Martha M. Leon Fernandez
Loyola University Chicago School of Law, J.D. 2024
In October of 2021, the Department of Justice (“DOJ”) announced it would ramp up its enforcement against corporate repeat offenders of white-collar crimes and prioritize action against individual actors to promote accountability. The new measures implemented permit the DOJ to consider all prior wrongdoing by a corporation when deciding how to resolve a new investigation. Leniency programs of the past will not be extended to wrongdoers unless all believed participants, whether employees or executives, are disclosed. There has also been a shift from financial penalties to probationary settlements, which require companies not only to admit fault and pay fines but also to improve their monitoring of employees to deter crime. This may require outside monitoring to verify compliance, which can be burdensome and expensive.
New head of DOJ’s criminal fraud division
Among the many changes that the DOJ has implemented, this past June, they selected Glenn Leon as head of the criminal fraud division. This decision falls in line with the DOJ’s focus on encouraging companies to invest resources into compliance programs that prevent or detect legal violations by their employees. Mr. Leon is a veteran in the industry, having served as a supervisor in the securities fraud unit, a deputy chief, a federal prosecutor at the U.S. attorney’s office in Washington, and more recently, the chief ethics and compliance officer at HP Enterprise.
Despite missteps, the DOJ has demonstrated greater leniency towards companies showing an effective compliance program. However, companies that prosecutors feel have not taken preemptive steps to be compliant face harsher penalties. Mr. Leon’s extensive experience in in-house compliance at a Fortune 500 company makes him a good fit for his new role. His presence will likely ensure that companies and individuals reinvigorate their commitment to effective compliance efforts, an important step in curbing white-collar crime.
DOJ is earnestly pursuing white-collar crime
This policy shift was an unexpected development, as the DOJ has historically been slow and reluctant to prosecute white-collar crimes. After the 2008 financial crisis, hardly anyone was prosecuted despite the apparent involvement of the Wall Street banks and their executives. According to data compiled by Syracuse University, corporate and white-collar prosecutions are at all-time lows. Federal white-collar prosecutions reached their peak in June 2010 and February 2011. However, since then, their records show that prosecutions have been on a downward spiral, and in 2020, it reached its lowest point since the tracking began during the Reagan Administration.
The DOJ’s previous hesitancy to prosecute has been at the forefront of this restructuring. Since their reform announcement in the fall of 2021, the DOJ has alerted Swedish telecom equipment manufacturer Ericsson AB and British bank NatWest Group PLC that they violated their deferred and nonprosecution agreements. More significantly, in June of 2022, the DOJ arrested Nate Chastain concerning his position as a former manager of OpenSea for wire fraud and money laundering. The DOJ alleged that he used confidential information to buy NFTs at a discount and resold them for two to five times as much. This is the first big indictment related to insider trading in NFTs; however, unexpected for the industry, this escalated enforcement is proof of the DOJ’s promise to crack down on violators.
DOJ renews its mission statement
During a speech in March of this year, the assistant attorney general of the DOJ criminal division, Kenneth Polite, reinforced the DOJ’s mission to hold individuals accountable for white-collar crime instead of only fining companies. They vowed to increase the focus on the victims harmed by white-collar crime. As a result, some divisions of the DOJ are appointing victim coordinators and using litigation as a tool to support victims. The main goal is to hold companies accountable by having them fully address the harm to victims as a part of the process when resolving a criminal investigation. The change in strategy also includes bifurcating corporate pleas when necessary. Holding separate plea and sentencing hearings with corporations when executing a settlement agreement gives individuals who may have been wronged more time to come forward. Although some might argue that focusing on victims is not a new aim of the DOJ, the agency’s new expectations pressure businesses to address their wrongdoings or face harsher penalties.
In the past ten months, there has been more activity within the DOJ’s criminal fraud division than in the last decade. The department’s internal restructuring, renewed commitment, and the recent appointment of Mr. Leon are concrete steps demonstrating the DOJ’s seriousness in prosecuting white-collar crime.