United States Attorney General Speaks on Corporate Crime
Calling on Congress to Fortify DOJ Enforcement Tools, Attorney General Holder Touts DOJ's Recent Successes and Warns that No Institution is Too Big to Prosecute
On Wednesday, September 17, 2014, United States Attorney General Eric Holder spoke on the campus of New York University School of Law at an event co-sponsored by the Program on Corporate Compliance and Enforcement and the Milbank Tweed Forum. Addressing an audience of over 500 students, faculty, alumni, judges and prominent lawyers from both the private and public sectors, the Attorney General outlined the Department of Justice’s pursuit of corporate crime and called on Congress to take action that would enable the DOJ to fortify its enforcement efforts. Within hours, various news outlets had reported on the event (see right sidebar).
The Attorney General’s speech at NYU came on the heels of three of the biggest corporate settlements with the Department of Justice in United States history: Bank of America’s $17 Billion Settlement in August; Citigroup’s $7 Billion Settlement in July; and JP Morgan Chase’s $13 Billion settlement last November. Sitting in the front row of the audience, United States Attorneys Preet Bharara (Southern District of New York), Loretta Lynch (Eastern District of New York) and Paul Fishman (District of New Jersey) listened intently as the Attorney General chronicled the recent successes of these and other DOJ enforcement actions.
The Attorney General also discussed obstacles facing Department of Justice prosecutors who seek to pursue criminal charges against corporations and the individual actors responsible for corporate misconduct. He cited the problems of establishing materiality and intent to defraud as some of the challenges in mounting a criminal prosecution against individual actors. The Attorney General said that he shared the public’s frustration that more high-ranking executives could not be held accountable for the misconduct that contributed to the 2008 financial meltdown.
Speaking directly to Congress from Vanderbilt Hall’s Tishman Auditorium, Holder outlined three proposals to strengthen the DOJ’s ability to investigate and prosecute illegal financial activities: imposing greater accountability on corporate executives; enhancing incentives for whistleblowers; and providing law enforcement with additional resources to investigate financial crimes.
Holder proposed that corporations should designate an officer who could be held accountable for alleged fraud and financial crime committed on their watch. “[T]he buck still stops nowhere,” he lamented, and “the buck needs to stop somewhere where corporate misconduct is concerned.”
Holder also addressed the need to incentivize witness cooperation and encourage whistleblowers to come forward. The Attorney General underscored the importance of conducting investigations in real-time, both because real-time investigations are less time and resource intensive than building historical cases and because they enable the government to limit the economic impact of a particular crime. Effective real-time enforcement, the Attorney General explained, requires critical assistance from cooperating witnesses and whistleblowers to expose sophisticated crimes and to provide critical evidence of intent to defraud. He called on Congress to provide greater financial incentives to whistleblowers by, among other things, updating the provisions of the Financial Institutions Reform, Recovery and Enforcement Act (“FIRREA”), a law enacted in the 1980s and recently resurrected to deal with the pervasive fraud from the 2008 financial crisis.
Finally, Holder called for the FBI to receive additional resources to investigate white-collar criminal cases and to foster law enforcement expertise in specialties like forensic accounting.
While the Attorney General devoted the bulk of his speech to accountability and enhancing prosecutorial efforts, the questions forefront on corporate minds surrounded the issue of transparency. How does Washington determine whether or not to pursue and prosecute a particular corporation when an acquired company or a narrow group of individuals is responsible for the misconduct? How can cooperation and already-established compliance programs mitigate their exposure? How were the multibillion dollar settlement figures reached?
“[D]ifferent outcomes have been appropriate in different circumstances,” the Attorney General remarked. “Where institutions themselves have failed – or where pervasive cultures of illegality have taken hold – it’s necessary to pursue institutional accountability to bring about fundamental change,” he explained, shedding some light on the Department’s previous charging decisions.
The Attorney General cautioned that the nation was again beginning to see the profit-driven risk-taking that contributed to the global financial crisis of 2008 and led to these astronomic civil penalties. More charges are expected in the coming months, he warned. And, “no institution is too large to prosecute,” Attorney General Holder declared. “We have put that myth to rest once and for all.”
Whether Attorney General Holder or his successor is at the helm when these charges come down remains to be seen. Just days after delivering his remarks on corporate crime and compliance at NYU School of Law, Attorney General Eric Holder announced that he would be stepping down.
Watch the full video of the Attorney General's speech below: