Academic journal article American University Business Law Review

Where Do We Go from Here? Prosecutorial Concerns of Chief Compliance Officers

Academic journal article American University Business Law Review

Where Do We Go from Here? Prosecutorial Concerns of Chief Compliance Officers

Article excerpt


Following the 2008 financial crisis, the United States government prioritized the deterrence of corporate misconduct.1 Consequently, over the years, the U.S. Department of Justice ("DOJ") addressed corporate misconduct in a variety of DOJ memoranda.2 These memoranda sought to ensure justice, fairness, and accountability for high-level corporate officials.3

However, each new administration brings a unique perspective. Thus, under the Trump Administration, there will likely be a shift in how the DOJ determines and prosecutes corporate misconduct. Because the Trump Administration appears unpredictable to much of the American public, it is as-yet unclear what stance the DOJ will take with respect to ongoing and future corporate misconduct.

This Comment attempts to predict what can be expected by the Trump Administration in relation to prosecutorial efforts to punish corporate misconduct. Section Two provides a detailed description of each DOJ memorandum, the context in which each memorandum was written, and the cases that arose as a result of each memorandum. Furthermore, Section Two will demonstrate how other administrative agencies, such as the U.S. Securities and Exchange Commission ("SEC"), have followed the DOJ's lead, holding individuals accountable for corporate misconduct. Section Three compares and contrasts the development of DOJ memorandas, discusses the memorandas' impact on case law, and explains how cases are brought against Chief Compliance Officers ("CCOs"). Section Four makes suggestions about what should be included in a new DOJ memorandum and explains why deregulating the financial services industry would harm the economy. Specifically, this Comment suggests that the Trump Administration should continue to focus on individual accountability for corporate misconduct. In particular, the Trump Administration should provide for consequences to high-ranking corporate officials and Board members that play a role in corporate misconduct. Finally, this Comment concludes with an explanation of why these proposed changes will benefit corporate CCOs, the business sector, and the economy as a whole.


A. DOJ Memoranda

In an effort to demonstrate a tough stance against corporations and the individuals who engage in misconduct, the DoJ has, throughout the years, issued memoranda guiding federal prosecutors on when to bring criminal charges against corporations, corporate officials, or both.4 The DOJ memoranda are meant to serve two purposes: (1) to combat corporate fraud and misbehavior5 and (2) to hold both corporations and individuals who engage in misconduct accountable.6 These memoranda possess substantial weight (although they are not binding within the legal community), because they set the tone for the DOJ's prosecutorial priorities, methods, and strategies.7 The following sections describe in more detail each DOJ memorandum and provide the social context in which each was adopted.

1.The Holder Memorandum

The Holder Memorandum ("Holder Memo") was the first memorandum of its kind.8 The Holder Memo's objective was to deter corporate fraud and ensure accountability from corporations and culpable individuals.9 The Holder Memo predominantly focused on the federal prosecution of corporations as a means of deterring corporate misconduct.10 Pursuant to the Holder Memo, corporations should be held responsible for their employees' behavior because employees act on behalf of the corporation.11 In bringing charges against corporations, prosecutors were encouraged to consider the following factors:

1) the nature and seriousness of the offense, including the impact on the public; 2) the pervasiveness of wrongdoing within the corporation, including any wrongdoing committed by corporate management; 3) the corporation's prior history of misconduct; 4) the corporation's timely and voluntary disclosure of wrongdoing and willingness to cooperate in investigation of its agents, including, if necessary, the waiver of the corporate attorney-client and work product privileges; 5) whether the corporation has a compliance program and whether that program is effective; 6) the corporation's remedial actions to discipline or terminate wrongdoers, to pay restitution, and to cooperate with the relevant government agencies; 7) collateral consequences, including disproportionate harm to shareholders and employees not proven personally culpable; and 8) the adequacy of non-criminal remedies, such as civil or regulatory enforcement actions. …

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