The Justice Department says it will try harder to hold company executives responsible for corporate crimes, following criticism that the department has been soft on Wall Street by relying on financial fines to settle investigations of corporate wrongdoing.
Don’t expect to see CEOs in handcuffs any time soon, however.
A Justice Department memo issued Wednesday by Deputy Attorney General Sally Yates sets new guidelines for federal prosecutors overseeing corporate crime cases.
The memo says companies must name employees responsible for wrongdoing in exchange for any credit for cooperating with investigators.
Justice Department civil attorneys will put a higher priority on pursuing lawsuits against company employees and executives, the memo says.
Much of what the memo orders is already being done by prosecutors. And prosecutors will still have to deal with restrictions on demanding corporate information that could be violation of attorney-client privilege.
It may be years before changes are visible. Major cases already in an advanced stage of investigation – such as one looking into possible criminal wrongdoing at General Motors over an airbag recall – won’t likely be affected by the new rules. The most significant impact is likely to come from an increase in civil cases against employees.
But the effort represents the latest retooling of the department’s corporate crime guidelines.
Unlike previous major financial crises, the 2008 global financial meltdown produced no major criminal prosecutions against the Wall Street executives who engineered the shoddy financial practices that produced the crisis.
Instead, big banks have paid billions of dollars in fines. Only after years of heavy criticism, has the department pushed for admissions of guilt by companies – though not executives – for criminal violations. And even then, only after ensuring companies don’t suffer any real consequences for pleading guilty.
In some cases recently banking executives have become emboldened to publicly complain about the fines – having safely escaped any chance of prosecution because the statute of limitations have expired.
Yates, in a speech Thursday at New York University, highlighted the perception problem the Justice Department faces.
“Crime is crime. And it is our obligation at the Justice Department to ensure that we are holding lawbreakers accountable regardless of whether they commit their crimes on the street corner or in the board room,” Yates said, according to prepared remarks. “Americans should never believe, even incorrectly, that one’s criminal activity will go unpunished simply because it was committed on behalf of a corporation.”
The department’s struggles with white-collar criminal prosecutions aren’t new: Yates’s memo follows more than a half-dozen others that have sought to strike the right tone on corporate crime.
Early during President George W. Bush’s administration, a memo issued by then-Deputy Attorney General Larry Thompson pushed companies to point fingers at executives responsible for wrongdoing and to not pay their legal fees as a way to help the Justice Department lock up executives.
That brought criticism from federal judges and lawmakers that the Justice Department was being too heavy-handed and violating the individual legal rights of company employees.
Successive memos then softened the department’s leverage over companies and their executives.
More recently, the Justice Department’s problems have been the opposite: being perceived as too soft on white-collar crime.
Department officials have said much of the conduct that led to last financial crisis were related to greed, not criminal behavior.
In his last months in office Attorney General Eric Holder made a last-ditch claim to order prosecutors to take one last look at bringing criminal charges against Wall Street executives. None were brought.
Still, Yates sounded a tough tone in her speech.
“The rules have just changed. Effective today, if a company wants any consideration for its voluntary disclosure or cooperation, it must give up the individuals, no matter where they sit within the company. And we’re not going to let corporations plead ignorance. If they don’t know who is responsible, they will need to find out,” she said.
CNN’s Haimy Assefa and Theodore Schleifer contributed to this report