In corporate crime cases, there are declinations with a press release.

And then there are declinations without.

The declinations corporate criminal defense lawyers prefer are of the second variety. 

No publicity declinations.

And apparently, they exist and might become a model for future corporate crime settlements.

That’s according to a new report from Public Citizen titled Corporate Prosecution Doldrums.

The report documents the continued years-long decline of prosecuting major corporate crime cases under the Biden administration.

But at the end, the report says that the worst part of the Biden administration’s safe harbor policy for corporate criminals “is the Justice Department’s renewed and expanded promise to reward corporate criminals that self-report misconduct with declinations.” 

“A declination is a formal guarantee that the government will not bring a criminal case,” the report’s author, Rick Claypool writes. “Despite a web page dedicated to posting declinations, they are not consistently disclosed.” 

“Corporate defense attorneys openly state their goal for clients subject to criminal investigations is to win a “non-public declination” – and may list the achievement on profiles they post to promote their services.”

Jonathan Barr, a partner at Baker Hostetler in Washington, D.C. says that he has experience with non-public declinations.

“Conducted internal investigation for public company and represented company in voluntary FCPA (Foreign Corrupt Practices Act) self-disclosure to the Department of Justice Fraud Section and the SEC that resulted in a rare non-public declination of prosecution from Department of Justice and closure of investigation without action from the SEC,” Barr writes on his personal profile page.

What’s the takeaway of the Public Citizen report?

“The Biden Justice Department came out saying that they were going to ramp up corporate enforcement, that corporate enforcement would be waxing and they would be holding corporations accountable,” Claypool told Corporate Crime Reporter in an interview last month.

“We took them at their word on that. They announced some policy changes that seemed to be not adequate to fit the moment in terms of reforms that were needed. And the report finds that the numbers of corporate criminal prosecutions haven’t changed much at all since the Trump years.”

What’s your explanation for that?

“There are a couple of possible explanations. They are saying they are going to be offering more declinations. Not a leniency agreement, just a straight out declination. They say that they are going to do that more to incentivize voluntary self-disclosure. And we know that not all declinations are made public.” 

“White collar defense lawyers like to boast about their success in achieving non-public declinations from the Justice Department. If the company is accused of violating the law and they are making amends that the Justice Department believes they need to make, they just don’t tell anybody about the declination.”

Defense attorneys tell us that the only time you are going to get non-disclosure of a declination is when the Justice Department determines that it’s not worth bringing the prosecution, it would be tough to get a conviction. But anytime there is a declination with some kind of remedial action, like disgorgement, then usually those cases are made public.

“The white collar firms are saying that the goal is to get a non-public declination,” Claypool said. “They see the new policies as making these more obtainable.” 

Jonathan Barr of Baker Hostetler, on his web site, talks about securing a rare non-public declination. It sounds like there was an allegation of some kind of violation, a self-disclosure and a non-public declination. How many of those are there? I don’t know. Are there many? I doubt it. But there are some. That’s one possible explanation for what’s going on.”

“Another is that they are bringing fewer cases. Why? I would like to know myself. I would like to know how many corporate criminal investigations the Department of Justice is opening. Then we could determine what percentage of those cases result in declinations, or deferred prosecutions or non-prosecutions.”

“We don’t have all the data for this year yet. But looking at the information compiled by Violation Tracker for the deferred prosecution and non prosecution agreement, we see that there are about 13 so far this year, with two declinations. That’s about the same as the last couple of years. So not much change. I’d be surprised if Fiscal 2023 brings a dramatic change.”

You lead your report with the fact that the Department of Justice brought 99 cases against corporate offenders in fiscal year 2022. But the reality is that most of those are against smaller companies. If you want to focus on major corporate crime cases, you are looking at the category that you call in your report leniency agreements. If it’s a settlement with a major corporation, it’s going to be one of these leniency agreements. 

If you look at the leniency agreements, the first two years of Biden were 32 and 11 – 43 total. The first two years of Trump were 37 and 29 – 66 in total. It’s counterintuitive. 

Something is going on that we don’t understand fully. 

“I would love to hear the answers or explanations from the Department itself, especially in light of the very forceful rhetoric they set out. They talked the talk,” Claypool said.

“We want the number of leniency agreements to go down. We want them to be prosecuted instead. They are prosecuting some big corporations. To their credit, they are prosecuting breaches of leniency agreements. But the disparity between big and small is very interesting.” 

“The Sentencing Commission found that in 2022, 81 percent of the corporations the Justice Department prosecuted had fewer than 50 employees. And seven percent had 1,000 or more employees.” 

Public Citizen sent its report out to all the major news outlets. Yet, there was very little pick up in the mainstream press. Was there any reporting other than Corporate Crime Reporter, Common Dreams and the American Prospect? 

“There was a mention of it in a Reuters story. But the press generally covers business from the perspective of business. Most coverage of corporate violations is framed as bad news for the company, not bad news for whoever was victimized by the company. There are outlier cases like the opioid epidemic and Boeing. But for the most part, there is very little interest in corporate crime or coverage of corporate crime.”

“There is also the sluggishness of the process. Companies will resolve some fairly egregious violations like the DuPont case for a toxic release that happened nine years ago. And the guilty plea came out earlier this year.”

“So they can deflect attention by slow walking the cases. I’ve often wondered how much of that is part of what is being negotiated between prosecutors and corporations – when the announcement is made, how much attention the Department tries to draw to its activities.” 

“For example, there is a pattern of putting out press releases of major corporate crime resolutions late afternoon on a Friday. I mean it was an issue in The West Wing television show – how to put out a press release that you don’t want anyone to read.”

[For the complete q/a format Interview with Rick Claypool, see 37 Corporate Crime Reporter 44(13), November 13, 2023, print edition only.]