Outing Companies That Avoid Charges a Dilemma for US Prosecutors

The Justice Department is wrestling over how to provide greater transparency into when it ends investigations of companies without pressing charges, former officials said.

Such coveted resolutions, known as declinations, are usually concealed from the public, as details of their existence are sought by the defense bar and other businesses considering whether to self-report white-collar crime.

But DOJ is also motivated to show its work, knowing it will give companies more certainty that turning themselves in won’t backfire.

Internal DOJ deliberations and discussions with outside counsel over ways to make the process less opaque have a major obstacle to overcome, according to six lawyers who’ve been involved in the talks that date to at least 2016. All parties benefit from more declination visibility except the recipient companies that are outed.

“Everyone says they want more data, more examples, more meat to compare and contrast, until it is your client—who is thrilled by the result but certainly does not want to share it with the world,” said Sandra Moser, a former chief of DOJ’s criminal fraud section.

Keeping under wraps the circumstances when prosecutors opt against bringing charges could hamper the department’s progress toward a top Biden administration priority of incentivizing companies to self-disclose misconduct. It also denies the public an indicator of whether DOJ is advancing its ultimate goal of obtaining greater company cooperation to help put executives in jail.

Over recent years, officials have discussed options such as announcing statistics on the volume of declinations and posting anonymized determinations to close cases that don’t reveal company names, said the attorneys, some of whom were granted anonymity to share private conversations.

“Publishing the declinations or having a repository we thought would create a system we’re all very familiar with, kind of a common law system, where you can look back at decisions that have been made and the rationale and apply them to your particular situation,” said Nathaniel Mendell, who was acting US attorney in Boston through February 2022.

Mendell, recalling meetings he attended as a member of DOJ’s advisory group that shaped the latest corporate voluntary disclosure policies, said there was a “clear consensus” about the need to create predictability for companies. The advisory panel also viewed a central archive of declinations as valuable for sharing institutional knowledge among all offices at DOJ headquarters and the 94 US attorney districts, he said.

Other recent corporate enforcement announcements have emphasized transparency and department-wide consistency. Deputy Attorney General Lisa Monaco, for example, called for all offices to develop and publish individualized voluntary self-disclosure policies. But DOJ officials have yet to tweak their approach to publishing declinations.

Only four declinations have posted on the department’s website during the Biden administration.

“The department is committed to being as transparent as possible in criminal prosecutions while adhering to our longstanding practice of not commenting on pending investigations,” a DOJ official said in a statement.

‘True Declinations’

Eighteen declination letters have been publicized since 2016 under the criminal division’s corporate enforcement policy, or CEP. That policy offers parameters for companies to avoid prosecution in exchange for timely self-reporting, full cooperation, and remediation.

A broader category of cases, relying on a more expansive definition of declination that’s more commonly used by private attorneys, are still kept out of sight. This includes decisions to close a case after an investigation failed to prove a crime and when companies self-disclose smaller matters that DOJ determines aren’t worth the resources to investigate.

The DOJ official said the “department tends to distinguish between” the public-facing corporate enforcement policy declinations where there was still a “prosecutable criminal case,” and case closures, which stem from insufficient evidence, witness concerns, lack of jurisdiction, and other issues.

“There are important reasons not to publicize case closures” and non-CEP declinations, such as privacy and victim interests, and preserving prosecutors’ discretion, the official added.

Occasionally, companies will announce declinations on their own, particularly publicly-traded ones that previously informed shareholders of a government investigation.

But by and large, when businesses are balancing the risks and rewards of walking in possible wrongdoing to DOJ, they find it difficult to identify concrete examples of how similarly-situated competitors have fared.

Monaco and her top deputy, Marshall Miller, have promoted the benefits of self-disclosures by pointing to a March declination that went to a publicly-traded coal company lacking national name recognition. Corsa Coal disgorged $1.2 million in profits for Foreign Corrupt Practices Act violations and handed over evidence that enabled DOJ to criminally charge two former vice presidents with bribing Egyptian officials.

Kara Brockmeyer, a Debevoise & Plimpton partner who was Corsa Coal’s co-counsel in the matter, said she distinguishes that decision from “true declinations” in which the public never finds out and the company isn’t fined.

“Those of us in the defense bar can say, ‘yes, we know declinations are alive and well because we’ve gotten them for our clients,’” said Brockmeyer, a former chief of the Securities and Exchange Commission’s FCPA unit. “But I think it’s a perennial issue for DOJ and SEC to figure out a way to provide that information.”

Despite the desire for transparency into those true declinations, Brockmeyer said she doubts “we’re ever going to see a situation where the government is able to disclose more than either statistics or anonymized examples.”

Imperfect Solutions

One possible approach is the opinion letter model used by other government agencies. This could involve redacting the company name, but still showing how its actions were given weight by prosecutors in deciding a charge wasn’t necessary.

For instance, it may still explain how soon after learning of the misconduct the company reported to DOJ and what qualified as “extraordinary cooperation” under recently revised declination guidance.

But even that solution is imperfect, as the department may need to avoid providing so much detail that industry insiders could still determine the company’s identity, said Mendell, now a partner at Morrison & Foerster.

Overall statistics on the department’s declination activity would also force DOJ to determine what exactly counts as a declination, said Tarek Helou, a former supervisor in DOJ’s FCPA unit.

When DOJ declines prosecuting a company for reporting a minor violation with a small dollar figure, the government won’t be inclined to consider that a declination, added Helou.

As the department mulls its options, not all companies will share the view that more public-facing declinations are necessary for their self-disclosure calculus, said Martin Bell, a former federal prosecutor in Manhattan.

“Companies may see this as something of a double-edged sword,” said Bell, now a partner at Simpson Thacher. “Everyone’s happy to have more datapoints out there until you are the public datapoint.”