Arnold & Porter Partner John Nassikas on International Corporate Crime Defense

It’s a flat world when it comes to corporate crime.

John Nassikas Arnold & Porter

John Nassikas
Arnold & Porter

Not only do white collar criminal defense lawyers have to deal with the Justice Department, the Securities and Exchange Commission (SEC), state Attorneys General, Inspectors General and suspension and debarment officials but increasingly, they have to deal with foreign prosecutors.

Corporate crime resolutions now give new meaning to the term “global settlement.”

As head of Arnold & Porter’s white collar practice, former federal prosecutor John Nassikas is at the front line observing the rapidly evolving field.

“The expansion of prosecutors and law enforcement agents since I left the government a little over 20 years ago — it’s been exponential growth in prosecutors not just in the major cities but across the country,” Nassikas told Corporate Crime Reporter in an interview last week.

“We are training these agents and prosecutors in offices around the country — for example even in the Western District of Virginia — which has led to some enormous corporate prosecutions in the healthcare area from that district.”

“But we are also exporting our knowledge of law enforcement prosecutions to other countries with training sessions in Europe, South America and around the world. Now other countries are getting emboldened in the modern flat world and they are now more aggressively enforcing new criminal prosecutions.”

“We are creating a bit of a monster here. Former prosecutors like myself who now focus on defense work, we can navigate the SEC, the Department of Justice, other regulatory agencies, state Attorneys General.”

“But it’s harder to control what happens in other countries.”

“Look at the Embraer case. You can navigate with the Department of Justice, but then the Brazilians unseal an indictment against twelve or thirteen former or current Embraer employees in the Dominican Republic. And now you have Canadians and Europeans and recently even Saudi Arabia working in conjunction with the Department of Justice.”

“The Vimpelcom case was one of the first times the Department of Justice worked closely with the Dutch. That is a trend for the future. And the more we seek extradition of foreign executives here for prosecution, the future is going to lead to U.S. executives being pursued for extradition purposes to other countries with maturing enforcement regimes.”

Is it politically easier for the Justice Department to go after foreign companies than U.S. companies?

“I don’t see that,” Nassikas said. “It just depends on the case. I see no hesitancy by federal prosecutors here to go after US businesses or their employees if the case is there. If anything, the grey area of business conduct in the United States has now crossed into the black area of criminal investigation. I do think we have over expanded criminal enforcement into gray areas of criminal enforcement that formerly were decided through civil or administrative sanctions.”

“International law enforcement has picked up, but I don’t think to the detriment of various vigorous domestic enforcement.”

On the Yates memo, Jim Cole, the former Deputy Attorney General says — “When you play it out, it is not necessarily better for the government and it’s certainly not better for corporations and counsel.” Do you agree with that assessment?

“I actually am not viewing Yates as a tectonic shift in Justice Department practice or defense response,” Nassikas said. “For years, in representing companies and individuals, both in house counsel and outside counsel have had to look carefully to decide — has someone internally done something clearly wrong, what should we do about that person, should we keep them on, should we lawyer them up, should we have a coordinated joint defense that tries to protect both the company and the individual? I don’t see that changing much.”

“My sense is that there is an awful lot of talk about Yates. There were political reasons that pushed the Yates Memo into creation. It derived from the financial crisis and the lack of results in pursuing individual financial executives while they were getting multi-billion dollar settlements from bank after bank and hedge fund after hedge fund, year after year.”

“My sense is that there is more of a political reason for that memo, but substantively the effect — I have not seen it change much. There is now the civil component of enforcement, where the memo is indicating that there are going to be more individuals pursued for civil resolutions in these investigations, whereas before the deep pocketed company was the only defendant being pursued. That might affect some cases — individuals will face more civil exposure.”

“Will you have to lawyer up some people more quickly than before? That’s possible. But generally speaking, if there is a good faith reason by the company to believe that an individual can and should be defended, I don’t see immediately deciding that to get corporate cooperation, we need to hand over five people who have legitimate state of mind defenses in a given case.”

“I don’t think Yates in five years is going to be considered as all that influential.”

Has talk of collateral consequences been overblown?

“The lawyers on both sides work carefully to make sure that there is not going to be an unforeseen consequences that might go beyond the deterrent or punitive effect of a given case,” Nassikas says. “And a new concern for regulated industries is the rise of the suspension and debarment officers. That can be a debilitating early consequence of a probe that the average prosecutor might not be that focused on. A suspension of government contracts might be the death knell to a government contractor.”

People talk about the death penalty, but for big companies you haven’t seen the death penalty.

“That’s right. But it’s because of real sensitivity and recognition internally with the Department of Justice that they are not there to kill off a company — unless it’s a completely fraudulent enterprise. But those tend not to be the big companies. Those tend to be the smaller companies that are at the center of a criminal inquiry and rightly so.”

“For the bigger companies — there is going to be a way to focus on a particular subsidiary. There is more recognition out there that a big company is going to have issues and it’s not a sign that the company is unsteady or unethical.”

Do you believe that the pendulum is swinging away from these deferred and no prosecution agreements and toward these guilty pleas?

“There are always going to be deferred and non prosecution agreements and declinations. But given the number of inquiries, there are always going to be aggressive prosecutors seeking more criminal sanctions. And civil enforcement is going to be on the rise — through civil enforcement and administrative sanctions through the rise of Inspectors Generals and suspension and debarment officials. That’s going to continue to rise. It’s becoming a trickier area of practice. You are dealing with a multi-headed monster in the United States, plus governments around the world that are getting into the game. And they don’t have the experience and the decades of built in credibility and experience.”

[For the complete q/a format Interview with John Nassikas, see 30 Corporate Crime Reporter 24(13), June 13, 2016, print edition only.]

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