In A RETURN TO COMMON SENSE, The Justice Department’s Latest Attempts to Deter Corporate Criminals, Michael Volkov explores the Department of Justice’s post-Yates memorandum goals and expectations in dealing with corporate misconduct.
After his influential previous books, “Question Everything: Effective Due Diligence and Third-Party Risk Management” and “The Art of the Internal Investigation,” Volkov delivers a concise and clear book that will make essential reading for corporate lawyers, lawmakers, and prosecuting officials alike.
Volkov’s 30 years of experience on both sides of the fence: as a federal prosecutor initially and in his private practice later, puts him in an ideal position to analyze every nuance of the DOJ’s past and present position regarding the prosecution of individuals in cases against corporations, which are often initiated by whistleblowers.
A Sea Change
In the first part of the book, Volkov offers a detailed account of the current state of the prosecution of corporations by the Justice Department. He refers to the current frequency of this type of prosecution as a “sea change,” when considering that it used to be a rare occurrence only a few years back.
Volkov sees this transformation in corporate responsibility in a positive light, pointing to the central role of the FCPA enforcement program in the matter. At the same time, he poses some important questions about the role of corporate fines without guilty pleas as deterrents.
For anyone who has been paying attention, it is obvious that the last few years have seen multi-million dollar settlements in cases against corporations hailed as victories in DOJ press releases. Volkov questions this behavior for a variety of reasons; not only because of the lack of admission of guilt in most cases, but also because shareholders may be bearing the burden of criminal fines and penalties “unfairly,” in his own words.
While someone with a more limited experience may have been tempted to offer a clear-cut solution to the problem, Volkov examines its every aspect with the precision of a neurosurgeon. To prove his point, he cites the example of the Department of Justice’s failure to hold accountable the individuals responsible for the 2008 crisis.
One of the most important questions the book asks is: what can the DOJ do when the entities under investigation seem “too big to fail” or “too big to jail.” The author certainly touches on the heart of the problem when he refers to these common justifications for failure to prosecute individuals as “convenient rationalizations for this debacle.”
DOJ’s New Direction: From Fines to Individual Prosecution
As the DOJ has shown some signs of starting to move in a different direction and trying to focus more on prosecuting individuals in cases against corporations, Volkov mentions instances in which the trend has been observed and attempts to do a bit of forecasting as to what the new corporate criminal enforcement model is going to look like in the coming years.
To exemplify the dangers of the large fines/deferred prosecution or no prosecution model, Volkov mentions a well-known case against General Motors. In a nutshell, GM admitted to causing roughly 10% of the deaths that were actually associated to a widespread ignition switch defect and no individuals were indicted. The corporation agreed to pay $900 million in a settlement, and that was the end of the story. Volkov calls the outcome of the case, a “disappointment” and sees it as a failure on the DOJ’s part; surely the relatives of the 124 dead as a result of the malfunction would agree.
In Volkov’s view, the DOJ is behaving as though it were powerless in the face of large corporations, when in reality, it is not. He speaks about the failures of the DOJ from a deep understanding of the judicial system. His book is designed to raise questions, rather than point fingers, which means that it can be an invaluable tool for both defense attorneys and DOJ officials. If there is one thing to praise about Volkov’s book, it is certainly his balanced views of an intricate and controversial subject.
The Yates Memorandum
In September 2015, the Justice Department unveiled the Yates Memorandum, announcing that cooperation with the DOJ would have to involve serving up individuals. The Memorandum, which is seen by Volkov as a welcome innovation, tried to make individual prosecution more viable, by offering a more favorable treatment to companies that collaborated by, basically, naming names.
When lives are at stake, as in the case of GM or in cases against pharmaceutical companies and health care providers, it is not enough to do a little reputation damage and recover a few million dollars. According to Volkov, we are going to see more individual prosecutions from now on, and that is, he believes, the biggest deterrent for future instances of corporate crime.