New year, new Department of Justice: Recent resolution of fraud allegations signals increased use by Department of Justice of corporate oversight

On December 21, 2021, the US Department of Justice (“DOJ”) announced the resolution of its criminal investigations into NatWest Markets Plc (“NatWest”), a UK-based global banking and financial services company. Accused of violating the terms of a 2017 Non-Prosecution Agreement (“NPA”), NatWest pleaded guilty to one count of wire fraud and one count of securities fraud, agreeing to pay approximately $ 35 million. dollars in criminal fines, restitution and forfeiture. In addition, NatWest has agreed to serve three years of probation and, more specifically, to hire an independent compliance monitor. The imposition of a corporate controller represents a radical departure from the reluctance of the previous administration to resort to this costly and often heavy sanction.

Context of the NatWest survey

The DOJ’s resolution stems from a series of conduct investigations into NatWest over the past decade. In 2015, NatWest pleaded guilty to a scheme to manipulate the currency market and was placed on probation. Two years later, the DOJ entered into an NPA with the company for a separate allegedly fraudulent scheme. Legal documents and NatWest’s confession reveal the basis of the latest fraud allegations, which relate to the manipulation of US Treasury markets. According to the firm’s affidavits, from around 2008 to 2014, NatWest traders in London and Connecticut engaged in fraud schemes in connection with the buying and selling of Treasury futures contracts. American.1 In the schemes, NatWest traders allegedly participated in an “impersonation” by placing orders with the aim of canceling those orders before their execution with the aim of profiting by deceiving other market participants. The so-called fraudulent orders would have inserted false market information to artificially deflate or inflate the prevailing market price so that NatWest traders can profit.

In determining criminal resolution with NatWest, the DOJ took into account the nature and severity of the breaches, NatWest’s substantial history of misconduct, its violation of a prior NPA, and the state of the compliance and ethics program. by NatWest. When the guilty plea was announced, Deputy Attorney General Lisa Monaco – the DOJ’s second in command – proclaimed that “there will be serious consequences for a company that violates the terms of an agreement with the government. “.2 She added, “Business leaders need to understand that investing in compliance programs can prevent situations like this and take action accordingly. “3

The rise and fall and rise again of independent corporate controllers

We have previously detailed the role of independent corporate controllers and their expansive development over the past two decades here. In short, the DOJ first promulgated guidelines for prosecutors considering the appointment of corporate controllers in 2008.4 The DOJ has supplemented these guidelines several times over the years, with the publication of the “Breuer Memo” in 2009,5 the “Grindler Memo” in 2010,6 and more recently the “Benczkowski Memo” in 2018.seven Under the Trump administration, the DOJ used monitors sparingly and only under the most egregious circumstances, in part due to recognition of their highly intrusive and expensive nature. More specifically, the Benczkowski Memo stated that prosecutors should favor the imposition of surveillance “only when there is [was] a demonstrated need and a clear benefit to be derived from monitoring in relation to the projected costs and charges. “8 The Trump administration’s apparently chosen approach has been borne out by the statistics. In April 2020, the DOJ began publishing a list of all company controllers actively engaged by companies in connection with criminal resolutions with the Fraud Section of the Criminal Division. At the time, only thirteen companies had active surveillance. Today that number has dropped to seven.9

Nonetheless, the NatWest resolution is an indicator of change. We recently reported that the DOJ was on the verge of breaking away from the previous administration and starting to impose more corporate oversight as part of the resolutions. While NatWest’s resolution covers financial fraud, any cases of suspected fraud that DOJ investigates could see increased imposition of corporate oversight, including investigations into false claims and corrupt practices at the company. abroad, making this development relevant to a wide range of businesses. At the American Bar Association’s National Institute on White Collar Crime in October 2021, Deputy Attorney General Lisa Monaco made it clear that cracking down on business would be a top priority for the Biden administration. Departing from the Trump administration’s approach, she noted that “[f]or clients negotiating resolutions, there is no presumption by default against corporate monitors. This decision regarding an instructor will be made on the basis of the facts and circumstances of each case. “ten

Looking Ahead: Developing a Robust Compliance Program

Taken together, the recent declarations of the DOJ and the NatWest demonstrate that companies should take seriously the prospect of negotiating a corporate resolution and, if faced with an investigation, seek expert advice from a knowledgeable lawyer and prioritize compliance and remediation up front to ” potentially avoid the imposition of a company auditor. Not only can a strong compliance program help prevent misconduct, but such a program can pay dividends for companies that are already under investigation. When negotiating a resolution, the DOJ will take into account a company’s pre-existing remediation efforts in determining whether to impose oversight. Involving experienced outside lawyers in government investigations can ensure that a company’s compliance program is designed in accordance with what the Department of Justice will view most favorably.

Comments are closed.