The U.S. Justice Department is seeking to increase prosecutions of individual employees for corporate crime and coax companies to turn over evidence on executives after criticism that the government failed to punish wrongdoers in the financial crisis.
Sally Quillian Yates, the department’s No. 2 official, ordered policy changes to push prosecutors to reinvigorate cases, according to a memo she issued Wednesday. Under the new approach, only companies that disclose information about individual wrongdoing may be eligible for lesser penalties for cooperating.
“Our mission here is not to recover the largest amount of money from the greatest number of corporations,” Yates plans to say Thursday at a speech at New York University School of Law, according to excerpts released by the Justice Department. “Our job is to seek accountability from those who break our laws and victimize our citizens. It’s the only way to truly deter corporate wrongdoing.”
The approach to corporate crime is the boldest policy announcement since Loretta Lynch became attorney general in April. Lawmakers had faulted the Justice Department under the previous attorney general, Eric Holder, for failing to send senior Wall Street executives to prison after the 2008 financial crisis.
While department officials say they haven’t held back prosecuting financial wrongdoing, cases against Wall Street bankers and corporate executives have been rare during the Obama administration.
The memo, sent to prosecutors around the country, says settlements with companies won’t shield individuals from prosecution or civil liability except in “extraordinary circumstances” and with approval from top department officials.
Prosecutors will be required to explain why cases against individuals couldn’t be made by the time the statute of limitations expires. Decisions not to charge individuals involved in misconduct must be approved by the U.S. attorney or the top Justice Department official overseeing the investigation.
Department lawyers investigating civil cases, such as false claims, must also focus on individuals and shouldn’t be governed by a person’s ability to pay. These lawyers and criminal prosecutors will also be required to share information with one another.
Some of the new policies were foreshadowed over the past year in speeches by officials in the Justice Department’s criminal division. The rules in the memo will apply to pending and future investigations of corporate wrongdoing.
A year ago, Holder told an audience at the same law school that charges against bankers for criminal conduct were in the works and that market manipulation investigations were being aided by informants and undercover traders. Those cases have been slow in coming, even as the department entered into multibillion-dollar settlements with global financial institutions.
Prosecutors charged 12 traders with attempting to rig benchmark interest rates. Three have pleaded guilty and the other cases are pending. The Justice Department never prosecuted a high-level investment-bank executive for wrongdoing that led to the housing bust and financial crisis, which has drawn ire from lawmakers, public-interest groups and even a prominent federal judge in Manhattan, Jed Rakoff.
The department has also relied heavily on deferred- prosecution agreements, which withhold criminal charges against companies in exchange for cooperation with investigations and promises to root out misconduct. Critics of the deals say they are too lenient and aren’t effective in deterring misconduct.
Yates’s speech comes as the department’s antitrust division is deciding whether to charge currency traders who were members of a chat room known as “The Cartel,” according to two people familiar with the matter. The traders allegedly colluded with counterparts at other banks to rig foreign-exchange fixings, according to authorities who settled with six banks and extracted nearly $6 billion in penalties in May.