Magistrate Judge Mark Falk in Newark federal court to an information charging it with one count of willfully violating OSHA standards by failing to provide fall protection to employees engaged in the construction of a residential home, which caused the death of an employee.
A 48-year-old worker for Tootsie Roll Industries LLC suffered a partial finger amputation after their employer allowed bypassed safety locks on a machine's access doors that enabled a bag sealer to close on an employee's finger.
OSHA cited the paint manufacturer for two willful and 33 serious safety violations of the agency’s process safety management and hazardous waste operations and emergency response procedures. OSHA also noted violations involving lack of personal protective equipment and employee training. The agency proposed $709,960 in penalties and placed Yenkin-Majestic in its Severe Violator Enforcement Program.
COMMENTARY / ANALYSIS
Is Chevron’s Vendetta Against Steven Donziger Finally Backfiring? - The Nation
Just before sentencing, the United Nations High Commissioner for Human Rights issued an opinion in Donziger’s favor, ruling that his two years of house arrest was illegal under international law and that he had been denied the right to a fair trial. A panel of five prominent jurists called that confinement “arbitrary” and said that both judges, Kaplan and Preska, had shown “a staggering lack of objectivity and impartiality.” In court, Preska briefly acknowledged the UN findings only to dismiss them.
Corporate Criminal Law Doesn’t Exist - Corporate Crime Reporter
“The United States’ purported system of corporate criminal justice lacks all four features. The biggest corporate criminals routinely side-step all criminal procedure and any possibility of conviction by cutting deals with prosecutors, trading paltry fines and empty promises of reform for government press releases praising their cooperation. The real question is not whether the United States should retain corporate criminal law, but what it would take for the United States to have a corporate criminal justice system in the first place.”