Baker Botts Partner Steven Solow on Solving Corporate Crime

Major corporate crime continues to ravage society – from pollution, to corruption, to maiming and killing.

Steven Solow
Baker Botts
Washington, D.C.

Clearly, government prosecutors are failing to curb the onslaught.

What to do?

In a paper titled Solving Corporate Crime, Baker Botts partner Steven Solow and co-author Leslie Couvillion argue that prosecutors should serve as problem solvers – not just case processors. 

They argue that government offices already exist to undertake the analytical work that is needed to support enforcers in that problem-solving role – the offices of the Inspectors General. 

“Before we can decide whether we need more or less (or zero) corporate criminal enforcement, we need to know more about what impact current efforts are having, along with a basis of comparison with other means and methods, including civil enforcement,” they write. “The goal of enforcement is, of course, not to simply bring cases, or even more cases. The goal of enforcement is to utilize enforcement tools to drive compliance. We propose a specific means to provide more information about enforcement efforts. We propose a method of conducting analyses on the impact of government enforcement on the frequency and extent of noncompliance.” 

“We propose that this work be undertaken by an existing government institution, one that has been hiding in plain sight as the debate about the role of corporate criminal liability in modern society has unfolded. Specifically, we propose that the Offices of Inspectors General (OIG) are ideally and uniquely situated to undertake this review and analysis.” 

“They have access to information that academics do not, and they are a government institution already charged with determining whether government agencies with regulatory authority are effectively and efficiently meeting their statutory goals.” 

“Among other things, we propose that the OIGs examine the root causes of corporate misconduct related to their agency’s goals as part of their assessment of the impacts of the government’s enforcement efforts. It is tempting to say that companies break the law because of ‘Sutton’s law,’ to wit, because breaking the law is ‘where the money is.’ But the reality is more complex.”

They say corporate crime is instead the result of multiple factors, including ineffective management, poor regulatory design, and conflicting priorities that create a corporate culture that leads to wrongdoing. 

“OIGs can help provide answers to the question as to what causes some companies – or their officers and employees – to break the law, while others (similarly situated) do not. Doing so is a logical imperative before spending government resources to prevent such law breaking from occurring and determining how best to use limited government enforcement resources to further the statutory goals of free markets, environmental protection, and a just society.”

Central to bringing corporate criminals to change their ways is the corporate monitor or corporate probation officer. For the past five years, Solow has been the monitor in the Carnival Cruise Lines criminal case.

Last month, the Deputy Attorney General Lisa Monaco said she wanted to improve the use of monitors. 

We asked Columbia Law Professor John Coffee about this and he said – “Often today the defendant corporation has de facto veto power over the choice and monitor.” Then he suggested one way to put teeth into monitor selection would be to appoint a blue ribbon oversight committee that would consult with the department on the choice of monitor. “Soft monitors do next to nothing in many cases today and earn high fees for a little work,” Coffee told us. 

My guess is that you would not be considered by your colleagues as a soft monitor, to use Professor Coffee’s term. What is your experience with corporate monitors in general?

“One of the things that was crucial to my monitorship was having judicial oversight,” Solow told Corporate Crime Reporter in an interview last week. “Judge Patricia Seitz in the Southern District of Florida was the judge who appointed me. And she took a very active role in overseeing the monitorship.” 

“This links up very well with something that Deputy Attorney General Lisa Monaco said. She called for prosecutors to take an active role in overseeing monitorships.” 

“She made the point that prosecutors need to make sure that monitors are staying true to what their mission is, that they’re also effectively managing their budgets. But she also made the point that prosecutors should make sure that monitors are getting the access they need and the resources they need to do an effective job.” 

“If people heard that solely as a constraint on monitors, I don’t think that’s what she was saying. Judge Seitz’s very engaged role was crucial to the success of the monitorship. She made all of my reports public. So there are more than 1,000 pages of reports covering this monitorship from the start towards the end, detailing the work that was done, the inquiries that were made and the analyses that were provided. Her approach of making the reports public is really important. Because monitors in the end are serving a public function. They are vindicating a public need even as they are working with an organization to make it more effective and more compliant.”

What percentage of monitor reports are made public?

“I don’t know the exact percentage, but I would guess it’s a very small number. There is a sort of unchallenged notion that by making reports public you would somehow reduce the ability of the monitor to effectively engage with an organization. I found that it was completely the opposite. Making the reports public holds the monitor to account in a very public way. You are reporting on your work.” 

“Within the organization, what I found was that it actually made people more forthcoming. We assured people of confidentiality. We were very careful about things that we reported being things that we could support factually. People in the organization could see that their concerns were being heard and that issues were being raised. This encouraged people to come forward and encouraged the organization to take action.” 

“I thought it had a very salutary effect overall in the process. When the Judge sought to make the reports public, counsel for Carnival Cruise Lines did not object to making them public.”

In your final letter as a monitor for Carnival Cruise Lines, you list some root causes of the problems at the company. You say there was an anti-learning culture.  

You identified an anti-learning culture that sought to minimize or avoid information that is negative, uncomfortable or threatening to the company, including to the top leadership rather than taking a learning culture approach to such information. 

You say that the company failed to prioritize the maritime sides of the business on par with the revenue generating sides of the business. 

And you say the company had an immature compliance culture including a persistent blame culture. You identified a low level of compliance culture maturity due primarily to the deficits in leadership behavior, in areas of trust, care and openness. 

So these are what you consider root causes to their consistent problems. When you left did those cultural problems persist? Or did the monitorship over five years have an ameliorative effect?

“How would I know anything about the culture of the company?” Solow asks. “How could I make any of those statements? Culture is a topic that is widely discussed now but I don’t think it is widely understood.” 

“We worked very hard with the support of Judge Seitz to find a competent culture survey provider. And what we were able to do in the early part of the monitorship and toward the end of the monitorship was to conduct a massive survey of their employees. We conducted a survey of 75,000 of their employees early on in the monitorship. And then later, when the pandemic had receded and they were back in operation, another survey of about 55,000 of their employees. And that’s how we were able to make those statements. It’s also how I’m able to say that yes, in fact, their culture improved during the course of the monitorship as they took very seriously and implemented a lot of the observations and concerns that were raised in our reports.”

“So I can say not just on the basis of my opinion, but on the basis of this really rigorous empirical work, that the things that we identified and the actions that they then took brought about a significant improvement in their culture. It’s not where they want it to be yet. But you don’t create problems overnight and you don’t solve them overnight.” 

“You don’t get into a situation in some instances, overnight, and you can’t get out of it in just a day. We found that we were able to come up with a valid means, a reliable means of assessing the culture. And then in doing that, it really pointed toward some of these barriers to improvement. Very early on the individual within the company who had been tasked to sort of be the compliance manager, he and I definitely had a meeting of the minds. What we tried to do and what my reports seek to do, is to illuminate both the achievements that the company made, and then the continued barriers toward a more sustainable compliance culture. And that was sort of the hallmark of that effort.”

At the Georgetown Law conference there were a group of abolitionists – academics and others who wanted to get rid of corporate crime prosecutions. Their view is that we should focus on the bad apples, not the bad apple orchard. The counter push was – focus on the bad apple orchards.  

One subtitle of that part of your paper is – Bad Apples or Something Larger?

There are major corporate crime cases that scream for a monitor, but no monitor is appointed. Front and center is Boeing. 

Are monitors being underused? 

“I can’t speak to percentages. But I think that what the Deputy Attorney General is demanding of prosecutors is that they make a meaningful assessment, not just the case in front of them, but any organization itself. A question was asked of her at that speech, was – how are prosecutors going to be able to do that? “

“Part of the answer goes back to what I said about someone like Matt Galvin coming in. His role is to sort of give prosecutors some more tools to be able to better assess when someone comes forward and says, you know, this was really just a product of either a rogue employee or it was a one off – to assess whether that’s true.” 

“The other thing she raised that is pretty significant is the notion of disfavoring the repeated use of non prosecution and deferred prosecution agreements. If a company has had one of those and is back before the Department, then it would have less likelihood of having a case resolution as a deferred prosecution agreement or a non prosecution agreement.”

“The alternative would be either a trial or a plea. That would mean, in effect, a monitor working for the judge. The monitor in that case is a version of a probation officer for the court. And that backing by a court can be very powerful.”. 

What percentage of monitors are supervised by a judge?

“I don’t know. But certainly in non prosecution and deferred prosecution agreements, generally speaking judges don’t play a supervisory role. It’s almost only in situations where you have a guilty plea or through trial and conviction.” 

In the Carnival Cruise Lines case, did the company put forth your names as a prospective monitor?

“It did, along with a couple of others. And then the Department of Justice made a choice. And that was presented to the court.”

Shouldn’t the Justice Department have an office of corporate probation where it actually assigns the probation officer or monitor?

“In a different world, one could imagine a scenario where there is an office of corporate compliance or probation oversight, even within the probation office itself or within the Department. That would be a publicly funded function to oversee corporate probation in a way that the probation office would oversee an individual. In that situation, individuals don’t get to pick their probation officers. And neither would companies.”

“But in the world we are living in now, the Deputy’s office is expanding the pool to require there to be a broader number of individuals to be put forward and seeking greater diversity in the individuals appointed as monitors. A broader and more diverse pool of candidates is very important. And it is something this Department is actively considering.”

[For the complete q/a format Interview with Steven Solow, 39 Corporate Crime Reporter 40(11), September 17, 2022, print edition only.]

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