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By Liz Crampton
Companies have to comply fully — “all or nothing” — with Justice Department investigations in order to get credit for cooperation, a top Justice Department official said Oct. 18.
“Does it have it be an all or nothing proposition? From a personal perspective, and I’ve spoken about this before, I think the answer is yes,” said Kathleen McGovern, senior deputy chief in the DOJ’s fraud section, speaking at the Association of Corporate Counsel conference.
McGovern’s comments shed light on the current administration’s thinking about how it should go after white collar crime. McGovern is a career official at the DOJ since 2003, but her comments aligned with those earlier in the month by Deputy Attorney General Rod Rosenstein about the government’s corporate prosecution policies.
McGovern said expectations for companies seeking reduced penalties in investigations are no different than for individuals under the 2015 Yates Memo. That memo, named for its author, then-deputy attorney general Sally Yates, directs law enforcement to hold individuals liable for participating in corporate fraud.
“I always liken it to when you have an individual who is cooperating. You don’t allow he or she to just provide some of the information about the criminal conduct or to cooperate 50 percent but not all the way. So I think that there should be the same primers in place for a company,” she said.
Companies should be ready to disclose misconduct to federal investigators through their own internal investigations, and they should be aware of the ramifications of that decision, McGovern said. The Justice Department frowns on weak internal investigations, “just checking the box or doing a cursory review.”
“The worst thing is for an internal investigation to be conducted, DOJ does its own investigation, and we uncover conduct that in good conscience we think could have been uncovered as a result of an internal. That doesn’t bode well for the company in terms of cooperation,” she said.
The Justice Department, having limited funds, relies on companies to self-police their conduct and report any violations in hopes of receiving reduced fines and punishment.
But the DOJ also evaluates the thoroughness of an internal investigation and pays attention to instances where violations were flagged but no probe of that conduct occurred, said Hui Chen, former compliance counsel. “That’s one of the situations you don’t want to be in,” she said.
Chen, who left the government in June, said she was brought in to the Obama administration’s DOJ to help investigators determine whether companies’ compliance programs were just “paper programs.” Such programs have the appearance of deterring and detecting illegal behavior, but they have no follow through. Since Chen’s departure, her position hasn’t been filled.
Recent enforcement decisions have been instructive for compliance counsel at other companies to ensure that their own compliance programs are working, said Michael Whitlock, counsel for Discovery Communications.
Whitlock said Halliburton Co.’s July settlement with the Securities and Exchange Commission was instructive to other companies because it showed the kind of behavior a good compliance program should detect. Halliburton revealed it violated the Foreign Corrupt Practices Act when making payments to a local company in Angola in order to win lucrative oilfield services contracts.
“You have to be able to somehow have a way to detect whether or not someone is circumventing those controls,” Whitlock said.
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