When federal enforcers fail to pursue the full range of sanctions, particularly the most severe against an offending corporation, they are often perceived as unwilling enforcers. 

What if, however, there is another explanation for the federal government’s behavior in pursuing sanctions against corporations?

In a new article, Notre Dame Law Professor Veronica Root Martinez argues that federal enforcers have, whether purposefully or not, adopted a model of enforcement that prioritizes gathering information from firms over levying significant sanctions against them. 

Instead of pursuing one of the traditional aims of punishment – retribution or deterrence – the government’s actions suggest that its priority is in ensuring that corporations disclose all relevant information of the corporation’s misconduct to the government. 

The question is whether the information is worth it? Is the information gathered by the government worth the potential decreased deterrent effect of its more lenient enforcement policies as a result of its quest for full information and disclosure?

The article is titled The Government’s Prioritization of Information Over Sanction: Implications for Compliance.

“It is something I have taught for a while,” Martinez told Corporate Crime Reporter in an interview last week. “Over a decade of observation of enforcement efforts, I see the government trying to get information.”

“A corporation may be fine giving information to the government, but doesn’t necessarily want that information to be available everywhere. The government fights Freedom of Information Act (FOIA) requests and joins in motions with the corporation fighting off reporters and attempts to get information.” 

“Whether purposeful or not, much of the federal government enforcement activity has gotten to the point where the government is willing to trade leniency in exchange for the government getting that information. If that is what is happening, what is the public getting out of that? We are losing out on some of the fines. It is not at all clear to me that the highest level of fines are ever being levied. And that makes you wonder about the deterrent effect of that policy.”

“If you are not getting the full deterrent effect because the government is really wanting the information, then what else is the government providing to the public? The government might do something with that information that might help others in their compliance efforts. The government could start going through that information and publishing best practices. The government could aggregate some of the information they have gathered and say – these are some common pitfalls.” 

In your article on the government prioritizing information over sanctions, you don’t actually come down and say – the government should seek more stringent sanctions.

“I don’t say in this article that the government should seek more stringent sanctions. Although I have written a different article titled – Coordinating Compliance Incentives. That was published in the Cornell Law Review a few years ago. In that article I do argue that the government is not sanctioning sufficiently, particularly corporations that have had repeat problems. I am actually somebody who thinks the government can ramp up its sanctions quite a bit. The government has shown an unwillingness to come up with fine numbers that would create a necessary deterrent effect. There are non monetary avenues that can be utilized to enhance a deterrent effect. One of those might be a monitor.” 

“But in this most recent article we are talking about, I take the world as it is. If it is true that the government is prioritizing information over sanction, then we should get something out of that information. We should be able to use that information for some larger public purpose.”

What should we get in return?

“The problem is that the information is going into lots of different places. I would like to get more information about trends. I wish somebody was looking through settlement agreements and after action reports and finding trends. I am still internally debating how much information should be disclosed. I’m working through this in a new article on monitors. I am not arguing that all monitor reports should be made public. There are a lot of reasons why that wouldn’t work practically. But there should be some sort of public reporting.”

“The reality is that while monitors are independent third parties, they are engaged in a quasi public function. They are helping us know that a corporation engaged in misconduct is engaged in a fruitful and effective remediation effort, or not. They are telling us something about the status of the remediation effort. There should be some sort of information that the public gets.”

“Right now we get a big flashy press release announcing the settlement agreement. But settlement agreements are often just the beginning of a three to five year period where the firm is supposed to be engaged in some sort of remediation effort. Why aren’t we getting as flashy a press release saying – this is how the corporation is doing? There should be something.”

“If the government is trading power to levy fines and sanctions for this information, then why isn’t the public getting something out of that information?” 

If you had criminal prosecutions and guilty pleas, you could impose effective court supervised monitors – probation officers. And corporate criminals have had probation officers assigned to them. Corporate monitors are like probation officers lite. There is little judicial oversight. And there is little transparency. 

You have argued for increased penalties. But why not just move back to a more criminal posture?

“I do argue in the Cornell Law Review piece that one of the ways you could ramp up the sanctions is instead of entering into these alternative settlements, you could engage in more formal criminal proceedings. And if these cases were resolved at the criminal level, then under the Sentencing Guidelines, we would get probation officers instead of monitors.” 

“Part of that has to do with Department of Justice policy. The article I wrote on information over sanctions grew out of a Duke Law School symposium last year celebrating the 20th anniversary of the Justice Department’s corporate prosecution policy – the Holder Memo. If the government was more willing to bring criminal prosecutions, some of this wouldn’t matter. If it’s a criminal prosecution, so much of this changes. The public’s right to know, the public’s right to access information changes. Many of these monitor reports have not been disclosed because they have been deemed not judicial records. I have been surprised that some of the litigation hasn’t gone up to the Supreme Court. I would like to see them go up. The district courts have tried to assert authority over these cases, but the Court of Appeals has been stopping them.”

“If more of these cases were resolved criminally, you would have more access to information and you wouldn’t have as many concerns about a lack of transparency.”

“But then some people will come back with – what about the lack of prosecutorial resources, or what about the Andersen effect – putting the firm out of business? “

“The problem right now is that no one believes that the government is willing to use its biggest stick. And if that’s the case, you are always under deterring. There are many examples of corporations fined time and time and time again. And then the misconduct keeps happening.”

[For the complete q/a format Interview with Veronica Root Martinez, see 34 Corporate Crime Reporter 45(11), Monday November 23, 2020, print edition only.]