Compliance Clues In DOJ Antitrust Official's Remarks

Law360, New York (February 29, 2016, 11:14 AM ET) -- Antitrust enforcement around the world has been on the rise against corporations in recent years.¹ Nowhere has that trend been more pronounced than in the United States. Just this past year, fines in antitrust cases brought by the U.S. Department of Justice reached a record high of $3.6 billion.²

At the same time, the Justice Department more broadly has recently expressed a renewed focus on enforcement against the individual executives and officers that carry out corporate acts. Deputy Attorney General Sally Yates released a much-publicized memo on Sept. 9, 2015, titled “Individual Accountability for Corporate Wrongdoing,” which called for “six key steps” to be followed at DOJ that would “strengthen [its] pursuit of individual corporate wrongdoing.”³ These steps are all directed toward putting an early and substantial focus on individuals during any corporate investigation and ensuring that pleas or settlements with corporations do not as readily absolve individual officers or directors of wrongdoing as they might have in the past.

In recent remarks at the Yale Global Antitrust Enforcement Conference, Deputy Assistant Attorney General Brent Snyder of the Antitrust Division said that the division is “embracing the Deputy Attorney General’s directive to do even better.”⁴ While noting one recent panelist’s cutting remark that competition authorities have lately been “drunk on fines,” Snyder put the focus on the Antitrust Division’s past work in the individual enforcement area while outlining new initiatives the division would be undertaking.⁵

Reading between the lines, Snyder’s remarks were fundamentally anchored on two key messages:

1. The division hopes to foster cooperation between prosecutors and antitrust offenders by strengthening and emphasizing the division’s carrot and stick enforcement approach; and
2. The division seeks to further incentivize the development of strong compliance cultures at firms.

Snyder disclaimed that he was breaking new ground with his remarks.⁶ Instead, Snyder’s comments indicate a continuity with the division’s recently intensifying enforcement efforts, as well as its focus on cooperation with authorities. With this message in mind, corporations and the executives and officers who act on their behalf, now more than ever, should heed the call to establish strong compliance programs.

Past actions against individuals by the Antitrust Division

For much of his address, Snyder touted the Antitrust Division’s past “emphasis on individual accountability.” While defending the division’s liberal employment of corporate fines and demurring on the charge of intoxication by the panelist, Snyder noted that the “division has long touted prison time for individuals as the single most effective deterrent to the ‘temptation to cheat the system and profit from collusion.’”⁷ Along this line, Snyder indicated that critics of the Division have created a false “either/or proposition” between corporate and individual enforcement. Instead, he noted “[t]hey go hand-in-hand.”⁸

Snyder spent a substantial portion of his remarks recounting statistics and anecdotes about the division’s past prosecutions of individuals for antitrust offenses. These statistics indicate, just as the growth in corporate fines does,⁹ the explosion in antitrust enforcement efforts. For example, from 2000-2009, the Antitrust Division prosecuted 220 corporations and 453 individuals, more than twice the number of corporations.¹⁰ The disparity grew in the past five years with nearly three times as many individuals facing prosecution as corporations, 352 to 123.¹¹ Although the disparity between corporate and individual prosecutions is not surprising because one can assume that multiple persons at any given firm may have culpability for the firm’s offenses, the sheer growth of individual enforcement is undeniable.

Snyder reinforced the deterrence rationale underlying this growth by asserting the division’s commitment to prosecuting high-level executives. He specifically pointed to the division’s pursuit of numerous C-suite office holders, including presidents, chairmen/CEOs, and a chief financial officer,¹² not to mention the dozens of individuals prosecuted at the vice president, managing director, division director and general manager levels.

In keeping with the globalization of both our economy and of competition enforcement, Snyder also reaffirmed that individual prosecutions do not stop at our waters’ edge. He stated that it has been and will continue to be the division’s goal that “culpable foreign nationals, just like U.S. co-conspirators, serve significant prison sentences for violating the antitrust laws of the United States.”¹³

New initiatives

Despite a record on individual enforcement of which the Antitrust Division is evidently proud, Snyder stated that the division has heard the Yates memo’s message and is taking steps to do “even better” in pursuing individuals.¹⁴ He laid out two key steps that the division is undertaking on this score:

1 The division has “adopted new internal procedures to ensure that each of [its] criminal offices systematically identifies all potentially culpable individuals as early in the investigative process as feasible and that [they] bring cases against individuals as quickly as evidentiary sufficiency permits.”

2 The division is also “undertaking a more comprehensive review of the organizational structure of culpable companies to ensure that [they] are identifying and investigating all senior executives who potentially condoned, directed, or participated in the criminal conduct.”¹⁵

These twin efforts appear directed at taking an even more expansive and critical look at individual wrongdoers at firms than the division has in the past. Rather than pinning the primary blame on one or two employees at a company, Snyder seems to be implying that the division will prosecute more individuals with an eye toward targeting all who may have had some role in antitrust violations.

Snyder’s statement that the division will pursue those who “condoned” antitrust violations is particularly aggressive. It is also in keeping with the division’s recent focus on senior level executives and their capacity to “incentivize changes in corporate culture.”¹⁶ For example, Snyder has stated in the past that compliance programs can only be effective if “senior management” actively supports them and “cultivate[s] a culture of compliance.”¹⁷ Otherwise, the firm, according to Snyder, will have a mere “paper compliance program.”¹⁸

One can glean from these remarks that the Antitrust Division intends to continue the trend of increasing enforcement for antitrust violations — by corporations and individuals. What may be new is the interest and pursuit of senior executives and officers at firms who have a more distant connection to the underlying offense.

Carrot and stick — fostering cooperation with authorities and deterring violations

The lion's share of Snyder’s remarks discussed the Antitrust Division’s leniency program and the opportunities for plea bargains and sentencing reductions through corporate and individual cooperation with prosecutors. This part of his remarks was focused on strengthening the carrot in the division’s carrot-and-stick approach to enforcement.  Indeed, Snyder made explicit at one point the connection between individual prosecutions and opportunities for leniency: “The Department’s emphasis on individual accountability enhances the opportunity for offenders to mitigate their criminal penalties by cooperating with the Antitrust Division in its criminal investigations.”¹⁹

Snyder repeatedly highlighted the strong incentives to cooperate early and actively. He stressed that the leniency program, which allows a corporation and qualifying individuals to receive immunity from prosecution, is only available to the first conspirator to reach the prosecutor’s door. Importantly, if the division is already aware of the conspiracy, the protections available to individuals are less assured.²⁰

Snyder also discussed corporate plea bargains and sentencing credits at length, hammering on the point that rapid, extensive, and unmitigated cooperation is essential to receiving these benefits.²¹ He emphasized, however, that individuals are treated separately from corporations in plea negotiations and that “one way or another they will be held accountable.”²²

Conclusion

DAAG Snyder’s recent and prior remarks cascade and evidence the Antitrust Division’s emerging philosophy of antitrust deterrence. This philosophy appears to be rooted in the view that intense and punitive enforcement coupled with substantial opportunities for absolution from offenses through leniency will increase deterrence.

Along these lines, the division has in recent years pursued extraordinary, unprecedented fines against corporate defendants. It has also touted its long-standing leniency program and its willingness to negotiate plea agreements with cooperating defendants. Finally, it has in limited instances rewarded companies that undertake strong compliance programs after violations have been identified.²³ An increased emphasis on individual enforcement, particularly with respect to those senior executives who merely “condoned” violations, is now added to this list. Snyder noted the philosophical basis for this addition at one point, stating that “holding individuals accountable for corporate wrongdoing” will “promote deterrence and incentivize changes in corporate culture.”²⁴

In light of these remarks and the enhanced enforcement environment, firms and the officers and executives who act on their behalf should heed the call for increased, robust compliance efforts. Adoption of a strong compliance program with effective training, monitoring, and auditing components provides the opportunity to both avoid or mitigate these concerns by preventing violations from occurring, identifying them at the earliest stage possible, and allowing a firm to pursue mitigation when necessary.²⁵