DOJ Guidance on Individual Accountability for Corporate Misconduct: - - PowerPoint PPT Presentation

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DOJ Guidance on Individual Accountability for Corporate Misconduct: Implications for Companies

Understanding Key Provisions, Ensuring Compliance, and Mitigating Legal Risks

Today’s faculty features:

1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific THURSDAY, NOVEMBER 12, 2015

Thaddeus R. McBride, Partner, Bass Berry & Sims, Washington, D.C. David Searle, Chief Compliance Officer and Associate General Counsel, Bristow Group, Houston Lindsey B. Fetzer, Bass Berry & Sims, Washington, D.C.

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DOJ Guidance on Individual Accountability for Corporate Misconduct: Implications for Companies

Strafford Publications Webinar November 12,2015

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 Introduction  Sentencing Commission Guidelines  Yates Memo  Best Practices  Questions

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Agenda

 Independent agency of the Judicial Branch  Promulgates guidelines for appropriate sentences for federal crimes

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U.S. Sentencing Commission

 Aimed at ensuring consistency of sentences in criminal cases  Guidelines are advisory but must be considered

 Court must select a sentence from within the Guidelines range or specify reason for departure (e.g., atypical features of crime)

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The Guidelines

 Penalty imposed is based on “Culpability Score”

 Start with “base” offense level for type of crime  Consider specific offense characteristics (e.g., amount of money involved)  Apply adjustments

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Culpability Score

Adjustments

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Culpability Score (cont’d)

Aggravating Factors Mitigating Factors Involvement in / tolerance of criminal activity Effective compliance and ethics program Prior history Violation of an order Self-reporting, cooperation, and acceptance of responsibility Obstruction of justice

 Designed to prevent and detect criminal conduct; and  Promote culture of ethical conduct and compliance with the law.

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Effective Compliance and Ethics Program

 Issued on September 9, 2015 by Deputy US Attorney General Sally Yates

 Memo to all US Attorneys  Focus on individual accountability for corporate wrongdoing

www.justice.gov/dag/file/769036/download.

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The Yates Memorandum

 DOJ will

 continue to pursue companies for corporate wrongdoing

and

 simultaneously pursue charges against individual employees

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Yates: Key Message

 “Because a corporation only acts through individuals, investigating the conduct of individuals is the most efficient and effective way to determine the facts and extent of any corporate misconduct.”  Six Key Principles to strengthen the pursuit of individual corporate wrongdoing

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Yates: Why and How

 To be eligible for any cooperation credit in a criminal or civil matter, a corporation must identify all individuals involved in

• r responsible for the misconduct at issue, regardless of

their position, status, or seniority, and provide the DOJ all facts relating to that misconduct.

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Yates Principle No. 1

 Criminal and civil corporate investigations should focus on individuals from the inception of the investigation.

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Yates Principle No. 2

 The DOJ’s criminal and civil attorneys handling corporate investigations should be in routine communication with one another.

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Yates Principle No. 3

 Absent extraordinary circumstances or approved DOJ policy, the DOJ will not release culpable individuals from civil

• r criminal liability when resolving a matter with a

corporation.

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Yates Principle No. 4

 DOJ attorneys should not resolve matters with a corporation without a clear plan to resolve related individuals cases, and should memorialize any declinations as to individuals in such cases.

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Yates Principle No. 5

 Civil attorneys should consistently focus on individuals as well as the company and evaluate whether to bring suit against an individual based on considerations beyond that individual’s ability to pay (e.g., the seriousness of the conduct, past misconduct, whether it is actionable, the burden of proof, and federal resources and priorities).

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Yates Principle No. 6

The DOJ understands that lower-level employees facing individual civil or criminal liability are likely to cooperate against their superiors, thereby facilitating DOJ’s ability to

• btain information necessary to prosecute individuals further

up the corporate ladder.

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Yates: General Analysis

 It remains to be seen the extent to which the Yates Memo represents a substantial policy change for DOJ as opposed to a confirmation of existing practices.  It also remains to be seen how meaningfully the memo will impact enforcement efforts going forward.

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Assessment

Remember the Sentencing Commission Guidelines:

An effective compliance program is designed to prevent and detect violations

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Best Practices for Companies

 Standards/procedures to prevent/detect criminal conduct  Standards/procedures are communicated to management, high-level personnel, employees, and agents as appropriate (e.g., training)  Management is knowledgeable about program and exercises “reasonable oversight”

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Effective Program: Characteristics

 High level personnel have responsibility and adequate resources, authority, and access to management  Effective mechanisms to respond to identified violations  Consistent enforcement (e.g., incentives and disciplinary measures)  Monitoring, auditing, and reporting mechanisms

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Characteristics (cont’d)

 Morgan Stanley executive (Peterson) improperly transferred a financial interest to a Chinese official  Morgan Stanley

 Maintained robust anti-bribery policies and accounting controls  Frequently trained employees – including Peterson seven (!) times  Monitored and audited transactions  Voluntarily disclosed and cooperated

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U.S. v. Peterson (2012)

 Peterson pled guilty to violating the FCPA

 Nine months in prison  $250,000 in disgorgement  Relinquishment of $3.4 million in real estate

 Morgan Stanley was not charged

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Peterson (cont’d)

 Developing and maintaining an effective compliance program can significantly reduce penalties in the case of a violation by a rogue employee  In light of Yates, it may be easier to impose blame / culpability on employee only

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Key Takeaway

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Questions?

THANK YOU!

David Searle Chief Compliance Officer Bristow Group dsearle@bristow.com Thad McBride Bass Berry & Sims tmcbride@bassberry.com Lindsey Fetzer Bass Berry & Sims lfetzer@bassberry.com

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