This article originally appeared in The Legal Intelligencer on February 21, 2017


Last fall, the U.S. Sentencing Commission published the results of its study on the federal ­prosecution of corporations and other organizational ­offenders. The results of that study, based on sentencing data for the calendar year 2015, says much about the types of organizations and offenses that are most likely at risk for federal prosecution and how corporate counsel can reduce the risk of corporate criminal liability in the new year. 

Don’t cut corners on compliance with environmental laws and regulations.

According to the study, the most ­common offenses committed by organizational offenders were environmental crimes (33.2 percent), followed by fraud (21 percent), food and drug offenses (12.2 percent) and antitrust violations (7.7 percent). Looking closer at the environmental crimes most likely to be prosecuted, the study revealed that 70 percent of the offenses related to water discharges, while 16.7 percent related to wildlife, 8.3 percent related to hazardous material discharges and 5 percent related to air discharges. If these 2015 statistics were not alarming enough, consider the U.S. Justice Department’s high-profile prosecution of Volkswagen AG as well as six of its corporate executives for violations of the Clean Air Act and other crimes. Still not concerned? Consider the dual threat of state prosecution for environmental crimes in Pennsylvania, where Pennsylvania Attorney General Josh Shapiro has pledged to make prosecution of state environmental crimes—particularly in the energy sector—a priority of his new administration.

Develop an effective compliance and ethics program.

In a statistic that should surprise no one, of the 181 organizations that were prosecuted for federal crimes, none had an effective compliance and ethics program. The importance of an effective compliance program is set forth in Title 9, Chapter 28 of the U.S. Attorneys’ Manual (U.S.A.M.) titled Principles of Federal Prosecution of Business Organizations: “In conducting an investigation, determining whether to bring charges, and negotiating plea or other agreements, prosecutors should consider the following factors in reaching a decision as to the proper treatment of a corporate target … the existence and effectiveness of the corporation’s pre-existing compliance program,” U.S.A.M. Section 9-28.300(5). Guidelines for establishing an effective compliance program are set forth in U.S.A.M. Section 9-28-800 (relating to corporate compliance programs). Obviously, failure to establish and maintain such a program is asking for trouble.

Be prepared to manage internal ­conflicts of interest.

According to the study, nearly 60 percent (58.6 percent) of all organizational cases involved at least one employee or related individual who was separately convicted. This statistic, which is based on 2015 data, is likely to increase substantially in 2017 as a result of the Justice Department’s new policy on individual accountability for corporate wrongdoing, commonly referred to as the Yates Memo. The Yates Memo, authored by then-Deputy Attorney General Sally Q. Yates on Sept. 9, 2015, has since been incorporated in the U.S. Attorneys’ Manual, and the results of this policy charge are on full display in the Justice’s Department’s prosecution of both Volkswagen and six of its corporate executives. While a detailed discussion of the Yates Memo is beyond the scope of this article, the lesson here is that corporate counsel must keep a keen eye out for potential conflicts of ­interest between the corporation and its ­officers/employees when trouble surfaces and take steps to ensure that alleged ­wrongdoers do not have undue influence over any internal investigation or responses to government inquiries.

Take extra care if you represent a privately held company, particularly one with a history of compliance problems.

According to the study, most of the ­companies charged with a federal crime in 2015 were owned by private entities. Closely held or private corporations accounted for 46.5 percent of all prosecutions, followed by limited liability companies (27.5 percent) and sole proprietorships (11.3 percent). Moreover, 27.6 percent of these organizations had a history of misconduct, consisting of previous criminal or civil adjudications or pending charges.

Don’t wage war with the U.S. Justice Department unless you have to.

During the early stages of a government investigation, it is advisable to keep your gunslingers at bay and strike a conciliatory tone with the Justice Department if you can. There are two reasons for this. First, there are built-in incentives for effective cooperation, as reflected by the Yates Memo and the U.S. Attorneys’ Manual, which, in relevant part, provides: “Cooperation is a mitigating factor, by which a corporation—just like any other subject of a criminal ­investigation—can gain credit in a case that otherwise is appropriate for indictment and prosecution,” U.S.A.M. Section 9-28.700 (relating to the value of cooperation). Second, corporations who wage all-out war with the Justice Department do not have the best track record. Indeed, according to the U.S. Sentencing Commission study, 97.8 percent of all organizational offenders who were charged in 2015 pleaded guilty. While rolling over during a government investigation is never a good strategy, most “wins” during criminal probes are the result of effective negotiations, where battles are fought quietly without jeopardizing an overall atmosphere of cooperation. 

Christopher D. Carusone is a Partner in the Firm’s Harrisburg office, where he serves as Chair of the Firm’s Government Law & Regulatory Affairs and Energy & Utilities Groups, as well as Co-Chair of the Internal Investigations Group.