White-collar crimes crackdown? 

In an Elon Law Now commentary, Professor Michael Rich applauds new policy changes at the U.S. Department of Justice developed to pursue white-collar crimes more aggressively, but questions the depth of impact those changes will have.   

Professor Rich’s commentary follows:

“In the first major policy announcement of her administration, Attorney General Loretta Lynch issued new policies for targeting individuals responsible for white-collar crimes, not just companies. The policies come in the wake of criticism that the Department of Justice has not punished the individuals responsible for the subprime mortgage crisis and other financial disasters that shook our economy over the last several years.

“The policy change with the most teeth says that a company cannot get credit in settlement negotiations with the DOJ for cooperating with an investigation unless it provides all relevant facts it has about individuals involved in corporate misconduct.

“In principle, this approach is laudable. After all, corporations must act through people, so if a corporation has engaged in wrongdoing, it logically follows that some employee committed a crime as well. But it is a bit of mystery how the DOJ will implement the policy in practice. In most white-collar-crime situations, the DOJ does not do the bulk of the investigation; rather, the corporation investigates itself and turns information over to the DOJ. How can the DOJ ensure that the corporation does not merely identify scapegoats while leaving the highest-level executives untouched?

“The problem of how to get to high-level wrongdoers is already an issue in investigations of typical criminal organizations like drug cartels. Drug kingpins build layers of bureaucracy between themselves and the low-level associates who actually traffic in narcotics and commit violence against competitors. Unraveling that bureaucracy to get evidence of wrongdoing by those at the top of the pyramid is a monumental challenge for investigators.

“The same problem exists when investigating a corporation. Even when a corporation is operating legitimately, layers of employees often operate between high-ranking executives and the employees who do the nuts-and-bolts work of the corporation. There is no reason to think that directors and officers of a corporation will put less effort than drug kingpins in using a company’s bureaucracy to insulate themselves when the corporation engages in wrongdoing. Rather, the problem of unraveling that bureaucracy and going after the high-level criminals will be magnified by the fact that corporations are treated with kid gloves and allowed to conduct their own investigations into criminal wrongdoing.

“The DOJ’s policy change should be applauded, but until we treat criminal corporations like we do other criminal organizations, imposing actual criminal liability on executive-level wrongdoers will remain a pipe dream.”

More information about Elon Law Professor Michael Rich is available here.

Elon Law Now is a recurring series of commentary and analysis about current legal issues by members of the faculty at Elon University School of Law.