The underpinning of the Justice Department’s criminal prosecutions program against companies is based on a simple premise – a company has to negotiate a pre-indictment settlement to avoid the catastrophe which occurred to Arthur Andersen in 2002. As you will recall, in 2002, Arthur Andersen went to trial, was convicted and the company evaporated, jobs were lost and pensions were gone. The impact on the community was huge.
The Justice Department cites this premise and companies follow the logic of it with few exceptions. It is a very powerful premise – companies are forced to enter into non-prosecution or deferred prosecution agreements (DPA or NPAs) which give prosecutors unprecedented power to impose “regulatory-type” requirements on companies. It is a dangerous practice to allow prosecutors to set corporate governance and compliance requirements, but that is the world in which we all live.
So let’s go back to the premise – can companies go to trial?
A recent example demonstrates that the answer may be yes. United Water just last week went to trial in an environmental crime cases and won an acquittal. Not only did United Water secure an acquittal but the threee individuals charged in the case were acquitted as well. The jury was out for a total of 8 hours deliberating. The cost of this debacle to the company, to taxpayers and the court system is enormous. For a good summary of the case, see Sol Weisenberg’s article on Professor Podger’s White Collar Crime Prof Blog here.
United Water is part of a global water conglomerate with services all around the world. It stands distinct from smaller companies such as Lindsey Manufacturing, which went to trial last year in an FCPA criminal case. The environmental crimes section took it on the chin. Unfortunately, this is not unprecedented. In 2009, the environmental crimes section lost a huge criminal case in Montana against W.R. Grace and three of its executives. It is important to keep these two significant cases in perspective. Overall, the environmental crimes section has had huge successes in prosecuting companies and individuals. Its track record is pretty impressive. My point in citing these two examples, however, is that there may be situations where a company can challenge the government’s evidence, exercise its constitutional right to a jury trial, and win. More importantly, the company can survive.
Of course, the reputational damage during the pendency of the case can be significant. The cost of going to trial is huge. And there is a benefit to a company to focus forward rather than devoting energy to defending itself for past actions.
Whatever the calculus is for an individual company, my question still stands – are there cases where companies can (or should) go to trial?
About the Author
Michael Volkov is a shareholder at the national law firm of LeClairRyan. His practice focuses on white collar defense, corporate compliance, internal investigations and regulatory enforcement matters, and he is a former federal prosecutor with almost 30 years of experience in a variety of government positions and private practice. He can be reached at firstname.lastname@example.org
Successfully represented three officers of a multinational company in two separate criminal antitrust investigations involving a criminal antitrust investigation in the District of Columbia and the Southern District of New York.
Defended pharmaceutical company before the Food and Drug Administration and Senate Finance Committee relating to application for approval of generic drug.
Conducted internal investigation which exonerated company against allegations of false statements in submissions to the FDA and against improper conduct alleged by Senate Finance Committee.
Represented company before the US State Department on alleged violations of ITAR which lead to voluntary disclosure and imposition of no civil or criminal penalties.
Advised several multinational companies on compliance with anti‐corruption laws, and design and implementation of anti‐corruption and anti‐money laundering compliance programs.
Advised hospitals, pharmaceutical companies and medical device companies on compliance issues relating to Stark law and Anti‐Kickback law and regulations.
Conducted due diligence investigations for large multinational companies for anti‐corruption compliance of: potential third party agents, joint venture partners and acquisition targets in Europe, Africa, Asia and Latin America.
Represented individual in white collar fraud case in Alexandria, Virginia and secured dismissal of criminal charges and expungement of criminal record.
Represented company before Congress and Executive Branch in effort to modify Justice Department regulations concerning use of federal funds.
Advised and assisted World Bank in review of global corruption policies, enforcement programs and corruption investigations and prosecutions.