A lot happened in the white-collar realm in 2021 and the Biden administration. The Department of Justice outlined a plan to increase its enforcement of white-collar crimes. It’s no surprise, then, that the number of white-collar criminal prosecutions were up from 2020. With the uptick in cases and the new administration’s aggressive focus on white-collar enforcement, companies and their executives should consistently evaluate their compliance programs and corporate culture to make internal improvements.
DOJ Announces Tougher Policies on White-Collar Crime
Last October, DOJ’s Deputy Attorney General Lisa Monaco announced at the American Bar Association’s White Collar Crime Conference, and published a Memorandum regarding a new, tougher policy toward prosecuting white-collar criminals. The memorandum titled, “Corporate Crime Advisory Group and Initial Revisions to Corporate Criminal Enforcement Policies” announced four policy changes:
- The main policy change is that the DOJ’s investigation of a corporation’s misconduct will not only include a corporation’s past similar misconduct, but will now include a company’s entire criminal, civil, and regulatory record. Monaco stated that prosecutors should “start by assuming all prior misconduct is potentially relevant.” This is not exactly a three-strikes law, but it puts companies on notice that misconduct in one area will not be looked upon favorably if there is a later criminal investigation.
- Companies must produce and disclose “all non-privileged information about individual wrongdoing” to receive cooperation credit. This allows federal prosecutors – not the corporations and executives – the ability to determine the relevance and culpability of any individual in the misconduct regardless of the individual’s position, status, or seniority. The DOJ will now take into consideration and investigate every individual involved in the misconduct.
- DOJ will impose independent monitors during investigations to oversee a corporation’s disclosure and compliance obligations. This is a shift from previous years where imposing independent monitors was the exception rather than the rule.
- Monaco announced in her memorandum the creation of the “Corporate Crime Advisory Group,” or CCAG, which is tasked with proposing new policies and procedures for corporate crime enforcement. The CCAG will focus on and analyze the DOJ’s approach to enforcement, specifically evaluating cooperation credit, non-prosecution agreements and deferred prosecution agreements, repeat corporate offenders, selecting independent monitors, and investing in new technologies.
These policy changes demonstrate that the Biden administration intends to aggressively go after corporate and individual white-collar enforcement. While it’s too early to tell how much these changes will impact corporations involved in DOJ investigations, these changes may make it even more difficult for companies to cooperate with the DOJ and conduct internal investigations to resolve these types of cases.
Cases We Saw in 2021
Looking at the numbers, Monaco’s tough talk proved to be true. White-collar criminal prosecutions were up from 2020. Now, the 2020 numbers were likely low due to the COVID-19 pandemic which limited the government’s ability to investigate and bring cases. According to the United States Sentencing Commission Quarterly Data Report, white-collar crime (fraud, theft, embezzlement, and money laundering) totaled 9.7% of all criminal cases in 2021, an increase from 8.9% of cases in 2020. There has, however, been a longer term trend of fewer white-collar cases. According to the TRAC Reports, compared to long-term trends, white-collar prosecutions in 2021 were down about 25% from five years ago and down about 50% from 2011 and 2001.
Although numbers were down in 2021 compared to past years, there were a number of high-profile white-collar trials in 2021. Some of these cases include:
- Operation Varsity Blues. A jury convicted Gamal Abdelaziz and John Wilson of conspiracy, wire fraud, and mail fraud for conspiring to get their children into top universities as recruited athletes. They used fake profiles and paid hundreds of thousands of dollars in bribes to university officials. Of the 57 defendants who have been charged in this admissions scheme, 47 have pleaded guilty or have agreed to do so since the indictments were announced in March 2019. There are some scheduled to go on trial in 2022.
- Theranos Founder Elizabeth Holmes. A jury found Elizabeth Holmes guilty of one count of conspiracy and three counts of wire fraud in connection with a multi-million-dollar scheme to defraud investors in Theranos, Inc.
- Trump Organization’s Chief Financial Officer Allen Weisselberg. New York prosecutors charged the Trump Organization and Weisselberg with a 15-year alleged tax scheme that marked the first criminal case against the former President’s namesake company. Weisselberg was charged with 15 felony counts in connection with an alleged scheme stretching back to 2005 “to compensate Weisselberg and other Trump Organization executives in a manner that was ‘off the books.’”
What This Means for Companies
Companies should be proactive in avoiding government investigations by reviewing and updating their compliance programs and procedures, and ethics programs. Conducting internal audits and reviewing corporate culture should be a top priority for corporations to make internal improvements. Due to these policy changes, investigations may be more burdensome for companies due to the increase in information that companies are required to provide the DOJ to receive cooperation credit. Additionally, due to the more subjective standard the DOJ has in determining company cooperation, it may be more difficult for companies to negotiate a resolution with the DOJ, which could potentially lead to more consequences.