April 27, 2017 / 7:12 PM / 3 years ago

"Partnership" to get new emphasis in U.S. fraud, bribery enforcement strategy - DOJ official

NEW YORK (Thomson Reuters Regulatory Intelligence) - The U.S. Justice Department will put more emphasis in its fight against fraud to encouraging cooperation from companies and individuals as opposed to seeking new enforcement records, but it has no intention to abandon prosecutions of white-collar offenses, a senior official said on April 20.

The Department of Justice (DOJ) logo is pictured on a wall after a news conference to discuss alleged fraud by Russian Diplomats in New York December 5, 2013.

The comments from Trevor McFadden, acting principal deputy assistant attorney general of the Justice Department’s criminal division, signaled a shift to a more business-friendly approach to fraud and corruption from the Obama administration.

The strategy of the Trump administration’s anti-fraud effort “is to motivate companies and individuals voluntarily to comply with the law” and “not to prosecute every company we can, or break our own records for the largest fines or longest prison sentences,” McFadden told the American Conference Institute (here).

In a speech to the institute’s annual conference on the Foreign Corrupt Practices Act, McFadden said a renewed emphasis by the Justice Department on fighting violent crime did not mean it would be less vigilant on foreign bribery or white-collar offenses in general. He noted that some have concluded the DOJ “is no longer is interested in prosecuting white-collar crime. I intend to dispel that myth.”


However, McFadden’s calls for “working with companies transparently and in partnership” and seeking “to motivate companies and individuals voluntarily to comply with the law” suggested a departure from the past in line with the Trump administration’s pro-business policies.

One of the top white collar prosecutors under Obama, Securities and Exchange Commission enforcement chief Andrew Ceresney, touted the many major cases settled by the SEC against companies in a year of record-setting corruption settlements when he addressed the same ACI group last November.

Ceresney had cited as key cases corruption charges settled with JPMorgan in its “sons and daughters” case and private equity firm Och Ziff, whose chief executive was fined for ignoring corruption warnings and conflicts. This “sent the message loud and clear that CEOs will be held responsible” for corruption and that “only by holding such senior decision makers responsible that we will deter such conduct,” Ceresney said at the time.

Said McFadden: “Business organizations are our partner in the fight against corruption, because they are in the best position to detect risk, to take preventative measures and to educate those who act on its behalf on best practices.”

“We hope that, in this cooperative effort, we can reduce corruption with effective compliance programs that prevent nefarious conduct from happening and through effective prosecutions to resolve violations in a way that punishes the conduct and deters similar future misconduct,” he said.


McFadden said the DOJ will enforce Foreign Corrupt Practices Act cases in which U.S.-regulated companies bribe public officials.

President Donald Trump and his nominee for SEC chairman, Jay Clayton, have called for curbs on FCPA in the past and anti-corruption advocates have questioned whether FCPA enforcement will be relaxed.

Nevertheless, McFadden said, the Justice Department understands “the importance of ensuring a fair playing field for honest corporations doing business abroad.”

“The department is committed to enforcing the FCPA and to prosecuting fraud and corruption more generally. The department does not make the law, but it is responsible for enforcing the law, and we will continue to do so.”


He said the Justice Department continues to review a year-old FCPA Pilot program that offers concessions to companies that self-report cases of bribery. The measure was seen having a signficant impact on companies and led to a half-dozen settlements over the past year. The one-year program expired on April 5 and the DOJ extended the review period but did not give a time frame for the review.

“We are now conducting a full assessment of the pilot program to consider how we can most effectively motivate companies and individuals to voluntarily comply with the law and how we can appropriately communicate our prosecutorial priorities and expectations to parties subject to the FCPA,” McFadden said. “The program will continue in full force as we evaluate it and until we reach a final decision regarding its permanence.”

Carrying on international cooperation, Yates memo

McFadden called FCPA enforcement a “two-way street” that encourages other countries to fight corruption and share information. He noted that Attorney General Jeff Sessions has met with four counterparts in other countries on continued cooperation. The Trump administration has vowed to review all international accords to see if U.S. interests are served. McFadden cited a need to build on past success in gloal FCPA enforcement.

“While we are boosting our focus on violent crime prosecutions, the criminal division is fully engaged in combatting crime in all its forms, and no matter what color collar its perpetrators wear,” said McFadden, a former Baker McKenzie partner who was a DOJ counsel during the Bush administration.

McFadden echoed the Justice Department’s “Yates memo” issued in 2015 that called on federal prosecutors to name individuals in enforcement actions, a policy enacted in response to criticism that the post-crash fraud cases were resolved with large payments and not admissions of guilt or individual jail sentences. McFadden cited the “the importance of individual accountability for corporate misconduct.”

“Our aim is to motivate companies and individuals voluntarily to comply with the law,” he said. “It is by working with companies transparently and in partnership that we can achieve this goal.”

(Richard Satran is a financial journalist covering daily and emerging issues for Thomson Reuters Regulatory Intelligence.)

This article was produced by Thomson Reuters Regulatory Intelligence and initially posted on Apr. 21. Regulatory Intelligence provides a single source for regulatory news, analysis, rules and developments, with global coverage of more than 400 regulators and exchanges. Follow Regulatory Intelligence compliance news on Twitter: @thomsonreuters

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