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US Justice Dept wants execs to foot bill for corporate misconduct

DOJ gives fine reductions for companies seeking to recover compensation from corporate offenders.

The U.S. Justice Department is rolling out a new policy to put the cost of corporate crime in executives’ pockets, the latest in a series of changes at the agency under President Joe Biden.

The agency’s criminal justice division will provide discounts on fines for companies seeking to recover compensation from corporate offenders, Deputy Attorney General Lisa Monaco said at a conference on Thursday. Any company seeking to resolve a US investigation will also need to implement a plan to include compliance targets as part of compensation and bonuses.

“Our goal is simple: to shift the burden of corporate malpractice from shareholders, who often play no role in wrongdoing, to those directly responsible,” Monaco said at an American Bar Association conference in Miami.

Companies often pay fines to U.S. authorities to resolve investigations of wrongdoing, a practice that some say further harms shareholders but leaves corporate executives unharmed.

“Clawbacks are not a new idea, but our view is that they have never really been deployed effectively or regularly,” Marshall Miller, deputy deputy attorney general at the Justice Department, told Reuters in an interview on the sidelines of the conference. .

The three-year pilot program gives discounts linked to the amount of recovery on fines, and companies will be allowed to keep a portion of that money even if they fail to recover the fee, provided they do so in good faith. try to do so, Miller said.

“If you’re going to create a culture that exposes misconduct and promotes compliance, you need people to play along,” Miller said.

The Securities and Exchange Commission last year dramatically expanded the scope of its clawback powers, which were created in 2002.

Monaco’s “strong warning to ‘step forward and call the shots’ is a clear shot across the bow of corporate America for nondisclosure companies,” said John Carney, co-leader of the White Collar, Investigations and Securities Enforcement and Litigation team by law. firm BakerHostetler.

“Balancing the threat of prosecution with the temptation not to seek out ‘a corporate guilty plea’ that emerges could be the deciding factor in self-reporting.”

Consequences for national security

Monaco also detailed a plan on Thursday to allocate more resources to corporate crime with implications for national security.

The Justice Department will hire more than 25 new prosecutors to investigate sanctions evasion, export control violations and similar economic crimes, including a new position of chief corporate enforcement attorney within the agency’s national security division.

The agency, together with the ministries of finance and trade, issued a warning to the industry about compliance with export controls and sanctions against Russia and Belarus.