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Cooperation from companies is crucial in reducing burden of criminal investigation

flag_scale_gavelAccording to a spokeswoman from the criminal division of the U.S. Department of Justice, a company’s willingness to investigate its own possible wrongdoing and to identify those responsible, counts tremendously in the agency’s prosecutorial decisions. Assistant Attorney General Leslie Caldwell told the Program on Corporate Compliance and Enforcement at New York University’s Law School that cooperation can, “significantly affect the length of the investigation and the costs incurred by the company. To receive cooperation credit, we expect companies to conduct appropriately tailored investigations designed to root out misconduct, identify wrongdoers and provide all available facts.”

Caldwell referred to the Foreign Corrupt Practices Act (FCPA) case against Alstom, a French power and transportation company.  The agency performed its own probe after Alstom chose not to cooperate with an investigation. The result was several guilty pleas and a fine of $772 million last year, which is the largest criminal penalty in the FCPA’s history.

The DOJ’s criminal division has made it a priority to increase transparency around decisions leading to charges and deferred or non-prosecution agreements, according to Caldwell. The division also announces corporate resolutions and pleas, determining factors, and detailed accounts of misconduct. Despite the fact that privacy rights and the interests of uncharged parties can be tough to disclose, the division is, according to Caldwell, “looking for ways to better inform the community about cases in which we decline to prosecute, as there is often as much to learn from a decision not to bring charges as a decision to prosecute.”

When companies become subject to a non-prosecution agreement (NPA) or deferred prosecution agreement (DPA) they are required to cooperate. Caldwell stated that if they sign and fail to cooperate, or if they participate in criminal conduct during the term of the agreement, the DOJ’s criminal division “will not hesitate to tear up a DPA or NPA and file criminal charges, where such action is appropriate and proportional to the breach. A company that is already subject to a DPA or NPA for violating the law should not expect the same leniency when it crosses the line again.”

Criminal investigations are often initiated with the help of whistleblowers. The SEC encourages whistleblowers to come forward and report possible violations of the federal securities laws via the Whistleblower Program, which was created by Congress to provide monetary incentives for individuals who provide such information. Under the program, eligible whistleblowers are entitled to an award between 10% and 30% of the monetary sanctions collected in actions brought by the SEC and related actions brought by other regulatory and law enforcement authorities. The Whistleblower Program also prohibits retaliation by employers against employees who provide information about possible securities violations.

Insurance protection of any type for criminal investigations is, of course, at the center of a public policy debate, and by no means a risk that insurers can readily offer insurance against. However, some coverage may be available for certain defense costs under D&O policies. ExecutiveRisk at WGA is a dedicated team of experts providing protection, advocacy, and leadership on all issues pertaining to the liability of individual directors and officers as well as their companies, for both the publicly and privately held.


About the Author

Marcus Janus is a Vice President in WGA’s Executive Risk Practice. He specializes in assisting organizations and their executives with protection and advocacy for their exposures to Directors’ & Officers’ Liability, Employment Practices Liability, Fiduciary Liability, Professional Liability, Crime, and Kidnap & Ransom.

617.646.0258 | MJanus@wgains.com | Connect with Marucs on LinkedIn |
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