Securities Regulation Daily Wrap Up, ENFORCEMENT—Deputy AG Rosenstein: Justice Department wants ‘less business’, (Nov 30, 2018)

By Joanne Cursinella, J.D.

In prepared remarks for the American Conference Institute's 35th International Conference on the Foreign Corrupt Practices Act, Deputy Attorney General Rod J. Rosenstein said that while prosecuting crime is their tool, the goal of the Justice Department is deterring crime and he emphasized that the department’s 115,000 employees work every day to uphold the rule of law, "fulfilling the mission articulated in our name: Justice." He also outlined some revised policy initiatives at the department and discussed the Task Force on Market Integrity and Consumer Fraud, which involves the SEC.

The importance of the rule of law. The rule of law, the government’s obligation to follow neutral principles and fair processes, is indispensable to a thriving and vibrant society, Rosenstein said, as it protects citizens from government overreach. It also allows businesses to invest with confidence and gives innovators protection for their discoveries, he added. Finally, it keeps people safe from dangerous criminals and "it allows us to resolve differences peacefully through reason and logic."

When we follow the rule of law, however, it does not always yield the outcome we prefer, Rosenstein observed. In fact, he pointed out, one indicator that we are following the law is when we respect a result that we do not agree with. "We respect it because it is required by an objective analysis of the facts and a rational application of the rules." The rule of law is not simply about words written on paper, Rosenstein claimed, it is the "culture of a society" and the "character of the people who enforce the law" that determine whether the rule of law endures.

Upholding the rule of law. Rosenstein said that one way to uphold the rule of law is to fight bribery and corruption. Until a few decades ago, paying bribes was viewed as a necessary part of doing business abroad, and some American companies were unapologetic about corrupt payments, he claimed. As an example, he said that in 1976, the U.S. Senate Banking Committee revealed that hundreds of U.S. companies had bribed foreign officials, with payments that totaled hundreds of millions of dollars. The committee concluded that there was a need for anti-bribery legislation and that was the basis for the Foreign Corrupt Practices Act.

"We aim to prevent corruption." Over the past year, the department’s FCPA Unit reached eight corporate resolutions, four of which were coordinated with foreign authorities, Rosenstein reported. The cases involved a total of almost one billion dollars in corporate criminal fines, penalties, and forfeitures, he added. Three recent corporate resolutions involved collaboration with the SEC. Those settlements resulted from coordinated dispositions consistent with the policy against "piling on" that was announced in May.

Under that new policy, Justice Department components work jointly with other enforcement agencies with overlapping jurisdiction. Our goal is to enhance relationships with law enforcement partners in the United States and abroad and avoid duplicative penalties, Rosenstein said. While it is important to punish wrongdoers, disproportionate and inefficient enforcement that can result if multiple authorities repeatedly pursue the same violator for the same misconduct should be avoided, he added.

White collar crime. Fighting white collar crime is a top priority for the department, Rosenstein said, and prosecutions have been increased in every priority area last year. Thanks to a series of initiatives and policy enhancements, white collar enforcement is more effective and more efficient, he added. President Trump issued an executive order instructing us to strengthen our efforts to investigate and prosecute fraud, and the department is following through on that mandate, Rosenstein said. The SEC and other groups have recently joined the Department of Justice to announce a Task Force on Market Integrity and Consumer Fraud, he reported.

The Task Force will promote inter-agency cooperation, consider policy changes, and implement enforcement initiatives, and Rosenstein welcomes input about how best to deter fraud and foster increased cooperation so that "our investigations will be both expeditious and effective."

Individual accountably policy. Rosenstein announced department changes that reflect valuable input from criminal and civil lawyers, law enforcement agents, and private sector stakeholders. Under a revised policy, pursuing individuals responsible for wrongdoing will be a top priority in every corporate investigation. The deterrent impact on the individuals for wrongdoing is sometimes attenuated in corporate prosecutions, Rosenstein pointed out, and he said that corporate cases often penalize innocent employees and shareholders without effectively punishing the human beings responsible for making corrupt decisions.

So, the department revised its policy to make it clear that, absent extraordinary circumstances, a corporate resolution should not protect individuals from criminal liability, and the policy states that any company seeking cooperation credit in criminal cases must identify every individual who was substantially involved in or responsible for the criminal conduct, Rosenstein said.

Civil liability. When criminal liability is not at issue, however, department attorneys need flexibility to accept settlements that remedy the harm and deter future violations so that they can move on to other important cases, Rosenstein claimed. Therefore, the policy is being revised to restore some of the discretion that civil attorneys traditionally exercised – with supervisory review, he added.

Rosenstein emphasized that the department policy does not allow corporations to conceal wrongdoing by senior officials. To the contrary, he said," it prohibits our attorneys from awarding any credit whatsoever to any corporation that conceals misconduct by members of senior management or the board of directors, or otherwise demonstrates a lack of good faith in its representations."

Other policy changes return discretion to civil lawyers to resolve each case consistent with relevant facts and circumstances and department attorneys are permitted to consider an individual’s ability to pay in deciding whether to pursue a civil judgment Rosenstein said.

These policy changes reflect a lot of deliberation and analysis by experienced government and private sector lawyers who understand the practical implications of our policies and how they sometimes help–but sometimes inhibit–efforts to achieve our goals, Rosenstein emphasized. The corporate enforcement policies should encourage companies to implement improved compliance programs, to cooperate in our investigations, to resolve cases expeditiously, and to assist in identifying culpable individuals so that they also can be held accountable when appropriate, Rosenstein added. He said," We will monitor the results, and we will revisit policies if warranted."

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