WE’LL KNOW IT ‘WHEN WE SEE IT’: CORPORATE COOPERATION IN DOJ CIVIL CASES

Boardroom

“We know meaningful cooperation when we see it,” Justice Department official Bill Baer said Sept. 27. At the time, he was slamming several financial institutions for failing to fully cooperate in the government’s mortgage securities investigations. These banks now are facing steep fines and a “cloud of uncertainty” because of their foot-dragging, Baer said.

Deutsche Bank AG, for example, is trying to negotiate down a possible $14 billion penalty to settle allegations over its residential mortgage-backed securities practices.

Baer heads the DOJ’s Office of the Associate Attorney General and is the third-highest ranking official at the department. His office handles a large portion of the DOJ’s civil litigation. His speech emphasized an initiative that the department unveiled last year in which companies must turn over culpable employees to obtain cooperation credit from the DOJ.

Baer clarified how the initiative—announced in a memorandum by Deputy Attorney General Sally Quillian Yates—applies to the DOJ’s civil cases.

First and foremost, Baer said, companies must disclose all facts relating to individuals who may be connected to the wrongdoing, no matter how high they are in the company. “We will not credit cooperation unless this threshold requirement has been met,” he warned.

He also summarized the types of cooperation that the DOJ will take into account when awarding credit. This includes measures that are:

  • proactive and of material assistance to the department;
  • timely—during the early stages of the department’s probe; and/or
  • supply information that allows the department to go after conduct that might not otherwise be addressed.

In addition, the DOJ may consider other actions “that lead to a more positive result,” Baer said. This may include efforts to help the victim of the wrongdoing, or “an acknowledgement of responsibility.”

Ultimately, companies must consider their specific circumstances in weighing how they may cooperate with the DOJ. But Deutsche Bank’s situation should be a clear warning that the government’s focus on individual accountability and corporate cooperation comes with a big stick.