DOJ: New Memorandum on Individual Accountability for Corporate Wrongdoing

The US Department of Justice (“DOJ”) has published a new memorandum on the prosecution of individuals in the context of investigation of economic crimes. The memorandum includes specific requirements on companies in order to qualify for any cooperation credit and is therefore of considerable significance for internal investigations or relevant follow up measures.

The memorandum explicitly states “One of the most effective ways to combat corporate misconduct is by seeking accountability from the individuals who perpetrated the wrongdoing”. While the impression given by the present discussion on the introduction of corporate criminal responsibility in Germany is that the criminal pursuit of companies is key for effective criminal action on economic crimes, the DOJ clearly favours more intensive pursuit of individuals.

Unlike Germany, US criminal law has recognised corporate criminal liability (at federal level) since the beginning of the 20th century. Companies are increasingly encouraged to voluntarily provide comprehensive assistance in the investigation which will then be taken into account in their favour in the corporate penalty. So far, The value of a company’s cooperation has been assessed according to – inter alia –the extent it served the prosecution of natural persons. This practice was based on principles formulated by the DOJ in 1999 which are part of the U.S. Attorney Manual today. The DOJ has continuously made it clear that the cooperation of a company with the prosecution authorities will not prevent the latter from pursuing the individuals involved.

With the memorandum now published, it goes a significant step further and requires in particular that companies must completely disclose all relevant facts about individual misconduct in order for the company to receive any consideration for cooperation. This is shown by the first of six principles which are summarised as follows:

1. Corporations must provide all relevant facts about the individuals involved in corporate misconduct. Unlike the previous position, this is a condition for eligibility for any cooperation credits.
2. Both criminal and civil corporate investigations should focus on individuals from the inception of the investigation.
3. Criminal and civil attorneys handling corporate investigations should be in routine communication with one another.
4. No corporate resolution will provide protection from criminal or civil liability for any individuals.
5. Corporate cases should not be resolved without a clear plan to resolve related individual cases.
6. Civil attorneys should consistently focus on individuals as well as the company.

In particular, the requirement to provide information on all individuals involved is of considerable practical significance for internal investigations and possibly the subsequent defence. This is all the more the case if a company can, apart from exceptional cases, no longer work towards protection of their individual employees from criminal liability. This considerably blocks decisive incentives to cooperate during the investigation which companies could offer employees possibly involved. Internal investigations will thereby from the outset be clearly more liable to conflict. It also becomes questionable if and in which cases a coordinated defence of companies and their employees could still be used as a means serving common interests.

In light of the new memorandum, the interests of all persons involved and of the company itself should be considered carefully from the outset of any internal investigation, i.e. immediately any suspicion arises. They should also be continue to be considered throughout all further steps, for example in dealing with information on on-going investigations internally.

The full text of the memorandum may be downloaded here.