The Principles of Federal Prosecution of Business Organizations

They are the roadmap to a federal prosecutor’s discretion in charging your business with a crime. The why, when, and how. You can read them yourself on the Justice Department’s website. They apply to all business organizations: corporations, limited liability companies, partnerships, sole proprietorships, and even public entities, or anything in between.

Here are the highlights.

Generally, prosecutors should not treat businesses any more harshly or leniently than people, so they must consider the same things in their charging decisions as they do with individuals. These include the sufficiency of the evidence, the likelihood of success at trial, the probable deterrent effect of a conviction, and the adequacy of non-criminal remedies.

But the prosecution of businesses brings special considerations into play. The following nine illustrate those considerations but don’t exhaust them. Some may not apply to your case, and one factor may even override the others. But here they are.

1. The nature and seriousness of the offense, including the risk of harm to the public and the Department’s priorities for particular categories of crimes. The Tax Division, for example, aims to prosecute people, rather than businesses, for corporate tax offenses. The Antitrust Division, to use another example, gives full cooperation credit only to the first cooperating business.
2. The pervasiveness of misconduct within your business, including management’s complicity in it. The government will look at the number and kind of people with substantial authority who participated in, condoned, or stayed willfully blind to the misconduct. It may judge the pervasiveness of misconduct at your business as a whole or at one of its units.
3. Your business’s history of similar misconduct in civil or criminal proceedings, which may include the history of any separate divisions, subsidiaries, or affiliates. Criminal prosecution is more likely if prosecutors believe your business has not responded adequately to prior warnings, charges, or sanctions.
4. Your business’s timely, voluntary disclosure of facts from any internal investigation and its willingness to cooperate in the investigation of its agents, officers, directors, or employees, including senior executives. This was the crux of a policy memorandum issued earlier this month that emphasized the prosecution of the people through whom businesses act over just the entities themselves.
5. The effectiveness of your business’s preexisting compliance program, if any, including how management enforces it.
6. Your business’s remedial efforts to cooperate, pay restitution, discipline wrongdoers, or implement or improve a compliance program.
7. The collateral consequences of prosecution, including any disproportionate harm to innocent investors, pensioners, employees, other third parties, or the public. Since every conviction of a person or business harms innocent third parties, the effect alone is not enough to ward off prosecution. But if the collateral consequences would be significant, the government may consider an alternative.
8. The adequacy of any prosecutions of responsible individuals.
9. The adequacy of alternative, civil or regulatory remedies.

Once prosecutors decide to charge your business, they will generally charge the most serious offense that’s likely to result in a sustainable conviction. Just like their cases against people, they will consider whether various possible charges fit the circumstances of your case, serve the ends of justice, and maximize the impact of federal resources. And just like their cases against people, they will then want a guilty plea to the most serious, readily-provable charge they filed. Their plea offer may impose substantial fines, restitution, compliance measures, court-appointed monitors, or regulatory exclusion, suspension, or debarment. And they will generally not accept your business’s guilty plea in return for cutting its officers or employees loose.