Deputy Assistant Attorney General Matthew S. Miner of the Justice Department’s Criminal Division Delivers Remarks at the 5th Annual GIR New York Live Event
New York, NY
Remarks as prepared for delivery
Good morning and thank you for that gracious introduction.
I also want to thank both Joe Warin and Bruce Yanett for co-chairing this event.
It is truly a pleasure to be here with all of you as part of the Fifth Annual GIR New York Live event in my role as a Deputy Assistant Attorney General in the Criminal Division.
In this role, I’m responsible for overseeing both the Appellate and Fraud Sections, the latter of which houses the FCPA, Health Care Fraud, and Securities and Financial Fraud Units.
In total, I oversee around 160 career federal prosecutors and appellate specialists. For those who have worked in the Department, it will come as no surprise that I am impressed every day by the dedication and quality of the lawyers I help to manage.
The timing of this event is particularly relevant, as we are about to close out our current fiscal year.
As we approach this milestone, we have covered a lot of ground and I think that events like this are a great opportunity to underscore the achievements of our Fraud Section, which has been under the able direction of Acting Chief Sandra Moser and Acting Principal Deputy Chief Rob Zink over the past fiscal year. It is not always easy to operate in an acting capacity, but I think they’ve both performed very well and achieved some great results over the last year.
I also want to focus on what the Department has been doing over the past 12 months with regard to white collar policy, and there is a lot to talk about.
We have seen not only a significant number of cases, but also numerous changes in our approach to corporate white collar enforcement.
It was just about a year ago when, last November, the Department announced the implementation of the FCPA Corporate Enforcement Policy, which is enshrined in what is now the Justice Manual.
For those who may be scratching their heads, I’m referring to what was until very recently called the United States Attorney’s Manual or USAM.
The name change may take a little getting used to, but given that the policies in the Manual are applicable to all Department employees, not just Assistant U.S. Attorneys, I think the name change is appropriate.
As Deputy Attorney General Rod Rosenstein stated when announcing the FCPA policy change: “The new policy enables the Department to efficiently identify and punish criminal conduct, and it provides guidance and greater certainty for companies struggling with the question of whether to make voluntary disclosures of wrongdoing.”
Given my experience in private practice, I know firsthand the difficult decisions that management must make when they uncover misconduct.
Senior management, boards of directors and their advisors have to weigh many factors when deciding how to respond to misconduct.
But of all the decisions that need to be made, whether to voluntary self-disclose is perhaps one of the most difficult.
The goal of the FCPA Corporate Enforcement Policy is to encourage voluntary self-disclosures by making clear the benefits for companies that voluntarily self-disclose, fully cooperate and remediate, most significantly a presumption of a declination. It also spells out the Department’s expectations for companies to satisfy the standards in the policy.
If you believe, as I do, that corporations are rational actors that react to clearly-defined economic stimuli, then it follows that the Department’s more concrete guidance will have a positive effect.
While it has been in place for less than a year, we’ve already had three FCPA declinations thus far under the Policy: the declinations involving Dun & Bradstreet Corporation, the Insurance Corporation of Barbados Limited, or ICBL, and Guralp Systems Limited.
The declination letters for all of these matters are available on the Fraud Section’s FCPA website, and we will continue to post future declination letters for cases resolved under the Policy.
The declinations involving ICBL and Guralp are particularly noteworthy as they represent instances in which senior executives were implicated in connection with the improper conduct, and yet we nevertheless declined both cases under the Corporate Enforcement Policy.
ICBL and Guralp make clear that although aggravating circumstances can overcome the presumption for a declination, such circumstances by no means preclude a declination.
Companies making the decision of whether to voluntarily disclose should consider these cases, and recognize the significant benefits they can achieve through good corporate behavior under the Policy.
ICBL and Guralp also demonstrate our clear commitment to holding individuals accountable for transnational corruption. Both cases involved the prosecution of culpable individuals.
Voluntary disclosures and full cooperation allow prosecutors to gather evidence in a more timely and efficient manner, and to take investigative steps they might not otherwise have been able to take. The Corporate Enforcement Policy is an important tool in our investigation and prosecution of individuals.
If is for all of these reasons that in March of this year, then-Acting Assistant Attorney General John Cronan announced that the Criminal Division would consider the FCPA Corporate Enforcement Policy as “nonbinding guidance” in all Criminal Division corporate criminal cases, not just those involving violations of the FCPA.
This broader application of the principles contained in the Policy makes perfect sense – the principles contained in the FCPA Corporate Enforcement Policy are based on sound policy considerations that are a net plus to both the Department and companies.
Businesses thrive in a stable legal environment. A stable legal environment exists when laws are enforced consistently and fairly. And when business thrives, it benefits all of us.
Our role is not to impose penalties that disproportionately punish innocent employees, shareholders, customers, and other stakeholders – especially for companies that have taken steps to rectify and prevent misconduct from occurring.
That is why the FCPA Policy emphasizes the need for effective compliance and ethics programs – programs that foster a culture of compliance; that dedicate sufficient resources to compliance activities; and that ensure that experienced compliance personnel have appropriate access to management and to the board.
But we also recognize that even with the best compliance program, it is still possible for one or a few bad actors to engage in misconduct. That is why the Policy encourages companies to promptly report misconduct, fully cooperate and enact prompt and effective remedial measures.
We know most companies want to do the right thing, and we want to reward those companies, accordingly.
An example of how we can look to the principles contained in the FCPA Corporate Enforcement Policy in the context of other corporate cases is the declination we posted in March of this year for Barclays in connection with front-running of FX transactions connected to its client, Hewlett Packard.
In that case, Barclays FX traders allegedly misappropriated confidential information provided to Barclays from HP in connection with FX options and spot transactions, and deceived HP about the nature of its trading.
This is serious conduct that led to charges against individuals. Yet, we declined prosecution of the company due to a number of factors. Some of these factors included that Barclays timely and voluntarily self-disclosed the misconduct, conducted a thorough and comprehensive internal investigation, and fully cooperated in the criminal investigation, including by providing all known relevant facts about individuals involved in the misconduct. Barclays also took steps to enhance its compliance program, including by promulgating policies and procedures to reduce the prospect of future fraud and market manipulation. In addition, Barclays agreed to full remediation, including paying full restitution to HP and disgorgement of ill-gotten gains.
Of course, every case will be assessed individually and on its own merits. But I think it is safe to say that our approach toward Barclays may have been different if the bank had not voluntarily self-disclosed, fully cooperated and remediated. The Barclays declination is an example of the culture we are trying to foster and encourage – a culture of openness and cooperation where good decisions are encouraged and rewarded, appropriately.
It is again because these principles make so much sense that, this past July, I announced that going forward we will seek to apply the FCPA Corporate Enforcement Policy principles to mergers and acquisitions that uncover potential FCPA violations.
We felt this clarification was needed because the Department’s guidance regarding mergers and acquisitions that was announced in the 2012 FCPA Guide and elsewhere was not updated or otherwise incorporated into the FCPA Corporate Enforcement Policy. The clarification was intended to be just that – a clarification that the new Policy also applied to misconduct detected through M&A activity and due diligence.
Consistent with the goal of clarity and consistency, it is also why today I’m letting you know that we will also look to these principles in the context of mergers and acquisitions that uncover other types of potential wrongdoing, not just FCPA violations.
The last situation we want to create is one where corporations and their attorneys uncover a problem and then face uncertainty as to what to do next.
We are fully cognizant that in some instances an acquiring company has limited access to a target company’s data and records in pre-acquisition diligence. We also recognize that corporate deals often move quickly.
In those instances, if an acquiring company unearths wrongdoing subsequent to the acquisition, we want to encourage its leadership to take the steps outlined in the FCPA Policy, and when they do, we want to reward them for stepping up, being transparent, and reporting and remediating the problems they inherited.
Take, as a hypothetical, that a large pharmacy is in the process of expansion through the purchase of smaller and independent pharmacies. This is a highly regulated industry with multiple risk factors, including, for instance, the illegal distribution of prescription opioids. As you know, we are now facing one of the greatest addiction crises in the history of our country. While we would hope that the majority of opioids are initially prescribed in good faith by doctors trying to help their patients, and that the drugs are dispensed by pharmacies that are also working in good faith, the data indicates that there is unfortunately no shortage of medical professionals who seem only too willing to prescribe and dispense opioids for profit.
If an acquiring pharmacy company uncovers evidence of improper conduct such as this while undergoing due diligence, either pre or post acquisition, we want to encourage that company to come forward and voluntarily report the misconduct. In such a situation, we would, of course, continue to look to hold the individuals responsible for the misconduct to account, but we also want to foster good corporate decision-making and compliance. Our approach to corporate enforcement is one way that we can encourage this type of good corporate behavior.
At the Department, we know that there are many benefits when law-abiding companies with robust compliance programs are the ones to take over otherwise problematic companies.
Not only can the acquiring company help to uncover wrongdoing, but more importantly, the acquiring company is in a position to right the ship by applying strong compliance practices to the acquired company.
When an acquiring company conducts robust due diligence that unearths wrongdoing, reports that conduct to the Department, and engages in remedial measures, including extending already robust compliance to the acquired company, it frees up resources for the Department that may have otherwise been expended investigating the acquired company. Most importantly, it stops the misconduct.
Another policy change from this past fiscal year that I would like to highlight is one that addresses coordinated resolutions.
In May of this year, we implemented our new Coordination policy, often labeled our Anti-Piling On policy, that directly addresses issues that may arise when a company is faced with a combination of criminal penalties along with civil and/or foreign penalties. This policy is also contained in the Justice Manual.
While we’ve endeavored in the past to coordinate resolutions, prior to the roll out of the Anti-Piling On policy, there was no specific policy applicable to all Justice Department prosecutors.
Consistent with this approach, our decision to decline the Guralp matter that I referenced a few minutes ago considered not only the company’s voluntary disclosure, remediation and cooperation, but also to the fact that Guralp, a U.K. company with its principal place of business in the U.K., was the subject of an ongoing parallel investigation by the U.K.’s Serious Fraud Office (SFO) for violations of law relating to the same conduct, along with the fact that the company committed to accepting responsibility for that conduct with the SFO.
In another example from this past fiscal year, in the Société Générale case, we saw the first coordinated FCPA resolution with France.
That case resolved both FCPA violations and violations arising from its manipulation of the London InterBank Offered Rate or LIBOR.
With regard to coordination with French authorities, we agreed to credit approximately $300 million that Société Générale will pay to French authorities under its agreement, roughly equal to half the total criminal penalty otherwise payable to the United States in the FCPA case.
Another important aspect of that case was our determination that the company did not warrant a monitor due to its significant remediation, together with the company’s risk profile and ongoing monitoring by L’Agence Française Anticorruption.
We also saw the first ever coordinated FCPA resolution with Singapore in the case involving Keppel Offshore & Marine Ltd. Under that resolution, Brazil received approximately $200 million, equal to 50 percent of the total criminal penalty, and Singapore received up to approximately $100 million, equal to 25 percent of the total criminal penalty.
And just this morning, we announced an FCPA resolution with Petrobras, the Brazilian state-owned and state-controlled energy company. Under the terms of the global resolution, the company agreed to pay a combined total of $853.2 million in penalties to resolve the U.S. government’s investigation into FCPA violations in connection with its role in facilitating payments to politicians and political parties in Brazil, as well as a related Brazilian investigation.
The penalty reflects a 25 percent discount off the low end of the Sentencing Guidelines fine range due to the company’s full cooperation and remediation.
In related proceedings, Petrobras reached a settlement with the SEC and entered into an agreement to reach a settlement with the Ministerio Publico Federal in Brazil.
Under the non-prosecution agreement, the United States will credit the amount that Petrobras pays to the SEC and Brazil under their respective agreements, with the Department and SEC receiving 10 percent each and Brazil receiving the remaining 80 percent.
These are not isolated events. We continue to see a significant rise in global enforcement and cooperation with foreign authorities.
Which brings me to the next topic I would like to address – some of our preliminary enforcement stats for our Fraud Section for the fiscal year, which concludes at the end of this month.
First, though, I want to make clear that these are preliminary numbers based on publicly available case information, and that we still have a few days to go before year end. As a result, these numbers may change.
With that caveat, I’m pleased to say that for our FCPA Unit, under the leadership of Dan Kahn, we have announced eight corporate resolutions this year, four of which were coordinated with foreign authorities, including the Société Générale, Keppel Offshore and Petrobras matters that I just mentioned. In the aggregate, these cases involved approximately $925 million in total corporate U.S. criminal fines, penalties, and forfeiture.
These numbers are consistent with those for Fiscal Year 2017, in which we announced 11 corporate FCPA criminal enforcement actions involving approximately $1.15 billion in total U.S. fines, penalties, and forfeiture.
In addition, our FCPA prosecutors brought public charges against more than 30 individuals, and obtained 19 convictions. This is again consistent with last year, when the Unit charged 28 individuals and secured 23 convictions.
While we had no FCPA Unit trials over the past 12 months, we do have at least five scheduled over the next seven months.
This is on top of the three trials that took place in calendar year 2017.
I think it is particularly noteworthy because, as a former private practitioner and someone who commented on policy matters in that role, I know that a frequent criticism of FCPA enforcement practice was that these cases almost never found their way into court. Due in large part to the Department’s focus on individual accountability, more and more FCPA cases are being resolved before the courts.
To put this in perspective, from 2013 to 2016, there was only one FCPA-related trial.
In our Securities and Financial Fraud, or SFF Unit, now led by Brian Kidd, our prosecutors brought charges against 62 individuals, including several individuals charged with manipulating our commodities markets, and obtained 36 convictions.
These numbers compare favorably with the prior year, in which the SFF Unit announced charges against approximately 40 individuals, along with 41 convictions.
The SFF Unit also announced two corporate resolutions, which included the LIBOR manipulation conduct in the resolution involving Société Générale and front-running conduct by certain executives of HSBC Holdings plc. In addition, the Section announced the Barclays declination that I spoke about a few minutes ago.
In the HSBC case, the company entered into a deferred prosecution agreement and agreed to pay approximately $100 million in criminal penalties, disgorgement and restitution to resolve charges that it engaged in a scheme to defraud two bank clients through a multi-million dollar scheme commonly referred to as “front-running.”
Our SFF Unit attorneys were also busy litigating cases in courtrooms across the country, in cases like the one involving a former executive vice president of State Street Bank & Trust, who was convicted in June for his role in a scheme to defraud at least six of the bank’s clients through secret commissions applied to billions of dollars of securities trades.
In another important case, our SFF attorneys obtained a conviction in a case involving a Rhode Island woman who participated in a Jamaican lottery fraud scheme, which has affected about 100 identified victims with reported losses totaling more than $6.7 million.
Another trial in our SFF Unit resulted in the conviction of two Costa Rican residents who were involved in a $10 million telemarketing scheme that defrauded primarily elderly victims in the United States from call centers in Costa Rica.
Turning to our Health Care Fraud, or HCF Unit, which is managed by Joe Beemsterboer, we have already broken records, announcing charges involving 320 individuals, and 193 convictions. This is a significant increase from the prior year, when HCF Unit attorneys brought public charges against 220 individuals, with 178 announced convictions.
And just two days ago, we announced a $260 million global criminal and civil resolution involving HMA, a former major U.S. hospital chain.
The incredible success of our HCF Unit was on further display when, in June of this year, we announced a record-breaking health care and opioid takedown that involved charges against over 600 defendants, including 165 doctors, nurses and other licensed medical professionals, for their alleged participation in health care fraud schemes involving more than $2 billion in false billings.
Of those charged, over 160 defendants, including 57 medical professionals, were charged for their roles in prescribing and distributing opioids and other dangerous narcotics.
Over half of the defendants charged in the takedown are being prosecuted by Strike Force prosecutors from our HCF Unit and our U.S. Attorney’s Office partners.
For those of you who may not be familiar with it, our health care fraud Strike Force model represents a joint law enforcement effort that brings together the resources and expertise of the HCF Unit, the U.S. Attorney’s Offices in the Strike Force locations, as well as our law enforcement partners at HHS-OIG, the FBI, and the DEA.
This model has proven so successful that just a few weeks ago Assistant Attorney General Brian Benczkowski joined with the U.S. Attorneys in Philadelphia and Newark to announce the expansion of the Medicare Fraud Strike Force into the Newark/Philadelphia region, which represents the 12th location in which the Strike Force operates.
While these stats are impressive standing alone, they provide only a glimpse into the difficult and important work being done by our prosecutors and law enforcement partners.
Stats alone do not tell the story of the suffering and harm caused to victims, people like those, including the elderly, who suffer significant and sometimes devastating financial losses due to financial fraud schemes, or people who are denied government services because of foreign corruption, or companies that fail to win contracts on the merits because of bribery.
Stats don’t tell the story of cases like one our prosecutors brought in the Southern District of Texas, where we recently charged a doctor, his wife and two other employees with allegedly participating in a nearly 20 year conspiracy to defraud federal health care programs, billing over $240 million and receiving over $50 million in payments.
The stats don’t explain how the charged scheme not only allegedly took money from health care programs for unnecessary and excessive medical procedures and tests, but also allegedly harmed innocent children, disabled individuals and others by subjecting these patients to harmful and unnecessary toxic medications, including chemotherapy, and excessive radiation from frequent and unnecessary X-rays.
Stats don’t speak to the incredible suffering of addicts and their families that result when people like a Houston doctor and a clinic owner who were convicted at trial operated a pill mill that involved over 18,000 prescriptions for over 2.1 million dosage units of hydrocodone, and over 15,000 prescriptions for over 1.3 million dosage units of carisporodal, a muscle relaxer. The combination of these two drugs is a dangerous drug cocktail with no known medical benefit.
Thanks to the hard work of our prosecutors and law enforcement partners, last week those two individuals were each sentenced to 35 years in prison.
And stats don’t provide details into a case like the one involving HMA, in which the company pressured physicians, sometimes under threat of termination, to admit patients based not on need, but on predetermined target admission rates.
All of these successes are a testament to the hard work of our Trial Attorneys, Unit Chiefs, Assistant Chiefs and paralegals who work tirelessly to bring some of the Department’s most complex white collar cases.
But these successes do send a clear message: we remain steadfast in our commitment to holding those engaged in wrongdoing accountable.
In other words, those who are responsible for wrongdoing or the concealment of wrongdoing will continue to be investigated and prosecuted.
As counsel, advisors and compliance professionals, I know that many of you in attendance today are on the front lines of detecting and preventing misconduct.
In that role, I hope that you will view those of us at the Department of Justice as partners, not adversaries.
I hope when you see something, you will decide to come forward and say something.
As I have said before and firmly believe, when business and industry work with the Department, rather than against it, our public institutions and our country are stronger for it.
Thank you for your time and enjoy the rest of this conference.