Enforcement Update – DOJ Raises Focus on Prosecuting Individuals

There has been a change in the US Department of Justice regarding corporate disclosures. The recently updated United States Attorney’s Manual has revised its provisions called the “Principles of Federal Prosecution of Business Organizations.” These Principles, commonly referred to as the Filip factors, determine when a company gets “mitigation credit” in a civil or criminal prosecution of any kind, including trade matters. Until this November 2015 change, companies would get “mitigating credit” for any voluntary disclosure. If they disclose all known information they will receive a large mitigation benefit. If the company discloses only a little data, it could still receive some credit for cooperating. However, this new policy requires that a company reach a “threshold hurdle” by providing the government with a complete picture of all individuals involved and all facts relating to the misconduct in order for the government to consider providing any cooperation credit for the disclosure by the company. This new policy is meant to help the Department prosecute individuals.

According to this new policy, the Department of Justice will now weigh the timeliness of a company’s voluntary disclosure separately from the company’s willingness to cooperate. Time is still of the essence so if the initial disclosure is incomplete it won’t affect credit for being timely. However, whether the company makes a complete disclosure and cooperates fully with the government by providing information on individual culpability will be a separate Filip factor. Bottom line is that following up with all the facts, including the role of individuals in committing the violation, is now required to receive any cooperation credit. These policy changes highlight the government’s interest in prosecuting culpable corporate executives and remind individuals to think twice before engaging or sanctioning illegal activities assuming there is limited liability for the individual protected within a corporate structure.  To me this signals another reason why corporate officers and Boards of Directors should focus on determining how effective their export compliance program is and what the company needs to do to ensure the officers and senior officials have taken an active role in maintaining a culture of compliance. It really does all come full circle back to compliance.

Wishing everyone a happy and safe holiday season.

Doreen