Justice News

Remarks by Principal Deputy Assistant Attorney General for the Criminal Division Marshall L. Miller at the Global Investigation Review Program
New York, NY
United States
Wednesday, September 17, 2014

Thank you, for that kind introduction.  As a born and bred New Yorker, it is a pleasure to be back in my hometown.

I want to focus my comments today on how we in the Criminal Division of the Department of Justice are addressing criminal conduct when it takes place at corporations and other institutions.  I’ll begin with a short discussion about our evolving approach to such investigations.  Then, I’ll turn to our thought process in deciding how to resolve charges against corporations with criminal exposure – or whether to bring criminal charges at all. 

Some years ago, there was a perception that the Justice Department outsourced investigations of corporate criminal conduct to private law firms, then sat back and waited for presentations and memos and hot docs to roll in.  At the Criminal Division, nothing could be farther from the truth.

As much as we encourage cooperation, we do not rely upon internal investigations to make our cases.  A company’s cooperation is just one of many tools we use to further our investigations.  It is not an insignificant tool, and it can expedite the department’s ability to act, but we successfully prosecute complex cases regardless of a company’s cooperation. 

As in any other type of case, the Criminal Division conducts its own active investigation of criminal misconduct at a corporation, even when an internal investigation is underway.  We serve subpoenas, execute search warrants, interview witnesses, and use a host of other mechanisms to obtain evidence. 

Today, in the Criminal Division, we are capitalizing on the cooperative relationships we have developed with foreign prosecutors, law enforcement and regulatory agencies to better access evidence and individuals located overseas.  Even more significantly, we have dramatically increased our coordination with foreign partners when they are looking at similar or overlapping criminal conduct – so that when we engage in parallel investigations, they complement, rather than compete with, each other. 

In fact, I flew into New York last night not from Washington but from London, where we are coordinating closely to add a new dimension to our countries’ historic special relationship, this time in the arena of white collar law enforcement.

And in today’s Criminal Division, we are vigorously employing proactive investigative tools that may not have been used frequently enough in white collar cases in past years:  tools like wiretaps, body wires, physical surveillance, and border searches, to name just a few. 

In one recent fraud investigation, Frederic Cilins, a French citizen, was captured on tape directing a witness to “destroy everything, everything, everything,” and saying that “we need to urgently, urgently, urgently destroy all of this.”  Unbeknownst to Mr. Cilins, his trusted cohort was actually a witness working for the FBI, and his obstructive instructions were captured on tape.  Faced with that damning evidence, Cilins recently pleaded guilty to obstruction of justice.

Similarly, in another recent Foreign Corrupt Practices Act (FCPA) investigation, a group of executives at BizJet International, a US-based subsidiary of the Lufthansa corporation, engaged in a scheme to funnel bribes to Mexican and Panamanian officials.  When one of the conspiring executives began cooperating with the investigation, he wore a body wire and recorded the scheme’s participants as they plotted.  The result: four executives and BizJet have now been charged with FCPA crimes; three of them – including the chief executive officer (CEO) and president – have pled guilty; and Bizjet entered into an eight-figure deferred prosecution agreement, admitted the full scope of its criminal conduct, replaced its leadership team, and overhauled its compliance programs.

Such proactive investigative tools – previously used primarily in organized crime and drug cases – have become a staple in our white collar investigations.  I can promise you we will continue to use them.

And when corporations engaged in wrongdoing choose not to cooperate – which, of course, they have every right to do – the Criminal Division will make the cases on our own.

An excellent example is the Marubeni case – an FCPA investigation stemming, in part, from a seven-year scheme to pay bribes to Indonesian officials in exchange for a $118 million power contract.  When the Criminal Division learned of that conduct and launched an investigation, Marubeni opted not to cooperate at all.  What ensued was an extensive multi-tool investigation involving recordings, interviews, subpoenas, mutual legal assistance treaty requests, the use of cooperating witnesses, and more.  Today, four individual executives of Marubeni’s consortium partner have been charged with FCPA crimes; three of the executives have pleaded guilty to those crimes; and Marubeni itself was charged and pled guilty to violating the FCPA.  And the investigation continues to grow. 

Marubeni decided to roll the dice.  I’m guessing they may have had some gambler’s remorse when the dice came to rest.

Other companies have taken a different approach.  Earlier this year, we announced charges against the former co-CEOs and general counsel of PetroTiger Ltd. for paying bribes to a Colombian official to secure a $39 million oil services contract.  The general counsel and one of the CEOs have pleaded guilty to bribery and fraud charges, and the other former CEO is headed for trial in January.  But unlike in the Marubeni case, this conduct was brought to the attention of the department through voluntary disclosure by PetroTiger, which cooperated fully with the department’s investigation.  Notably, no charges of any kind were filed against PetroTiger, and no non-prosecution agreement was entered.

This is all to say: we would like corporations to cooperate.  We will ensure that there are appropriate incentives for corporations to do so.  But if there is no cooperation, we will continue to investigate and prosecute the old-fashioned way.  And companies will face the consequences. 

Now, a few observations about the developing landscape of corporate resolutions.  The last year has made crystal clear that the Department of Justice will use every legal avenue to hold corporations responsible for criminal conduct.  The guilty pleas from BNP Paribas and Credit Suisse, two of the world’s largest financial institutions, have demonstrated once and for all that no institution is too large to prosecute.

At the Criminal Division, we’ve shown that we will pursue the full range of corporate resolutions – from non-prosecution agreements and deferred prosecution agreements to guilty pleas – sometimes all in the same case, as we did just last week with Hewlett-Packard.  In that case, we secured a guilty plea from the HP subsidiary where the most extensive criminal conduct occurred, a deferred prosecution agreement from a second subsidiary, and a non-prosecution agreement from a third, calibrating each resolution to address each entity’s culpability.  In all, the company paid $109 million in penalties to the Justice Department and the U.S. Securities and Exchange Commission and overhauled its accounting, reporting and compliance programs.  And the investigation continues, as we seek to hold all culpable parties responsible for their actions.

Now, given the sophistication of this audience, nobody here needs an introduction to the Principles of Federal Prosecution of Business Organizations, or the Filip factors, upon which we base our corporate charging and resolution decisions.  I suspect that nearly everyone in this audience has given presentations on behalf of corporate clients regarding those factors.  In fact, both in Brooklyn and now in Washington, I have sat across the table from many of you during those presentations.

I want to focus today on an aspect of those factors that I believe, at times, receives insufficient attention – but that lies at the heart of our approach at the Criminal Division.  And that is what the factors have to say about the importance of individual prosecutions to the decision on how to approach a corporation.

Let me start by explaining the lens through which we view corporate cooperation.  Now, the Department frequently touts the benefits of corporate cooperation and the perils of opting not to cooperate.  The lack of timely and complete cooperation, which effectively frustrated the pursuit of individual prosecutions, was one of the tipping points that led to the charges, guilty pleas, and landmark monetary penalties in the BNPP and Credit Suisse cases.  By contrast, in the paradigmatic case involving a declination – the Morgan Stanley case from 2012 – corporate cooperation was a prime motivating factor.

In publicly announcing that declination – an unusual move for the Justice Department, where we are usually silent in the many cases where we decline prosecution – we praised Morgan Stanley’s robust internal compliance program and its voluntary disclosure of the misconduct. 

But often overlooked is one of the critical factors that led to that declination.  Morgan Stanley assisted the government in identifying the individual executive responsible for the criminal conduct, Garth Peterson, and in securing evidence to hold Peterson criminally responsible.   

As you all know, Filip Factor Four addresses corporate cooperation.  And in analyzing that factor, companies are always quick to tout voluntary disclosure of corporate misconduct and the breadth of an internal investigation.  What is sometimes given short shrift, however, is in many ways the heart of effective corporate cooperation: whether that cooperation exposed, and provided evidence against, the culpable individuals who engaged in criminal activity, as in the Morgan Stanley example. 

The importance of cooperating regarding individuals is set forth, in black and white, in the text of the factor itself.  Factor Four expressly states that prosecutors should evaluate a corporation’s “willingness to cooperate in the investigation of [its] agents.”  This key point is fleshed out later in the guidance section, where prosecutors are directed to consider the corporation’s “willingness to provide relevant information and evidence and identify relevant actors within and outside the corporation, including senior executives.”

Voluntary disclosure of corporate misconduct does not constitute true cooperation, if the company avoids identifying the individuals who are criminally responsible.  Even the identification of culpable individuals is not true cooperation, if the company fails to locate and provide facts and evidence at their disposal that implicate those individuals.        

This principle of cooperation is not new or unique to companies.  We have applied it to criminal cases of all kinds for decades.  Take, for example, organized crime cases.  Mob cooperators do not receive cooperation credit merely for halting or disclosing their own criminal conduct.  Attempted cooperators should not get reduced sentences if they refuse to provide testimony or fail to turn over evidence against other culpable parties.  A true cooperator – whether a mobster or a company – must forthrightly provide all the available facts and evidence so that the most culpable individuals can be prosecuted. 

The importance of this principle is enhanced by a second Filip factor – Factor Eight – which states that, in deciding whether to charge a corporation, prosecutors must consider “the adequacy of the prosecution of individuals responsible for the corporation’s malfeasance.”  So, effective and complete corporate cooperation in the investigation and prosecution of culpable individuals is not only called for by Factor Four, but reinforced by Factor Eight. 

In assessing how to treat corporations, the Criminal Division carefully considers whether its law enforcement interests have been – or can be – met by the prosecution of culpable individuals.  Conversely, in some cases, when prosecutions of culpable individuals are prevented, the government’s interest may only be vindicated by prosecuting the corporation itself.  This is one of the lessons that should be drawn from the BNP Paribas and Credit Suisse cases.  Through parent-level guilty pleas and multi-billion dollar penalties, BNP Paribas and Credit Suisse paid a historic price not only for their criminal conduct, but also for their insulation of culpable corporate employees.

Just as importantly, if a corporation wants credit for cooperation, it must engage in comprehensive and timely cooperation; lip service simply will not do. 

Corporations are often too quick to claim that they cannot retrieve overseas documents, emails or other evidence regarding individuals due to foreign data privacy laws.  Just as we carefully test – and at times reject – corporate claims about collateral consequences of a corporate prosecution, the department will scrutinize a claimed inability to provide foreign documents or evidence.  We have forged deepening relationships with foreign governments and developed growing sophistication and experience in analyzing foreign laws.  A company that tries to hide culpable individuals or otherwise available evidence behind inaccurately expansive interpretations of foreign data protection laws places its cooperation credit at great risk.  We strongly encourage careful analysis of those laws with an eye toward cooperating with our investigations, not stalling them. 

Understand too, that we will use our own parallel investigation to pressure test a company’s internal investigation: to determine whether the company actually sought to root out the wrongdoing and identify those responsible, as far up the corporate ladder as the misconduct goes, or instead merely checked a box on a cooperation punch list. 

Companies that have not conducted comprehensive investigations will not secure significant cooperation benefits.  Worse, companies that hamper the government’s investigation while conducting an internal investigation – for example, by conducting interviews that serve to spread corporate talking points rather than secure facts relating to individual culpability – will pay a price when they ask for cooperation credit.

A few final words: when you come in to discuss the results of an internal investigation to the Criminal Division and make a Filip factor presentation – expect that a primary focus will be on what evidence you uncovered as to culpable individuals, what steps you took to see if individual culpability crept up the corporate ladder, how tireless your efforts were to find the people responsible. 

At the risk of being a little too Brooklyn, I’m going to be blunt. 

If you want full cooperation credit, make your extensive efforts to secure evidence of individual culpability the first thing you talk about when you walk in the door to make your presentation. 

Make those efforts the last thing you talk about before you walk out. 

And most importantly, make securing evidence of individual culpability the focus of your investigative efforts so that you have a strong record on which to rely.

Corporations do not act criminally, but for the actions of individuals.  The Criminal Division intends to prosecute those individuals, whether they’re sitting on a sales desk or in a corporate suite.

We’re already doing it.  Just two weeks ago, the former CEO and chief financial officer of ArthroCare Corporation, a stock exchange-listed Texas medical device company, were sentenced to decades in prison after their trial convictions for securities and accounting fraud – 20 years and 10 years, respectively.  Last week, the chief credit officer of a publicly traded commercial bank pleaded guilty to defrauding the bank’s shareholders and creditors.  As we speak, the CEO of a large Houston hospital is on trial for allegedly engaging in massive corporate health care fraud.  And there’s much more to come.

The prosecution of individuals – including corporate executives – for white-collar crimes is at the very top of the Criminal Division’s priority list under Assistant Attorney General Caldwell. 

We seek the cooperation of corporations where criminal conduct occurred, but we will not wait for it.  We will reward with cooperation credit companies who identify criminal wrongdoers and provide evidence that assists in their prosecution.  And we will be looking long and hard at corporations who purport to cooperate, but fail to provide timely information and available evidence about the criminal misconduct of their executives and employees. 

It has been a privilege to speak with you, and a pleasure to be back home – where I know New Yorkers appreciate straight talk.  Thank you for having me here.

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Updated September 17, 2014