Federal prosecutor explains how businesses can become targets

Daily Record and the Kansas City Daily News-Press, Jan 11, 2006 by Donna Walter

(This article was originally published in The Daily Record, St. Louis, Mo., another Dolan Media publication.)

A businessman commits fraud. Does the federal government prosecute the businessman, the company or both?

The depends, said Assistant U.S. Attorney Thomas C. Albus as he spoke Friday morning at a breakfast meeting of the Missouri Chamber of Commerce.

Albus, filling in for U.S. Attorney Catherine Hanaway, described the nine factors that go into the U.S. Justice Department's decision whether to prosecute an entity. These factors were published in a January 2003 memorandum by Deputy Attorney General Larry D. Thompson.

The factors set forth in the Thompson memo are:

(1) the nature and seriousness of the offense, which includes the risk of harm to the public;

(2) the pervasiveness of the wrongdoing within the corporation;

(3) a corporation's history of similar conduct;

(4) the timely and voluntary disclosure of wrongdoing and a willingness to cooperate in the investigation;

(5) the existence and adequacy of a corporation's compliance program;

(6) a corporation's remedial actions;

(7) the collateral consequences of prosecution, including consequences to innocent shareholders or employees;

(8) the adequacy of prosecuting the individuals and;

(9) the adequacy of civil or regulatory enforcement.

As a corporate manager, the Department of Justice looks for people that emphasize to their staff and to the folks that work in their corporation obviously that criminal conduct - and specifically, if you think of your different agencies, conduct that has been prosecuted or has been discussed disfavorably by government regulators in the past - will not be countenanced, Albus said. That's something that when it is emphasized throughout the corporate culture is something that is a positive in the Department of Justice's eyes. When something that in past that has occurred has been weeded out and has been condemned by corporate management, that is something that's seen as a positive, seen as a reason to forgo entity prosecution in the Department of Justice's eyes.

It's sometimes more appropriate for the Justice Department to work with a company toward civil or regulatory remedies than to prosecute the entity. Looking at the collateral consequences of entity prosecution, Albus noted a number of people objected strongly to the prosecution of Arthur Andersen. The company had a very long history and was generally a well-respected player in our corporate culture for decades and decades, and ultimately what it basically went down for was one lawyer - not even a partner at Arthur Andersen - instructing people to shred documents, he said. People have raised the idea: Was this swatting a fly with a sledgehammer by the Department of Justice?

Albus described how the Thompson memo factors were considered in the Justice Department's decision last June not to prosecute Shell Oil for overstating by 23 percent its reserves of hydrocarbon in public filings with the U.S. Securities and Exchange Commission.

Shell settled an enforcement action with the SEC, which included consenting to a cease-and-desist order finding violations of several provisions of federal securities laws and paying a $120 million civil monetary penalty, he said.

In addition, Shell self-reported the material misstatements to Wall Street and to the government, and the corporation cooperated fully with the government investigation by making available to investigators documents and employees from all over the globe, by waiving attorney-client and work-product privilege, and by setting up a database of information government regulators could search easily, Albus said.

The lesson is if there's ever anything . . . in your life or in your dealings with your business that makes you think twice, go ahead and call up your general counsel or call up your outside counsel and disclose everything. And probably nine times out of 10, your counsel is going to say, 'Oh, you're paranoid; everything is fine.' Get the letter, and put it in your file, that that's fine, and it probably is fine, he said.

Albus also took a moment to talk about Missouri's criminal laws and procedural rules. He urged the business leaders to look at truth- in-sentencing laws - where convicted criminals serve 85 percent of their sentence - and consider how that might be a smart investment in our economy.

In addition, he said evidentiary rules have been created just for the sake of favoring criminal defendants, such as rules that don't allow juries to learn of prior convictions or prior bad acts.

I think it would be helpful in the state of Missouri to take a comprehensive look at our criminal evidentiary rules, at our criminal sentencing rules and the various crimes that we have and consider: Are these appropriate from a business standpoint? Are these going to be the most efficient use of the resources that we poured into our criminal justice system? he said.