As the [Deputy Attorney General Sally Yates] said at NYU Law School, our focus on individuals stems from the reality that corporations act through human beings, and that justice usually requires identifying those responsible for criminal conduct and holding them personally accountable. Prosecuting the corporate entity, and imposing a fine and other impersonal conditions, simply is not enough – in most instances – to fully punish and, more importantly, deter corporate misconduct.

The new policy guidance announced by the [Deputy Attorney General] is premised on that straightforward point, and forcefully focuses all federal prosecutors on pursing individual accountability for corporate criminal conduct. That focus, in turn, should send a powerful message to those who would engage in misconduct, as well as to companies that have engaged in wrongdoing and are seeking leniency in exchange for cooperating with a department investigation.

Assistant Attorney General Leslie R. Caldwell

One of the great frustrations for the American public following the recent economic crisis – as evidenced by the Occupy Wall Street movement – has been the government’s unwillingness to prosecute the individuals behind the fraud. CEOs and corporate executives made billions from duping the American people, and when it came time to pay the piper, they retired to their yachts and penthouses and watched while the world burned. Whatever penalties were levied by the government were levied on the corporations and not the people who ran the corporations, and so the price was ultimately paid by the shareholders, which often included the employees and public who were ripped off in the first place.

As qui tam attorneys, we share this frustration. It is not uncommon for the government to intervene and settle with a corporate entity – a hospital, bank, mortgage lender, or defense contractor, for example – while the executives who were the architects of the fraud are allowed to pocket the millions of dollars they secured at the public’s expense.

In an exciting turn of events for the American taxpayer, earlier this month the Department of Justice issued a memo that directs prosecutors to increase their focus on the individual wrongdoers and not just the corporate entities. One of the most important new provisions is that whereas companies used to receive credit for generally admitting to wrongdoing, they now must also offer information regarding the specific individuals within the company who were responsible. As explained by Leslie Caldwell, Assistant U.S. Attorney General for the criminal division of the DOJ:

This means that companies seeking cooperation credit must affirmatively work to identify and discover relevant information about culpable individuals through independent, thorough investigations. Companies cannot just disclose facts relating to general corporate misconduct and withhold facts about the responsible individuals. And internal investigations cannot end with a conclusion of corporate liability, while stopping short of identifying those who committed the criminal conduct.

In recent years, federal judges have expressed concern with how the Department of Justice pursued the corporate, but not individual, wrongdoers that led to the financial crisis, with perhaps Judge Jed Rakoff of New York being the most vocal. He reacted favorably to this new emphasis on personal responsibility, noting that the DOJ’s emphasis on prosecuting banks and corporations, but not senior officers, was “misguided for many reasons, but the most obvious being that it’s individuals who commit the crimes.”

Time will tell whether the civil division follows suit and prosecutes the individuals responsible for fraud under the False Claims Act, but it appears that Deputy Attorney General Sally Yates has implemented an important first step in making sure that those who commit fraud will be prosecuted to the fullest extent of the law.