November 2015 CLE Workshop
Omni Shoreham Hotel · Washington, DC
November 11 – 13, 2015
11A
How to Interact with
External Regulators
and Investigators
COLLEGE & UNIVERSITY COMPLIANCE PROGRAMS:
NOW AND FOR THE FUTURE
National Association of College and University Attorneys
November 2015 CLE Workshop
College & University Compliance Programs: Now And For The Future
Session 11A
"How to Interact with External Regulators and Investigators"
Kathleen S. Tighe
Inspector General, U.S. Department of Education
I.
Introduction to U.S Department of Education
and the Office of Inspector General
U.S. Department of Education (ED)
A.
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ED operates with an annual budget of approximately $70 billion, the bulk of
which is provided to States, school districts, colleges, and universities. ED also
disburses about $150 billion in student loans annually and manages an
outstanding loan portfolio of $1 trillion. This makes ED one of the largest
financial institutions in the country.
ED administers more than 120 programs that involve 55 State and territorial
educational agencies, more than 13,500 school districts, more than 132,000
schools, more than 6,000 institutions of higher education, and countless other
grantees and subgrantees.
ED Office of Inspector General (ED OIG)
B.
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The Offices of Inspector General were created as independent entities within their
respective Federal agencies and departments. ED OIG is responsible for
identifying and preventing fraud, waste, abuse, and criminal activity involving ED
funds, programs, and operations. ED OIG conducts independent audits and other
reviews, and, based on its findings, makes recommendations to ED for program
improvements and to address systemic weaknesses. ED OIG also conducts
criminal investigations involving ED programs and operations and recommends
changes needed in relevant Federal laws and regulations.
ED OIG activities each year have resulted in the identification of unallowable
costs and recoveries, judgments, and fines of more than twice its total annual
budget.
As of January 1, 2015, ED OIG operates with a staff of 242, composed of
auditors, criminal investigators, attorneys, forensic specialists, financial analysts,
information technology (IT) professionals, and management and support
personnel.
ED OIG has its own separate budget from ED.
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ED OIG is headquartered in Washington, D.C., with 16 offices located across the
country.
ED OIG Audits
C.
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ED OIG currently operates with an audit staff of 105 to cover all ED programs
and operations, oversight of the financial statement audits of ED and Federal
Student Aid, and oversight of the quality of non-Federal audits (i.e., single
audits). ED OIG issues between 20-25 audit-related reports each year.
ED OIG has the authority to audit any program or entity that relates to ED
programs and operations or that receives ED funding.
ED OIG audit assignments follow the goals established in its 5-year Strategic Plan
and in its annual plans. ED OIG solicits suggestions for its annual plan from ED
OIG staff, ED leaders, Congress, and the Office of Management and Budget.
Prior to 2010, single entity compliance-based audits composed the bulk of ED
OIG audit work. While it still performs some single entity compliance audits, ED
OIG has shifted its focus to results-based audits that assess the performance of
multiple entities in the context of a particular ED program(s), and evaluate ED’s
oversight of the program(s). ED OIG assesses accomplishments and compares
them to intended results or benefits. These are often nationwide audits that are
more complex and time-consuming; however, the final product is ultimately more
valuable in determining whether a program overall is reaching the intended
recipients and achieving the desired outcomes.
ED OIG Investigations
D.
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ED OIG currently operates with an investigative staff of 84, including 78 criminal
investigators, and carries an annual investigative caseload of about 250-300 cases.
ED OIG operates with statutory law enforcement authority and conducts
approximately 60 arrest warrants and between 20-25 search warrants each year.
ED OIG cases are prosecuted by the Department of Justice and state and local
prosecutors throughout the country.
ED OIG refers cases to ED for administrative action, including suspension and
debarment.
ED OIG has the authority to investigate any entity or individual that receives ED
funds or participates in ED programs, including ED employees, grant and
subgrant recipients, ED contractors and subcontractors, school officials, teachers,
and students.
ED OIG investigations cover a wide range of wrongdoing, including Federal
student aid fraud rings, diploma mill schemes, fraud and corruption in afterschool tutoring programs, fraudulent billing of contracts, and public corruption.
ED OIG investigations have unraveled multi-billion dollar fraud schemes by high
ranking school officials, school owners, and other people placed in positions of
trust to educate our children.
Cases come to ED OIG in a number of ways, including its Hotline, self-initiated
investigations based on its audit-related or previous investigative work, reports
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E.
from schools, universities, colleges, grantees, contractors, other State or Federal
law enforcement agencies, ED employees, and Congressional staffers.
ED OIG also investigates a substantial number of qui tam cases filed under the
False Claims Act, 31 U.S.C. §§ 3729 -3733. These cases have included
proprietary, non-profit, and public institutions of higher education.
IT Audit and Cybercrime Investigations
In 2004, ED OIG became one of the first OIGs to establish a unit focused on
information technology audits and investigations. ED OIG’s Information
Technology Audit and Computer Crime Investigations unit (ITACCI) is
responsible for Federal Information Security Management Act reviews and
investigating network intrusions and other technology crimes impacting ED’s
programs and funding. ED OIG has established a state-of-the-art computer
forensic laboratory that enables staff to perform forensic media analysis to
support criminal investigations. ITACCI’s IT audit division is equipped and
trained to perform system security testing and evaluation. Additionally, ITACCI
has created a data analytics capability with sophisticated risk and analytical
models for resource management and fraud detection. ITACCI also produces IT
security and other reports to help ED identify and mitigate risks to improve and
secure its critical business systems.
F.
Top Priority Issues
ED OIG issues an Annual Plan, which details the assignment areas and resources
it plans to focus on in the fiscal year (FY). For FY 2015, assignment areas
include: Federal student aid programs and oversight of program participants;
elementary and secondary education programs and oversight of grantees; ED
business operations, including contract monitoring, information technology
security, and risk management programs. ED OIG also produces an annual
Management Challenges report, which highlights the most serious challenges ED
faces. The challenges identified in ED OIG’s FY 2015 Management Challenges
report mirror those identified in previous reports: improper payments; IT security;
oversight and monitoring; data quality and reporting; and IT system development
and implementation. Copies of these reports are available on the ED OIG Web
site available at www.ed.gov.
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II.
Issues in Higher Education
A.
Oversight and Administration of Federal Student Aid
in New Forms of Education Delivery
ED OIG has focused recent audit work on the challenges posed to the proper
administration and oversight of federal student financial assistance by new forms
of education delivery:
The Higher Learning Commission Could Improve Its Evaluation of CompetencyBased Education Programs to Help the Department Ensure the Programs Are
Properly Classified for Title IV Purposes, A05O0010, Sept. 30, 2015.
Direct Assessment Programs: Processes for Identifying Risks and Evaluating
Applications for Title IV Eligibility Need Strengthening to Better Mitigate Risks
Posed to the Title IV Programs, A05N0004, Sept. 14, 2014.
Title IV of the Higher Education Act Programs: Additional Safeguards Are
Needed to Help Mitigate the Risks That Are Unique to the Distance Education
Environment, A07L0001, Feb. 21, 2014.
B.
Fraud Rings and Individuals Exploiting Distance Education
Fraud rings -- large, loosely affiliated groups of criminals who seek to exploit
distance education programs in order to fraudulently obtain Federal student aid -continue to be a focus of concern and ED OIG investigative efforts. As of March
31, 2015, OIG has opened 146 fraud ring investigations, secured more than 556
indictments of fraud ring participants, and recovered more than $23.3 million.
Semiannual Report to Congress, No. 70, Oct. 1, 2014 - Mar. 31, 2015.
Student Aid Fraud Ring Assessment, X18M0001, Jan. 17, 2013.
Investigative Program Advisory Report Distance Education Fraud Rings,
L42L0001, Sept. 26, 2011.
C.
Information Security with External Users of ED Systems
ED OIG continues to be concerned about the security and protection of personal
information in ED systems used to administer the student financial aid programs,
particularly as those systems are utilized by external users.
FY 2015 Management Challenges, pp. 19-23.
Review of Federal Student Aid's Oversight and Monitoring of Private Collection
Agency and Guaranty Agency Security Controls, X11N0003, Sept. 22, 2014.
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PIN Security Vulnerabilities, X21L0002, Sept. 30, 2013.
III. OIG Authority and Cooperation from Program Participants
A.
ED OIG Authority
ED OIG derives its authority from the Inspector General Act of 1978, 5 U.S.C.
app. (IG Act). The purpose of the IG Act is to create independent and objective
units within each agency whose duty it is to combat waste, fraud, and abuse in the
programs and operations of that agency. To this end, each IG is responsible for
conducting audits and investigations relating to the programs and operations of its
agency and providing leadership and coordination and recommending policies for,
and to conduct, supervise, or coordinate other activities for the purpose of
promoting economy, efficiency, and effectiveness and preventing and detecting
fraud and abuse in those programs and operations. Importantly, each IG is also to
keep the agency head and the Congress “fully and currently informed” about
problems and deficiencies relating to the administration of agency programs and
operations. The IG Act contains a variety of statutory guarantees of Office of
Inspector General independence, designed to ensure the objectivity of OIG work
and to safeguard against efforts to compromise that objectivity or hinder OIG
operations.
For more detail on OIG authority and independence, see the Council of the
Inspectors General on Integrity and Efficiency’s July 14, 2014, paper on The
Inspectors General available at www.ignet.gov.
B.
OIG Access to Records and Personnel
1.
Access under the IG Act
Section 6(a)(1) of the IG provides that an OIG is authorized:
to have access to all records, reports, audits, reviews, documents,
papers, recommendations, or other material available to the [agency]
which relate to programs and operations with respect to which that
Inspector General has responsibilities under this Act.
As a result, if an agency has access to the records of a grantee, contractor,
or program participant, then the agency’s IG also has access.
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2.
Access in Federal Student Financial Aid Programs
Institutions of Higher Education and their servicers have obligations under
34 C.F.R. § 668.24(f) to cooperate with the OIG and provide access to
records and personnel:
(1) An institution that participates in any title IV, HEA program and
the institution's third-party servicer, if any, shall cooperate with . . .
the Secretary, the Department of Education's Inspector General. . .
or their authorized representatives, in the conduct of audits,
investigations, program reviews, or other reviews authorized by law.
(2) The institution and servicer must cooperate by—
(i) Providing timely access, for examination and copying, to
requested records, including but not limited to computerized records
and records reflecting transactions with any financial institution with
which the institution or servicer deposits or has deposited any title
IV, HEA program funds, and to any pertinent books, documents,
papers, or computer programs; and
(ii) Providing reasonable access to personnel associated with the
institution's or servicer's administration of the title IV, HEA
programs for the purpose of obtaining relevant information.
(3) The Secretary considers that an institution or servicer has failed
to provide reasonable access to personnel under paragraph (f)(2)(ii)
of this section if the institution or servicer—
(i) Refuses to allow those personnel to supply all relevant
information;
(ii) Permits interviews with those personnel only if the institution's
or servicer's management is present; or
(iii) Permits interviews with those personnel only if the interviews
are tape recorded by the institution or servicer.
Institutions in their program participation agreements with ED agree that
oversight bodies, including ED, accrediting agencies, state licensing
agencies and designated entities may share “any information pertaining to
the institution's eligibility for or participation in the Title IV, HEA
programs or any information on fraud and abuse.” 34 C.F.R. §
668.14(a)(17).
Accrediting agencies must provide ED and ED OIG any information that
may “bear upon an accredited or preaccredited institution's compliance
with its Title IV, HEA program responsibilities, including the eligibility of
the institution or program to participate in Title IV, HEA programs.” If
requested by ED or ED OIG, the agency may not disclose the request to
the institution. 34 C.F.R. § 602.27(f)(a)(7) & (b).
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3.
Access in Non-Student Aid Grant Programs
Grantees must provide access under 2 C.F.R §200.336(a):
The Federal awarding agency, Inspectors General, the Comptroller
General of the United States, and the pass-through entity, or any of
their authorized representatives, must have the right of access to
any documents, papers, or other records of the non-Federal entity
which are pertinent to the Federal award, in order to make audits,
examinations, excerpts, and transcripts. The right also includes
timely and reasonable access to the non-Federal entity's personnel
for the purpose of interview and discussion related to such
documents.
4.
Family Educational Rights and Privacy Act
If ED OIG requires access to student educational records to investigate,
audit, or evaluate the Federal student financial aid programs or other ED
programs, student or parental notice and consent is not required before
providing the records to ED OIG. 20 U.S.C. §§ 1232g(b)(1)(C)(i)(II) &
(b)(3); 34 C.F.R. §§ 99.31(a)(3)(iii), 99.31(a)(4) & 99.35. ED OIG can
redisclose educational records to enforce the terms and conditions of ED
programs. 20 U.S.C. §§ 1232g(b)(1)(C)(i)(II) and (b)(3); 34 C.F.R. §§
99.31(a)(3)(iii) and 99.35.
5.
OIG Subpoenas
Section 6(a)(4) of the IG Act provide provides IGs with broad authority to
subpoena all information “necessary in the performance of the functions
assigned by [the IG] Act,” with no restriction on the recipients of a
subpoena.
C.
Duty to Notify ED OIG
1.
Title IV Institutions
Institutions must refer to ED OIG “any credible information indicating”
that a student aid applicant, employee, third party servicer, or agent of the
institution “may have engaged” in fraud. 34 C.F.R. § 668.16(g) provides
that an institution must:
[Refer] to the Office of Inspector General of the Department of
Education for investigation—
(1) After conducting the review of an application provided for
under paragraph (f) of this section, any credible information
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indicating that an applicant for Title IV, HEA program assistance
may have engaged in fraud or other criminal misconduct in
connection with his or her application. The type of information that
an institution must refer is that which is relevant to the eligibility
of the applicant for Title IV, HEA program assistance, or the
amount of the assistance. Examples of this type of information
are—
(i) False claims of independent student status;
(ii) False claims of citizenship;
(iii) Use of false identities;
(iv) Forgery of signatures or certifications; and
(v) False statements of income; and
(2) Any credible information indicating that any employee, thirdparty servicer, or other agent of the institution that acts in a
capacity that involves the administration of the Title IV, HEA
programs, or the receipt of funds under those programs, may have
engaged in fraud, misrepresentation, conversion or breach of
fiduciary responsibility, or other illegal conduct involving the Title
IV, HEA programs. The type of information that an institution
must refer is that which is relevant to the eligibility and funding of
the institution and its students through the Title IV, HEA
programs[.]
2.
Non-Student Aid Grant Programs
Under 2 C.F.R. § 200.113:
The non-Federal entity or applicant for a Federal award must
disclose, in a timely manner, in writing to the Federal awarding
agency or pass-through entity all violations of Federal criminal law
involving fraud, bribery, or gratuity violations potentially affecting
the Federal award. Non-Federal entities that have received a
Federal award including the term and condition outlined in
Appendix XII—Award Term and Condition for Recipient Integrity
and Performance Matters are required to report certain civil,
criminal, or administrative proceedings to [the System for Award
Management]. Failure to make required disclosures can result in
any of the remedies described in § 200.338 Remedies for
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noncompliance, including suspension or debarment. (See also 2
CFR part 180, 31 U.S.C. 3321, and 41 U.S.C. 2313.)
IV. Whistleblower Protection
Section 828 of the National Defense Authorization Act for FY 2013, Pub.L. 112-239,
established a 4-year pilot program of whistleblower protection for employees of Federal
contractors, subcontractors, grantees (but not subgrantees) for any award after July 1,
2013. The Act prohibits reprisal against any employee making protected disclosures of
gross mismanagement, gross waste, substantial and specific danger to public health or
safety, abuse of authority, or violation of law, rule, or regulation related to Federal
contract or grant funds.
Under this statute, ED OIG investigates allegations of reprisal involving ED grants or
contracts. The Secretary of Education can order the abatement of any reprisal that an
OIG investigation substantiates, including ordering reinstatement, back pay, and
attorney’s fees.
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HOW TO INTERACT WITH EXTERNAL REGULATORS AND INVESTIGATORS
November 11-13, 2015
Anthony S. Barkow
Partner
Jenner & Block LLP
Enu A. Mainigi
Partner
Williams & Connolly LLP
Kathleen S. Tighe
Inspector General
U.S. Department of Education
Timothy G. Lynch
(Moderator)
Vice President and General Counsel
University of Michigan
Supplemental Materials
U.S. Department of Justice, Office of the Deputy Attorney General, Memorandum for the
Assistant Attorney General, Subject: Individual Accountability for Corporate Wrongdoing
Association of Corporate Counsel, Ten Tips If You Are Facing a Government Investigation
When Boards Seek Outside Counsel, by Craig C. Martin and Devlin Su
(Note: Due to page limits, these materials are available online at
http://www.softconference.com/NACUA/login.asp)
U.S. Department of Justice
Office of the Deputy Attorney General
Uf:Jshington, D.C. 20530
The Deputy Attorney General September 9, 2015
MEMORANDUM FOR THE
THE
THE
THE
ASSISTANT ATTORNEY GENERAL, ANTITRUST DIVISION
ASSISTANT ATTORNEY GENERAL, CIVIL DIVISION
ASSISTANT ATTORNEY GENERAL, CRIMINAL DIVISION
ASSIST ANT ATTORNEY GENERAL, ENVIRONMENT AND
NATURAL RESOURCES DIVISION
THE ASSISTANT ATTORNEY GENERAL, NATIONAL
SECURITY DIVISION
THE ASSISTANT ATTORNEY GENERAL, TAX DIVISION
THE DIRECTOR, FEDERAL BUREAU OF INVESTIGATION
THE DIRECTOR, EXECUTIVE OFFICE FOR UNITED STA TES
TRUSTEES
ALL UNITED STATES ATTORNEYS
~
FROM: Sally Quillian Yates
Deputy Attorney General
SUBJECT: Individual Accountability for Corporate Wrongdoing
Fighting corporate fraud and other misconduct is a top priority of the Department of
Justice. Our nation ' s economy depends on effective enforcement of the civil and criminal laws
that protect our financial system and, by extension, all our citizens. These are principles that the
Department lives and breathes- as evidenced by the many attorneys, agents, and support staff
who have worked tirelessly on corporate investigations, particularly in the aftermath of the
financial crisis.
One of the most effective ways to combat corporate misconduct is by seeking
accountability from the individuals who perpetrated the wrongdoing. Such accountability is
important for several reasons: it deters future illegal activity, it incentivizes changes in corporate
behavior, it ensures that the proper parties are held responsible for their actions, and it promotes
the public's confidence in our justice system.
There are, however, many substantial challenges unique to pursuing individuals for
corporate misdeeds. In large corporations, where responsibility can be diffuse and decisions are
made at various levels, it can be difficult to determine if someone possessed the knowledge and
criminal intent necessary to establish their guilt beyond a reasonable doubt. This is particularly
true when determining the culpability of high-level executives, who may be insulated from the
day-to-day activity in which the misconduct occurs. As a result, investigators often must
reconstruct what happened based on a painstaking review of corporate documents, which can
number in the millions, and which may be difficult to collect due to legal restrictions.
These challenges make it all the more important that the Department fully leverage its
resources to identify culpable individuals al all levels in corporate cases. To address these
challenges, the Department convened a working group of senior attorneys from Department
components and the United States Attorney community with significant experience in this area.
The working group examined how the Department approaches corporate investigations, and
identified areas in which it can amend its policies and practices in order to most effectively
pursue the individuals responsible for corporate wrongs. This memo is a product of the working
group's discussions.
The measures described in this memo arc steps that should be taken in any investigation
of corporate misconduct. Some of these measures are new, while others reflect best practices
that are already employed by many federal prosecutors. Fundamentally, this memo is designed
to ensure that all attorneys across the Department are consistent in our best efforts to hold to
account the individuals responsible for illegal corporate conduct.
The guidance in this memo will also apply to civil corporate matters. In addition to
recovering assets, civil enforcement actions serve to redress misconduct and deter future
wrongdoing. Thus, civil attorneys investigating corporate wrongdoing should maintain a focus
on the responsible individuals, recognizing that holding them to account is an important part of
protecting the public lisc in the long term.
The guidance in this memo reflects six key steps to strengthen our pursuit of individual
corporate wrongdoing, some of which reflect policy shifts and each of which is described in
greater detail below: (l) in order to qualify for any cooperation credit, corporations must provide
to the Department all relevant facts relating to the individuals responsible for the misconduct;
(2) criminal and civil corporate investigations should focus on individuals from the inception of
the investigation; (3) criminal and civil attorneys handling corporate investigations should be in
routine communication with one another; (4) absent extraordinary circumstances or approved
departmental policy, the Department will not release culpable individuals from civil or criminal
liability when resolving a matter with a corporation; (5) Department attorneys should not resolve
matters with a corporation without a clear plan to resolve related individual cases, and should
2
memorialize any declinations as to individuals in such cases; and (6) civil attorneys should
consistently focus on individuals as well as the company and evaluate whether to bring suit
against an individual based on considerations beyond that individual's ability to pay. 1
I have directed that certain criminal and civil provisions in the United States Attorney's
Manual, more specifically the Principles of Federal Prosecution of Business Organizations
(USAM 9-28.000 el seq.) and the commercial litigation provisions in Title 4 (USAM 4-4.000 et
seq.), be revised to reflect these changes. The guidance in this memo will apply to all future
investigations of corporate wrongdoing. It will also apply to those matters pending as of the elate
of this memo, to the extent it is practicable to do so.
1. To be eligible for anv cooperation credit, corporations must provide to the Department
all relevant facts about the individuals involved in corporate misconduct.
In order for a company to receive any consideration for cooperation under the Principles
of Federal Prosecution of Business Organizations, the company must completely disclose to the
Department all relevant facts about individual misconduct. Companies cannot pick and choose
what facts to disclose. That is, to be eligible for any credit for cooperation, the company must
identify all individuals involved in or responsible for the misconduct at issue, regardless of their
position, status or seniority, and provide to the Department all facts relating to that misconduct.
If a company seeking cooperation credit declines to learn of such facts or to provide the
Department with complete factual information about individual wrongdoers, its cooperation will
not be considered a mitigating factor pursuant to USAM 9-28.700 el seq. 2 Once a company
meets the threshold requirement of providing all relevant facts with respect to individuals, it will
be eligible for consideration for cooperation credit. The extent of that cooperation credit will
depend on all the various factors that have traditionally applied in making this assessment (e.g.,
the timeliness of the cooperation, the diligence, thoroughness, and speed of the internal
investigation, the proactive nature of the cooperation, etc.).
This condition of cooperation applies equally to corporations seeking to cooperate in civil
matters; a company under civil investigation must provide to the Dcpaiiment all relevant facts
about individual misconduct in order to receive any consideration in the negotiation. For
1
The measures laid out in this memo are intended solely to guide attorneys for the government in
accordance with their statutory responsibilities and federal law. They are not intended to, do not,
and may not be relied upon to create a right or benefit, substantive or procedural, enforceable at
law by a party to litigation with the United States.
2
Nor, if a company is prosecuted, will it support a cooperation-related reduction at sentencing.
See U.S.S.G. USSG § 8C2.5(g), Application Note 13 ("A prime test of whether the organization
has disclosed all pertinent information" necessary to receive a cooperation-related reduction in
its offense level calculation "is whether the information is sufficient ... to identify ... the
individual(s) responsible for the criminal conduct").
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example, the Department's position on "full cooperation" under the False Claims Act, 31 U.S.C.
§ 3729(a)(2), will be that, at a minimum, all relevant facts about responsible individuals must be
provided.
The requirement that companies cooperate completely as to individuals, within the
bounds of the law and legal privileges, see USAM 9-28.700 to 9-28.760, docs not mean that
Department attorneys should wait for the company to deliver the information about individual
wrongdoers and then merely accept what companies provide. To the contrary, Department
attorneys should be proactivcly investigating individLtals at every step of the process - before,
during, and after any corporate cooperation. Department attorneys should vigorously review any
information provided by companies and compare it to the results of their own investigation, in
order to best ensure that the information provided is indeed complete and docs not seek to
minimize the behavior or role of any individual or group of individuals.
Department attorneys should strive to obtain from the company as much information as
possible about responsible individuals before resolving the corporate case. But there may be
instances where the company's continued cooperation with respect to individuals will be
necessary post-resolution. In these circumstances, the plea or settlement agreement should
include a provision that requires the company to provide information about all culpable
individuals and that is explicit enough so that a failure to provide the information results iu
specific consequences, such as stipulated penalties and/or a material breach.
2. Both criminal and civil corporate investigations should focus on individuals from the
inception of the investigation.
Both criminal and civil attorneys should focus on individual wrongdoing from the very
beginning of any investigation of corporate misconduct. By focusing on building cases against
individual wrongdoers from the inception of an investigation, we accomplish multiple goals.
First, we maximize our ability to ferret out the full extent of corporate misconduct. Because a
corporation only acts through individuals, investigating the conduct of individuals is the most
efficient and effective way to determine the facts and extent of any corporate misconduct.
Second, by focusing our investigation on individuals, we can increase the likelihood that
individuals with knowledge of the corporate misconduct will cooperate with the investigation
and provide information against individuals higher up the corporate hierarchy. Third, by
focusing on individuals from the very beginning of an investigation, we maximize the chances
that the final resolution of an investigation uncovering the misconduct will include civil or
criminal charges against not just the corporation but against culpable individuals as well.
3. Criminal and civil attorneys handling corporate investigations should be in routine
communication with one another.
Early and regular communication between civil attorneys and criminal prosecutors
handling corporate investigations can be crucial to our ability to effectively pursue individuals in
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these matters. Consultation between the Department's civil and criminal attorneys, together with
agency attorneys, permits consideration of the full range of the government's potential remedies
(including incarceration, fines, penalties, damages, restitution to victims, asset seizure, civil and
criminal forfeiture, and exclusion, suspension and debarment) and promotes the most thorough
and appropriate resolution in every case. That is why the Department has long recognized the
importance of parallel development of civil and criminal proceedings. See USAM 1-12.000.
Criminal attorneys handling corporate investigations should notify civil attorneys as early
as permissible of conduct that might give rise to potential individual civil liability, even if
criminal liability continues to be sought. Further, ifthcre is a decision not to pursue a criminal
action against an individual - due to questions of intent or burcleu of prool~ for example ­
criminal attorneys should confer with their civil counterparts so that they may make an
assessment under applicable civil statutes and consistent with this guidance. Likewise, if civil
attorneys believe that an individual identified in the course of their corporate investigation
should be subject to a criminal inquiry, that matter should promptly be referred to criminal
prosecutors, regardless of the current status of the civil corporate investigation.
Department attorneys should be alert for circumstances where concurrent criminal and
civil investigations of individual misconduct should be pursued. Coordination in this regard
should happen early, even if it is not certain that a civil or criminal disposition will be the end
result for the individuals or the company.
4. Absent extraordinary circumstances, no corporate resolution will provide protection
from criminal or civil liability for any individuals.
There may be instances where the Department reaches a resolution with the company
before resolving matters with responsible individuals. In these circumstances, Department
attorneys should take care to preserve the ability to pursue these individuals. Because of the
importance of holding responsible individuals to account, absent extraordinary circumstances or
approved departmental policy such as the Antitrust Division's Corporate Leniency Policy,
Department lawyers should not agree to a corporate resolution that includes an agreement to
dismiss charges against, or provide immunity for, individual officers or employees. The same
principle holds true in civil corporate matters; absent extraordinary circumstances, the United
States should not release claims related to the liability of individuals based on corporate settlement
releases. Any such release of criminal or civil liability clue to extraordinary circumstances must be
personally approved in writing by the relevant Assistant Attorney General or United States
Attorney.
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5. Corporate cases should uot be resolved without a clear plan to resolve related individual
cases before the statute of limitations expires and declinations as to individuals in such
cases must be memorialized.
If the investigation of individual misconduct has not concluded by the time authorization
is sought to resolve the case against the corporation, the prosecution or corporate authorization
memorandum should include a discussion of the potentially liable individuals, a description of
the current status of the investigation regarding their conduct and the investigative work that
remains to be done, and an investigative plan to bring the matter to resolution prior to the end of
any statute of limitations period. If a decision is made at the conclusion of the investigation not
to bring civil claims or criminal charges against the individuals who committed the misconduct,
the reasons for that determination must be memorialized and approved by the United States
Attorney or Assistant Attorney General whose office handled the investigation, or their
designees.
Delays in the corporate investigation should not affect the Department's ability to pursue
potentially culpable individuals. While every effort should be made to resolve a corporate matter
within the statutorily allotted time, and tolling agreements should be the rare exception, in
situations where it is anticipated that a tolling agreement is nevertheless unavoidable and
necessary, all efforts should be made either to resolve the matter against culpable individuals
before the limitations period expires or to preserve the ability to charge individuals by tolling the
limitations period by agreement or court order.
6. Civil attorneys should consistently focus on individuals as well as the company and
evaluate whether to bring suit against an individual based on considerations beyond
that individual's ability to pay.
The Department's civil enforcement efforts are designed not only to return government
money to the public fisc, but also to hold the wrongdoers accountable and to deter future
wrongdoing. These twin aims - of recovering as much money as possible, on the one hand, and
of accountability for and deterrence of individual misconduct, on the other - are equally
important. In certain circumstances, though, these dual goals can be in apparent tension with one
another, for example, when it comes to the question of whether to pursue civil actions against
individual corporate wrongdoers who may not have the necessary financial resources to pay a
significant judgment.
Pursuit of civil actions against culpable individuals should not be governed solely by
those individuals' ability to pay. In other words, the fact that an individual may not have
sufficient resources to satisfy a significant judgment should not control the decision on whether
to bring suit. Rather, in deciding whether to file a civil action against an individual, Department
attorneys should consider factors such as whether the person's misconduct was serious, whether
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it is actionable, whether the admissible evidence will probably be sufficient to obtain and sustain
a judgment, and whether pursuing the action reflects an important federal interest. Just as our
prosecutors do when making charging decisions, civil attorneys should make individualized
assessments in deciding whether to bring a case, taking into account numerous factors, such as
the individual's misconduct and past history and the circumstances relating to the commission of
the misconduct, the needs of the communities we serve, and federal resources and priorities.
Although in the short term certain cases against individuals may not provide as robust a
monetary return on the Department's investment, pursuing individual actions in civil corporate
matters will result in significant long-term deterrence. Only by seeking to hold individuals
accountable in view of all of the factors above can the Department ensure that it is doing
everything in its power to minimize corporate fraud, and, over the course of time, minimize
losses to the public fisc through fraud.
Conclusion
The Department makes these changes recognizing the challenges they may present. But
we are making these changes because we believe they will maximize our ability to deter
misconduct and to hold those who engage in it accountable.
In the months ahead, the Department will be working with components to turn these
policies into everyday practice. On September 16, 2015, for example, the Department will be
hosting a training conference in Washington, D.C., on this subject, and I look forward to further
addressing the topic with some of you then.
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