White-Collar Crime

Justice Department releases guidelines to foster pursuit of individuals in corporate wrongdoing

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Attorney General Loretta Lynch has approved a new policy that aims to hold individuals accountable for corporate wrongdoing.

The policy, outlined in a memo to federal prosecutors, says settlement agreements won’t give companies credit for cooperating with the government unless they turn over evidence against employees involved in wrongdoing, report the New York Times, the Wall Street Journal (sub. req.) and the New York Law Journal (sub. req.).

According to the Times, the memo “is a tacit acknowledgment of criticism that despite securing record fines from major corporations, the Justice Department under President Obama has punished few executives involved in the housing crisis, the financial meltdown and corporate scandals.”

The memo was written by Deputy Attorney General Sally Yates, a career prosecutor who was confirmed to the deputy attorney general position in May. The Times says she has “established herself in the first months of her tenure as the department’s most vocal advocate for tackling white-collar crime.”

One obstacle for prosecutors targeting individual corporate wrongdoers is an FBI shift to investigating terrorism, espionage and computer crimes, the New York Times DealBook blog reports. And when charges are brought, the cases don’t always succeed. A jury acquitted two Bear Stearns hedge fund managers accused of lying to investors before the economic downturn. In another case, two overseas JPMorgan traders accused in a $6 billion trading loss were never extradited to New York.

The article also points to a December decision by the New York-based 2nd U.S. Circuit Court of Appeals that overturned two “signature convictions” in insider trading prosecutions. The court said the accused hedge fund traders couldn’t be convicted unless they knew the corporate insiders who passed on information were doing so for personal benefit, DealBook reported in this December story.

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