Justice Department Aims to Hold Individuals Responsible for Corporate Fraud
The Justice Department recently stated that it will begin prosecuting individuals that are allegedly at fault for a company's wrongdoings.
White-collar crimes generally involve deceit for financial gain. Examples of crimes that fall into this category include various forms of fraud such as securities fraud and mortgage fraud as well as embezzlement, and tax evasion. Those who are accused of these crimes can face an assortment of penalties including hefty monetary fines and imprisonment. In addition to criminal penalties, these allegations also come with social stigma. In fact, the Federal Bureau of Investigation (FBI) defines these types of crimes as "lying, cheating and stealing." Bouncing back from allegations of white-collar crimes can be difficult, and changes in the Justice System may make this an even larger obstacle.
In the past, executives and employees of companies were somewhat sheltered from criminal charges if the company was found guilty of wrongdoing. The company itself would receive a fine and individuals would avoid charges. The Justice Department recently announced via memo that they will be moving forward with prosecutions against individual employees and executives within businesses and large corporations that are accused of wrongdoing. While individuals have always been subject to criminal prosecution, the Justice Department's emphasis is to seek large fines from corporations and harsh sentences of imprisonment for corporate employees and officers who commit the fraud.
The evolution of white-collar prosecution: The basis for change
A recent report by Reuters covered the issue, noting the change in prosecution strategy will likely lead to conflict. The change may result in a reduction of reports. The threat of personal liability, it is argued, will result in officers and other employees of businesses that are under investigation being less likely to cooperate with internal investigations or less likely to report any wrongdoings.
The New York Times also discussed the change, explaining that the shift is rooted in 16 years of precedent. The Justice Department's "Holder Doctrine" is at issue, which was designed off the premise that corporations are too large to jail and that "collateral consequences" resulting from prosecutions should be taken into consideration before moving forward. Examples include potential corporate instability or collapse and the potential for a negative impact on the economy.
This foundation, according to the article, is likely the reason there were no criminal prosecutions connected to Wall Street companies responsible for the 2008 financial crisis. The strategy was put forward by then deputy attorney general of the United States, Eric H. Holder Jr. and was recently challenged by current attorney general Loretta Lynch. This was done through a memo sent by her deputy, Sally Quillian Yates, to every United States attorney and senior management at the Justice Department stating future investigations of corporate wrongdoing should hold "individuals who misbehaved" responsible for their wrongdoing.
Ultimately, this level of individual accountability is intended to deter future issues and provide incentive to corporations to change their culture while also providing the public with confidence in the workings of the justice system. However, it could lead to false accusations and the attempt to find "scapegoats." As a result, those who are under investigation for corporate crime should recognize to risk of being charged with serious crimes and seek the personal counsel of an experienced white-collar crimes attorney.
