The U.S. Department of Justice generated significant publicity in September 2015 by announcing a change in policy in business investigations. In a memorandum to prosecutors throughout the DOJ covering virtually all criminal and civil investigations of business wrongdoing the DOJ stated it would focus on individuals.
The DOJ appeared to undercut this policy initiative almost immediately by the subsequent announcement of the deal with General Motors on the ignition problem that involved no action against an individual GM employee. Business people must nevertheless give attention to the impact of the DOJ change in policy.
The memo issued by the Department sets forth six policy changes in any federal investigation. These are:
- In order to qualify for any cooperation credit, corporations must provide to the Department all relevant facts relating to the individuals responsible for the misconduct;
- Criminal and civil corporate investigations should focus on individuals from the inception of the investigation;
- Criminal and civil attorneys handling corporate investigations should be in routine communication with one another;
- Absent extraordinary circumstances or approved departmental policy, the Department will not release culpable individuals from civil or criminal liability when resolving a matter with a corporation;
- Department attorneys should not resolve matters with a corporation without a clear plan to resolve related individual cases and should memorialize any declinations as to individuals in such cases; and
- Civil attorneys should consistently focus on individuals as well as the company and evaluate whether to bring suit against an individual based on considerations beyond that individual’s ability to pay.
Car Dealer Impact
With the focus in any federal business investigation on individuals, what does this mean for car dealers?
Car dealers face more laws than almost any other businesses. They have dramatically increased their emphasis on compliance. However, the DOJ policy change makes a culture of compliance even more critical.
Dealers have been concerned about the increasing level of – and even criminalization of – enforcement efforts aimed at dealer sales practices. For example, F&I practices that twenty-five years ago would have resulted in simple demands that the dealership buy back certain contracts assigned to financial institutions are now leading to demands for damages and even criminal referrals for fraud on financial institutions. This has led to some notable prosecutions of dealership employees involved in the activities. The new DOJ policy changes can only accelerate that trend.
Now, if a federal prosecutor becomes involved in any activities directed at financial institutions, the focus will be on the wrongdoing of the individuals. In any investigation, prosecutors will demand information about those involved. Actions against individuals will be the rule, not the exception.
Another danger area is OSHA and environmental enforcement actions.
Dealers are concerned about the safety of their employees and have implemented compliance programs under the Occupational and Safety Health Act (“OSHA”). Dealers should not forget that OSHA can be enforced through criminal actions. While those are rare, they are increasing. Given the direction to focus on individuals from the outset of any investigation, one can expect that criminal actions against dealers and employees for flagrant violations of OSHA (especially when serious injury or death may result) are a possibility.
Another area of concern is environmental enforcement. Criminal enforcement actions under the environmental laws are more frequent than those under OSHA. If any flagrant environmental violations occur, criminal actions are a potential problem. In those cases, the new policy will have federal prosecutors looking at the individuals involved along with the businesses.
What This Means for Employees?
The new DOJ policies apply in both criminal and civil investigations. Not only can individuals face criminal punishment, they can be defendants in U.S. government civil actions – regardless of their financial circumstances.
What Should a Dealer Do?
Compliance must be an integral part of all dealership operations. Dealers must implement programs for compliance best practices – training, oversight, and discipline for violations. Individual employees must understand that problems they create are not something they can just walk away from.
The federal government’s policy to concentrate on individual conduct in any investigation it is doing will surely bleed down to state investigations. That will affect individuals personally if they ignore the law or violate the law. Dealers must emphasize this shared liability must lead to a culture of compliance in the dealership.