Corporate criminal prosecutions are in decline.

The Department of Justice has paid lip service to corporate prosecutions, but in practice, the Department has extended new forms of leniency to the largest corporations in the most serious criminal cases.

What to do?

Create an independent unit within the Justice Department to prosecute corporate criminals.

That’s the take of Duke Law Professor Brandon Garrett in a new article titled Declining Corporate Prosecutions (forthcoming, American Criminal Law Review, March 26, 2019.)

“Centering corporate prosecution functions in a dedicated expert group within the Department of Justice would help to insulate this work, in the way that the Antitrust Division and the Foreign Corrupt Practices Act (FCPA) group has been,” Garrett wrote. “The inconstancy of U.S. corporate prosecution policy and practice is a function of our system’s reliance first and foremost on nearly unfettered prosecutorial discretion. A welter of non-binding Department of Justice guidelines accompanies a complex system for corporate prosecutions that ultimately hinges on the policies and attitudes of prosecutors.”

Garrett says that “the U.S. system of negotiated outcomes does not deliver certainty for corporations and it does not serve the public interest well.”

“Prosecutors were widely seen as not having responded adequately to the financial crisis. However, we continue to rely on the discretion of prosecutors, with their political and resources constraints, to handle the most serious corporate crimes. Ten years later, if we still have not learned the lessons of the last financial crisis, then the next one cannot be far ahead.”

“Ten years after the crisis, one does not see concrete public pressure to do anything about the family of ‘too big to jail’ problems associated with the decline in corporate prosecutions and the weakening of corporate enforcement policy. Federal corporate penalties have sharply declined with the change in presidential Administrations. Despite stated efforts to charge individuals alongside corporations, such individual prosecutions have remained infrequent and fairly marginal. A raft of Department of Justice policies have been introduced to reduce corporate criminal penalties, relax individual charging priorities, avoid the use of independent corporate monitors, and more. The change in federal priorities has been sharp and it is apparent in corporate prosecution outcomes.”

Most glaring is the increased use of declinations.

“One simple reason that corporate penalties would be expected to decline is that in large cases, the Department of Justice increasingly declines charges,” Garrett writes. “Importantly, these are not traditional declinations, in which prosecutors decide that they do not have sufficient evidence or cause to pursue a criminal matter further. Such declinations are typically not made public, since after all, it would be harmful to the reputation of an innocent party to disclose that an investigation was initiated, but then terminated.”

Instead, the Department “has defined a new type of declination in the corporate setting, in which a case has merit but is not pursued,” Garrett writes.

“A declination of this type, the Department explains, consists in ‘a case that would have been prosecuted or criminally resolved except for the company’s voluntary disclosure, full cooperation, remediation, and payment of disgorgement, forfeiture, and/or restitution.’”

“Thus, a corporate case that has merit, and that would have resulted in a conviction if pursued, is dropped,” Garrett writes. “Under this policy, declinations may be made public; some are listed on the Department of Justice’s website, but other more traditional declinations are not made public, when they are in the nature of an investigation that the Department notifies the company that it has closed. The declinations do not always just state that charges were decline, either. They can include statements of facts describing criminal acts. They can include payments of disgorgement.  The line between a non-prosecution agreement and a declination can be fine.”