Justice News

Assistant Attorney General Leslie R. Caldwell Delivers Remarks at the Second Annual Global Investigations Review Conference
New York, NY
United States
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Tuesday, September 22, 2015

Thank you Bruce [Yannett] and Joe [Warin] for that kind introduction. 

It is a pleasure to be here in New York at this second annual conference focusing on international investigations.  

As you all are aware, two weeks ago, Deputy Attorney General (DAG) Sally Yates delivered an address at NYU Law School announcing some policy shifts in the way the department will do business going forward in corporate criminal and civil investigations.  From my perspective as the head of the Criminal Division, the DAG’s announcement strongly reinforced what we have been doing for a long time. 

Indeed, at this very conference last year, my friend and former colleague, Marshall Miller, discussed the Criminal Division’s approach to investigating and prosecuting corporate misconduct, including our commitment to holding individual wrongdoers accountable.  He described how we evaluate the cooperation of corporate entities and explained that for a corporation to receive credit for cooperating in a government investigation, the company must focus, whenever possible, on identifying the individuals responsible for the criminal conduct.  And companies must provide that information to the government in a timely manner. 

As the DAG said at NYU Law School, our focus on individuals stems from the reality that corporations act through human beings, and that justice usually requires identifying those responsible for criminal conduct and holding them personally accountable.  Prosecuting the corporate entity, and imposing a fine and other impersonal conditions, simply is not enough – in most instances – to fully punish and, more importantly, deter corporate misconduct. 

The new policy guidance announced by the DAG is premised on that straightforward point, and forcefully focuses all federal prosecutors on pursing individual accountability for corporate criminal conduct.  That focus, in turn, should send a powerful message to those who would engage in misconduct, as well as to companies that have engaged in wrongdoing and are seeking leniency in exchange for cooperating with a department investigation.

Before I discuss the new policy guidance in more detail, however, I would like to recap some of our recent prosecutions that illustrate how the department’s approach plays out in practice – both how we take corporate cooperation into account and how we emphasize the prosecution of individuals responsible for corporate wrongdoing.  Although these prosecutions predate the announcement of the new guidance, they were undertaken consistent with its approach to individual accountability and cooperation credit, and our experiences in these cases and others contributed to the formulation of the guidance.  I would then like to return to a discussion of the new guidance and talk about how I see it playing out in practice.

Not long after last year’s conference, you got a good illustration of our approach in practice.  In December, Alstom S.A., the French power company, pleaded guilty to violating the Foreign Corrupt Practices Act (FCPA).  Alstom admitted to its criminal conduct and agreed to pay a penalty of over $772 million, the largest ever foreign bribery resolution with the Department of Justice.  In addition, Alstom’s Swiss subsidiary pleaded guilty to conspiracy to violate the anti-bribery provisions of the FCPA.  Two U.S.-based subsidiaries also admitted to conspiring to violate the FCPA and entered into deferred prosecution agreements (DPAs).

The investigation also resulted in criminal charges against five individuals, including four corporate executives, in connection with the bribery scheme.  To date, four of those individuals, including three of the corporate executives, have pleaded guilty.

In reaching the global corporate resolution with Alstom, we considered many factors, not the least of which included the company’s failure to voluntarily disclose the misconduct and its refusal to cooperate with our investigation until years later, after we already had charged several company executives.

While I mention this case primarily as an example of what happens when companies decide not to cooperate with our investigations, it also demonstrates that the Criminal Division will not be thwarted by a lack of corporate cooperation.  As we did in this case, we will conduct our own investigation, we will use an array of traditional investigative techniques, we will develop our own evidence and we will prosecute culpable individuals as well as the company.   

In addition to the Alstom case, we resolved two other notable FCPA investigations with corporate resolutions and guilty pleas from the responsible corporate executives.

In June, IAP Worldwide Services (IAP) entered into a non-prosecution agreement (NPA) in which it agreed to pay a $7.1 million penalty to resolve foreign bribery-related charges.  At the same time, a former vice president of IAP pleaded guilty to conspiracy to violate the FCPA. 

In July, Louis Berger International, a New Jersey-based construction management company, entered into a DPA in which it admitted to conspiring to violate the anti-bribery provisions of the FCPA and agreed to pay a $17.1 million criminal penalty.  In addition, two of the company’s former executives pleaded guilty to FCPA charges. 

In entering into the these agreements with IAP and Louis Berger International, the Criminal Division considered, among other factors: (1) the companies’ cooperation with the investigations, including voluntarily making U.S. and foreign employees available for interviews, and collecting, analyzing and organizing key evidence; (2) the companies’ extensive remediation efforts, including terminating the employees responsible for corrupt payments; and (3) the companies’ demonstrated commitment to improving their compliance programs and internal controls.  Both companies also agreed to continue to cooperate in the ongoing investigations of their officers, directors, employees, agents and consultants.

Our focus on the prosecution of culpable individuals extends beyond the FCPA context.  Most of you are likely familiar with the international investigation into the manipulation of benchmark interest rates, including the London Interbank Offered Rate (LIBOR).  To date, the department has criminally charged 12 individuals from three different financial institutions in this investigation and three of these individuals have pleaded guilty.

Additionally, that investigation yielded another example of a corporation that decided not to cooperate with our investigation until late in the game.  In April, Deutsche Bank Group Services, a U.K.-based subsidiary of Deutsche Bank AG, pleaded guilty to wire fraud and admitted its role in manipulating the LIBOR.  The subsidiary also agreed to pay a $150 million fine.  The parent company entered into a DPA and agreed to pay an additional $625 million penalty to resolve criminal fraud and antitrust investigations relating to the bank’s manipulation of both the LIBOR and another benchmark interest rate.  The DPA also required the imposition of a corporate monitor.

Deutsche Bank was the sixth bank to resolve LIBOR-related charges, and it paid the highest financial penalty for its misconduct.  In reaching this resolution, we specifically noted in the documents resolving the matter that Deutsche Bank’s cooperation fell short in some important respects.  For example, the bank was slow to cooperate fully with the government’s investigation, and was not proactive in its investigation or disclosure.  Although Deutsche Bank’s cooperation at the outset of the government’s investigation was inadequate, it did improve over time, and we did credit that improvement.

We are applying the same metrics to our corporate investigations and prosecutions in other contexts.  This past year, the Criminal Division secured the convictions of 11 individuals for their roles in a $158 million Medicare fraud scheme involving Houston’s Riverside General Hospital.  Six defendants pleaded guilty.  Five other defendants were convicted at trial, including the former hospital president.  In June, some of these defendants were sentenced to prison terms ranging from 12 to 45 years.

Going forward, the department will continue to sharpen our focus on the individuals responsible for corporate criminal conduct.  As the DAG stated, “[f]undamentally,” the new guidance will “ensure that all department attorneys – from main justice to the 93 U.S. Attorney’s Offices across the country – are consistent in using our best efforts to hold individual wrongdoers accountable.”

In addition to her speech at NYU, the DAG also issued a department-wide memorandum regarding individual accountability for corporate wrongdoing.  In doing so, she identified six specific steps that the department is taking to enhance our ability to hold individual corporate wrongdoers accountable.

First, as set forth in the guidance, to qualify for cooperation credit, corporations must identify all individuals involved in the wrongdoing and must provide to the government all available relevant evidence implicating those individuals.  This requirement builds on the Principles of Federal Prosecution of Business Organizations – or the Filip Factors – which direct prosecutors to evaluate a corporation’s “willingness to cooperate in the investigation of [its] agents.”  The Principles further direct prosecutors to consider the corporation’s “willingness to provide relevant information and evidence and identify relevant actors within and outside the corporation, including senior executives.”

The new guidance flows directly from the familiar direction provided in the Filip Factors.  It emphasizes that, to the extent that a company elects to cooperate, it must provide all relevant facts – to which it has access – relating to the misconduct at issue, including all facts about the individuals responsible for the misconduct.

This means that companies seeking cooperation credit must affirmatively work to identify and discover relevant information about culpable individuals through independent, thorough investigations.  Companies cannot just disclose facts relating to general corporate misconduct and withhold facts about the responsible individuals.  And internal investigations cannot end with a conclusion of corporate liability, while stopping short of identifying those who committed the criminal conduct. 

We recognize, however, that a company cannot provide what it does not have.  And we understand that some investigations – despite their thoroughness – will not bear fruit.  Where a company truly is unable to identify the culpable individuals following an appropriately tailored and thorough investigation, but provides the government with the relevant facts and otherwise assists us in obtaining evidence, the company will be eligible for cooperation credit.  We will make efforts to credit, not penalize, diligent investigations.  On the flip side, we will carefully scrutinize and test a company’s claims that it could not identify or uncover evidence regarding the culpable individuals, particularly if we are able to do so ourselves. 

As I have said before, it is not our intent to outsource our investigation of corporate wrongdoing to companies and their outside advisors.  As in the past, we will not sit idle, waiting for a company to conduct or complete its investigation.  Regardless of a company’s cooperation, federal agents and prosecutors will conduct thorough investigations.  If, through this process, we are able to identify the culpable individuals when the company itself did not do so, as well as evidence that would support the charging and prosecution of those individuals, we will assess whether that evidence truly was unavailable to the company. 

We, of course, recognize that we sometimes can obtain evidence that a company cannot.  We often can obtain from third parties evidence that is not available to the company.  Also, we know that a company may not be able to interview former employees who refuse to cooperate in a company investigation.  Those same employees may provide information to us, whether voluntarily or through compulsory process.  Likewise, there are times when, for strategic reasons, we may ask that the company stand down from pursing a particular line of inquiry.  If so, the company will not be penalized for failing to identify facts subsequently discovered by government investigators.

Some may be concerned that the new policy guidance will require companies to conduct ever more extensive – and expensive – investigations to obtain credit for cooperating.  That is not the case.  Quality internal investigations have always sought to uncover the wrongdoing and the wrongdoers.  Nothing has changed in this regard.  As we have said before, we are not asking companies to boil the ocean every time they find evidence of wrongdoing.  We expect investigations to be thorough and tailored to scope of the wrongdoing.  To the extent companies and their counsel are unclear about what this means, I make this suggestion: call us.  I have made this offer in the past, and the DAG made it again in her recent remarks.  While we cannot and will not direct a company’s internal investigation, we remain willing to maintain an open dialogue about our interests and our concerns.  An open and transparent dialogue between company counsel and the prosecutors should save companies from aimless and expensive investigations.

I also want to make clear that the new guidance does not change existing department policy regarding the attorney-client privilege or work product protection.  Prosecutors will not request a corporate waiver of these privileges in connection with a corporation’s cooperation.  

While the renewed focus on corporate cooperation in the newly-issued guidance has garnered the most attention, the other points are worth mentioning as well.  The remaining five points relate to how department prosecutors will approach cases involving corporate criminal conduct, although they may have a less direct effect on how corporations conduct their internal investigations.

As a second point, the memorandum provides that corporate investigations will focus on individuals from the outset.  This is, in a sense, the flipside of the first point: just as we expect corporations seeking cooperation credit to provide relevant facts about culpable individuals, so do we expect our prosecutors to maintain a focus on the identification and prosecution of culpable individuals at all stages of an investigation.

Third, when the nature of the allegations warrant, the department’s criminal and civil attorneys will coordinate efforts in corporate investigations and consult with their law enforcement partners in other federal agencies.  And they will do so in the early stages of an investigation.  This reflects our goal of ensuring that we confront corporate wrongdoing in an appropriate manner in every case.  Likewise, it ensures that we will have a timely opportunity to obtain appropriate remedies in every investigation. 

Fourth, absent extraordinary circumstances and high-level approval, corporate resolutions will not protect individuals from criminal or civil liability.  This puts new force behind pre-existing department policies in this area. 

Fifth, all corporate resolutions will include a clear plan to resolve potential related cases against individuals, and all decisions declining to prosecute or to bring civil actions against potentially culpable individuals must be approved by a U.S. Attorney or Assistant Attorney General, or their designees. 

Sixth and finally, civil attorneys, too, will focus on individuals.  Civil enforcement actions also are intended to hold persons accountable and deter future misconduct. 

Overall, the new policy guidance builds upon the core considerations of the existing Principles of Federal Prosecution, but also represents a strong step forward to promote and better reflect the importance of individual accountability.  Those counsel who are used to dealing with the Criminal Division in investigations like the ones I described earlier may not ultimately see the new policy guidance as anything radical; and those looking from the outside at the practice of corporate criminal law should, as the DAG said, see only the exercise of common sense. 

But those who previously believed they could obtain cooperation credit without disclosing relevant facts about culpable individuals, or who advised clients that the department was more interested in a corporate resolution and a large fine rather than accountability for the people responsible for the crime, should hear a new message and see a different approach.

No individual or entity is above the law.  The Criminal Division will continue to investigate and prosecute corporate misconduct and, with or without corporate cooperation, is committed to holding individuals accountable for criminal misconduct – whether it occurs in a boardroom, a C-suite or a regional sales office – in the U.S. or in another part of the globe. 

Thank you.

Updated January 8, 2016