Michael Volkov, CEO and owner, Volkov Law Group LLC*
Editor’s Note: This is the third in a series of six guest commentary posts that will address the six distinct topic areas covered in Washington Legal Foundation’s recently released Timeline: Federal Erosion of Business Civil Liberties. To read the other posts in this series, click here.
Over the last thirty years, the U. S. Department of Justice has dramatically expanded criminal prosecutions of corporations and individuals, relying on a steady litany of so-called criminal-prosecution policies. Underlying each of these policies are two significant purposes: (1) to replace prior civil and regulatory enforcement with “new” criminal prosecution tools and (2) to provide criminal prosecutors with ever-increasing leverage over companies and individuals to extract criminal fines and pleas.
As one looks at the handy Washington Legal Foundation Timeline chart, the view across each category reveals a disturbing picture. When it comes to criminal prosecutions, we have seen unprecedented expansion of the use of criminal statutes for “new” purposes such as false statements (18 U.S.C. § 101), conspiracy to defraud the U.S. Government (18 U.S.C. § 371), and honest services fraud (18 U.S.C. § 1346), in a manner that stretches them well beyond congressional intent.
As a former prosecutor and now a defense attorney, I have watched this sea change unfold. Civil enforcement, once viewed as a powerful tool, has now been jettisoned in favor of stiff penalties, threats to companies’ very existence, and incarceration of individuals for crimes that 20 years ago were considered, at most, regulatory or civil infractions.
One area this trend has been constrained, thanks in part to WLF’s consistent and powerful advocacy, is enforcement against off-label “marketing.” Federal prosecutors have targeted drug and device companies’ education of practitioners about lawful (and in some instances, essential) uses of their products with increasingly creative criminal-prosecution strategies, some of which have arisen from civil False Claims Act actions. Such prosecutions have compelled numerous companies and their executives to plead guilty to regulatory crimes under the Food, Drug, and Cosmetic Act. Some companies and executives have, with WLF’s help, fought back with preemptive First Amendment lawsuits.
Companies and individuals subject to regulatory regimes in the defense industry, the financial sector, and the healthcare sector have been subjected to criminal threats of prosecution for otherwise “civil” or “regulatory-type offenses. The Justice Department has embraced this trend with the release of criminal-prosecution memos that pay lip service to the preservation and separation of civil-enforcement programs, but in reality license a new and more dangerous use of criminal laws for regulatory purposes.
Gone are the days when our criminal laws were reserved for the worst of the worst actors; instead, criminal investigations are launched in the hopes of convincing companies to “cooperate” and settle for huge financial penalties in order to avoid collateral consequences from a criminal prosecution.
Prosecutors have extraordinary power under this new regime. Criminal cases are typically resolved favorably for the government—and done so expeditiously. Companies and individual that often face severe penalties have no choice but to cooperate and settle or plead guilty in the hopes of avoiding jail.
Traditional civil enforcement has been relegated to a backwater area for Justice Department officials. This new regime has blindly ignored potential pitfalls arising from the improper sharing of grand-jury information for civil enforcement purposes. Parallel investigations of civil and criminal violations are less frequent because prosecutors can use criminal tools, or the threat of criminal prosecution, to force companies to conduct their own internal investigation, report back to the government on their findings, and then have prosecutors dispense justice in the form of corporate settlement or plea agreements.
No longer does the judiciary exercise a meaningful role in the criminal prosecution of companies. In fact, in some specific areas such as foreign bribery or foreign-export sanctions violations, judges rarely have an opportunity to interpret and resolve important statutory issues because so few individuals decide to take a criminal case to trial.
The Justice Department’s latest criminal-prosecution statement, known as the Yates Memorandum on Individual Accountability, further erodes the procedural and substantive boundaries between civil and criminal enforcement matters. The Yates Memo orders civil and criminal prosecutors to coordinate and share information yet again, ensuring that culpable individuals are identified and prosecuted either criminally or civilly.
The Justice Department’s criminalization of enforcement programs is facing greater resistance and calls for reform. With the help of WLF and other organizations, lawmakers are finally paying attention to the impact these enforcement programs have on corporations, shareholders, individuals, the U.S. economy, and the public interest. We can only hope that some meaningful reform occurs to return the proper balance of justice in prosecution of corporations and individuals.
*Prior to entering the private practice of law, Mr. Volkov spent 17 years as a federal prosecutor in the U.S. Attorney’s Office for the District of Columbia. He maintains a highly popular FCPA blog, Corruption, Crime & Compliance.