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A Policy Change For Settlements In Corporate Fraud Cases

There has long been debate over who commits a crime in cases of corporate misconduct. A corporation is a legal entity. It is an artificial stand-in for a person. White collar crimes, including bank fraud, mortgage fraud and wire fraud, often implicate corporations and individual employees of those corporations. Responsibility for the acts considered criminal by investigators is often spread out among a number of employees. Many of those employees may have no idea that any laws are being broken. Cases involving corporate fraud are almost always complex.

The Department of Justice recently clarified its position regarding situations where a corporation chooses to cooperate with an investigation. Typically, the cooperation is based on the hope that the corporation will face fewer or less severe penalties. The new DOJ position may make it less likely that corporations choose to cooperate. That is because the new position makes it harder for corporations to receive credit for cooperating. 

The DOJ released a memo indicating that corporations would not receive credit for cooperating unless they name the individuals responsible for the wrongdoing. Corporations will not receive credit if they cannot name names. Basically, the less culpable the organization as a whole, the less likely the corporation is to get the benefit of cooperating with investigators.

In reality, corporations do not have perfect understanding of the actions of the individuals working for them. It is unrealistic to expect that a corporation will easily be able to determine who committed each illegal act and report them to investigators. The new policy may discourage some companies from cooperating, but it may also encourage companies to offer scapegoats in an attempt to appease investigators. In any case, the new policy is unlikely to further the cause of justice for all the parties involved.

Source: Courthouse News Service, "DOJ Wants Entities to Give Up Wrongdoers," by Tish Kraft, 14 September 2015 

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