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Board and Fraud is a blog that aims to bring a practical approach to issues facing the board of directors and the audit committee specifically in the area of governance, risk management, compliance, and internal audit, with a strong focus on fraud, ethics, and internal controls.

Focus on the Bad Actors! DOJ Outlines Key Policy Revisions Re-Focusing on Individual Accountability

American Conference Institute’s 35th International Conference on the Foreign Corrupt Practices Act

“Fighting white-collar crime is a top priority for the Department, and we increased prosecutions in every priority area last year. Thanks to a series of initiatives and policy enhancements, we are making white-collar enforcement more effective and more efficient.”

“Under our revised policy, pursuing individuals responsible for wrongdoing will be a top priority in every corporate investigation.”

On November 29, 2018, keynote speaker Deputy Attorney General Rod Rosenstein outlined the revisions to the DOJ’s policy regarding individual accountability in corporate cases, both civil and criminal.

He emphasized holding “individuals responsible for wrongdoing,” thereby increasing the deterrent effect of prosecutions, an effect that he noted is often lost in corporate-level prosecutions, as well as creating policies that work in “the real world of limited investigative resources.”

Furthermore, Rosenstein noted that the revised policy will offer corporations cooperation credit in civil corporate investigations, stating “the ‘all or nothing’ approach to cooperation introduced a few years ago was counterproductive in civil cases.”


Rosenstein noted that a corporation “must identify all wrongdoing by senior officials, including members of senior management or the board of directors, if it wants to earn any credit for cooperating in a civil case.” He also stated that a corporation can earn maximum cooperation credit, if it identifies “every individual person who was substantially involved in or responsible for the misconduct.

Practice Pointer – This is why it is imperative to triage allegations appropriately and when the situation warrants conduct an Independent Investigation!

Internal Investigation: Directed by management, either with company investigative resources or outside counsel  and consultants.

Independent Investigation: Directed by a committee of  the Board of Directors (e.g., audit committee or special  committee) with independent counsel and consultants.

Rosenstein revealed that prosecutors will also have permission and discretion to negotiate some amount of credit, even where maximum credit is not available to the corporation, providing the possibility for credit where a corporation meaningfully assists the government in its investigation and eliminating, in his words, a “binary choice” that could “delay the resolution of some cases while providing little or no benefit.”

For example: In a civil False Claims Act case, a company might make a voluntary disclosure and provide valuable assistance that justifies some credit even if the company is either unwilling to stipulate about which non-managerial employees are culpable, or eager to resolve the case without conducting a costly investigation to identify every individual who might face civil liability in theory, but in reality would not be sued personally.

Note that Rosenstein made clear that no credit would be available in cases where it is revealed that a corporation concealed misconduct or wrongdoing “by members of senior management or the board of directors.” In addition, he stated that prosecutors will have discretion to “negotiate civil releases for individuals who do not warrant additional investigation in corporate civil settlement agreements” and to “consider an individual’s ability to pay in deciding whether to pursue a civil judgment.”

In summary, Rosenstein’s remarks seem to be a logical and balanced approach to re-instituting the discretion that DOJ prosecutors once had in civil cases so that cases could be resolved more efficiently, while also ensuring a strong deterrent effect.

Criminal Cases

Switching gears, Rosenstein addressed individual accountability in criminal cases. Specifically, he stated that “absent extraordinary circumstances, a corporate resolution should not protect individuals from criminal liability.” As such, the revised policy instructs prosecutors that “any company seeking cooperation credit in criminal cases must identify every individual who was substantially involved in or responsible for the criminal conduct.” However, Rosenstein also emphasized that investigations should not be “delayed merely to collect information about individuals whose involvement was not substantial, and who are not likely to be prosecuted.”

The Top

Rosenstein stated that the new policy would focus on those at the top, including individuals “who play significant roles in setting a company on a course of criminal conduct” or “who authorized” such conduct. Finally, the revised policy eliminates any cooperation credit that a company would otherwise receive if the DOJ finds that a company is not operating in good faith to identify individuals who were substantially involved in or responsible for wrongdoing.

Some Key Takeaways 

  • Yates Memo The DOJ will continue to focus on individual accountability in investigations and prosecutions.  Note:  The Yates Memo puts a particular emphasis on the need to hold high-level officials responsible for misconduct.
  • Cooperation is key especially when there is alleged criminal conduct – Corporations must cooperate if they are seeking credit.
  • Investigations – Corporate investigations must be done with care.
  • Oversight The rule of law is not simply about words written on paper.  After all as Rosenstein remarked, it is the culture of a society and the character of the people who enforce the law determine whether the rule of law endures. 
  • Ignorance will not be tolerated – “Companies that self-report, cooperate, and remediate the harm they caused will be rewarded. Companies that condone or ignore misconduct will pay the price.”

Rosenstein summed up his remarks by stating that corporate enforcement policies should encourage companies to implement improved compliance programs, to cooperate with DOJ investigations, in an effort to resolve cases expeditiously, and to assist in identifying culpable individuals so that they also can be held accountable when appropriate.

Closing Thoughts

I personally think this is another step in the right direction; however, I would like to see more emphasis and incentive placed on the board of directors to do right, after all they are part of “the top“, but I am pleased they were called out twice.  After all, the starting point for setting the tone begins with the corporation’s governing authority; generally, this means the board of directors. 

Having an investigative team that understands governance, risk management, and compliance is more important than ever!

I welcome your thoughts, comments, and opinions.


Jonathan T. Marks

Harvard Law
Greg Paw
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