Enforcement Abyss
As Corporate Prosecutions Plunge, Biden’s Department of Justice Pledges Corporate Crime Enforcement Surge
Overview
Corporate impunity reached record levels under President Trump. Federal corporate prosecutions plunged to double digits for the first time on record to a low of 99 in 2018, down two thirds from the peak of 296 in 2000. The decline in corporate prosecutions was the unsurprising result of Trump administration policies easing enforcement against corporate wrongdoers. Subsequently, corporate prosecutions fell further to 94 in 2020, Trump’s final year.
The Biden administration has pledged to end this era of corporate impunity. In October 2021, Deputy Attorney General Lisa Monaco announced new Department of Justice enforcement policies to crack down on corporate crime and urged prosecutors to “be bold” in holding corporate criminals accountable. Attorney General Merrick Garland echoed this sentiment in a speech in March highlighting the DOJ budget request for a surge in resources for bringing more white-collar cases. “I have […] seen the Justice Department’s interest in prosecuting corporate crime wax and wane over time,” Garland said. “Today, it is waxing again.”
Nevertheless, the U.S. Sentencing Commission reported in March that corporate prosecutions declined further still, to 90, during the first year under President Biden. This is less than half of the average annual number of corporate prosecutions over the previous 25 years (181).
Corporate prosecutions and leniency agreements, fiscal years 1996-2021
Additionally, the number of DOJ-negotiated leniency agreements with corporate offenders also fell between 2020 and 2021, from 45 to 32, according to data from the University of Virginia / Duke University Corporate Prosecution Registry. Prosecutors use leniency agreements – which the DOJ refers to as deferred prosecution agreements (DPAs) and nonprosecution agreements (NPAs) – to resolve cases in a way that avoids filing criminal charges against defendants. Over the past two decades, such agreements have become the DOJ’s routine method for resolving criminal cases against big corporations.
Because of the simultaneous trends of declining corporate prosecutions and the DOJ’s increased reliance on corporate leniency agreements, the agreements made up over a quarter (26%) of the cases in 2021. While this is a decline from 2020’s record-high percentage of corporate leniency agreements (32%), it remains extraordinarily high, especially in comparison with two decades ago, when prosecutors entered leniency agreements with corporate criminals only about 1% of the time.
Corporate prosecutions and leniency agreements, fiscal years 1996-2021
| Fiscal Year | Prosecutions | Leniency Agreements | Percentage Leniency Agreements | Total Cases Concluded |
|---|---|---|---|---|
| 1996 | 157 | 2 | 1% | 159 |
| 1997 | 220 | 1 | 0.50% | 221 |
| 1998 | 218 | 2 | 1% | 220 |
| 1999 | 255 | 1 | 0.40% | 256 |
| 2000 | 296 | 2 | 1% | 298 |
| 2001 | 238 | 3 | 1% | 241 |
| 2002 | 252 | 2 | 1% | 254 |
| 2003 | 200 | 4 | 2% | 204 |
| 2004 | 130 | 5 | 4% | 135 |
| 2005 | 187 | 16 | 8% | 203 |
| 2006 | 217 | 26 | 11% | 243 |
| 2007 | 197 | 37 | 16% | 234 |
| 2008 | 199 | 23 | 10% | 222 |
| 2009 | 177 | 26 | 13% | 203 |
| 2010 | 149 | 26 | 15% | 175 |
| 2011 | 160 | 41 | 20% | 201 |
| 2012 | 187 | 40 | 18% | 227 |
| 2013 | 172 | 30 | 15% | 202 |
| 2014 | 162 | 24 | 13% | 186 |
| 2015 | 181 | 73 | 29% | 254 |
| 2016 | 132 | 55 | 29% | 187 |
| 2017 | 131 | 37 | 22% | 168 |
| 2018 | 99 | 29 | 23% | 128 |
| 2019 | 118 | 26 | 18% | 144 |
| 2020 | 94 | 45 | 32% | 139 |
| 2021 | 90 | 32 | 26% | 122 |
Source: U.S. Sentencing Commission and the Duke University/University of Virginia Corporate Prosecution Registry
Analysis
It makes sense that the Trump administration’s soft-touch corporate enforcement policies would lead to a decline in corporate enforcement. It makes less sense that corporate enforcement would continue to decline even after the Biden appointees took the reins of the Justice Department and started implementing policies intended to ramp up corporate enforcement. So what’s going on?
First, one observation our data shows is that a change in administration typically brings a dip in corporate crime case conclusions. Case conclusions fell 19% between the Clinton and Bush administrations, 9% between the Bush and Obama administrations, 10% between the Obama and Trump administrations, and 12% between the Trump and Biden administrations. These dips should not be particularly surprising. Transitions between administrations are moments of upheaval. The past four changes in administration have also been changes in party, from Republican to Democratic or the reverse, which means a change in political leadership at every division of Main Justice in Washington, D.C., and all 94 U.S. Attorneys Offices.
The changes in personnel are accompanied by changes in policy. Trump’s DOJ, for example, increased the use of leniency agreements, adopted policies that lowered the fines corporate lawbreakers pay, and narrowed the scope of investigations into individuals, such as executives, who might be implicated in corporate cases. Senior Trump DOJ officials ordered staff investigators and prosecutors to stand down in criminal cases against Walmart for opioid dispensation violations, Monsanto for illegally storing hazardous waste and Caterpillar for tax evasion.
As a result of the Trump DOJ corporate enforcement policies, corporate cases plunged further in 2018, to what at the time was the record low of 128. Even into the Trump administration’s second year, the biggest corporate crime cases being resolved originated much earlier. For example, the DOJ’s 2018 case against France-based financial corporation Société Générale over alleged Foreign Corrupt Practices Act violations, resulting in $860 million in criminal penalties, was first reported in 2014 and involves allegations of wrongdoing as far back as 2004. Also in 2018, Trump’s DOJ settled with United Kingdom-based banks Royal Bank of Scotland and Barclays over their role in the 2008 financial crisis – both receiving penalties that were billions lower than expected.
Now Biden’s DOJ, under Attorney General Merrick Garland, is undergoing its own round of policy changes. Two weeks after Inauguration Day, Biden’s DOJ rescinded Trump-era policies to weaken enforcement against corporate polluters. In October of 2021, Deputy Attorney General Lisa Monaco announced changes to the DOJ’s corporate enforcement policies, including ratcheting up penalties for corporate repeat offenders, widening the scope of individuals who can be implicated in corporate investigations, and directing a squad of FBI agents tasked specifically with targeting white-collar crime. In a more recent speech, Attorney General Merrick Garland cited his budget request of $325 million for 900 FBI agents investigating white-collar cases. Assistant Attorney General Jonathan Kanter noted recently that the Antitrust Division, which he oversees and which, because of the nature of the offenses in its jurisdiction, focuses on corporate crime, ended fiscal year 2021 with 146 grand jury investigations – the most in 30 years.
Taken together, these policy changes suggest federal corporate crime enforcement is ramping up. However, most of these changes were not announced until October of 2021 – the first month of fiscal year 2022. This means any impact the policy changes might have on the number of corporate cases being concluded will not be apparent until 2023, when the U.S. Sentencing Commission releases 2022 sentencing data.
The strongest corporate enforcement reforms Biden’s DOJ announced – those targeting corporate repeat offenders – will have their most immediate effect on cases that have already been concluded. The DOJ has pledged to ensure that corporations that were permitted to conclude criminal investigations through leniency agreements are abiding by the terms of these agreements. These agreements allow corporations to avoid the reputational damage and court supervision that comes with a criminal conviction. They were originally intended to give first-time low-level offenders a chance to avoid the full force of criminal prosecution. The rationale for the DOJ’s use of these agreements with corporations is that the facilitate corporate compliance with the law. The empirical evidence, however, shows that corporations that receive leniency agreements instead of facing prosecution are not deterred from reoffending. A new approach, clearly, was needed.
Leniency agreements require corporations to reform themselves and forbid them from committing subsequent crimes. If a company breaches its agreement, it can face prosecution. Before the Biden DOJ’s strengthened oversight of corporations bound by leniency agreements, prosecutions for breaching leniency agreements were extremely rare. In an analysis covering 535 corporate leniency agreements between 1992 and 2019, Public Citizen identified only seven instances – about 1% of the time – when a corporation was punished for violating a leniency agreement. In four cases, the agreement was extended beyond its term. In only three instances was the company prosecuted over its breach. This is despite the fact that the analysis found 21 cases in which a company faced a subsequent federal criminal enforcement action either during or within one and a half years of being bound by a leniency agreement.
But in the six months after Deputy Attorney General Lisa Monaco announced the DOJ’s renewed focus on holding corporations to their leniency agreements, the government has prosecuted two corporations for breaching their agreements (Monsanto and NatWest). Deutsche Bank had its oversight by an independent corporate monitor extended. Ericsson, meanwhile, was notified the DOJ found it to have breached its agreement, though exactly what consequences the telecom corporation will face are yet to be announced. Together, these instances of corporate accountability represent a remarkable shift and a significant instance of federal enforcement officials matching their words with action.
Nevertheless, revisiting existing cases is not the same as bringing new cases. Frustratingly, the slow pace of Biden’s nominations – only 43 out of 93 U.S. Attorneys as of February 2022 – and the Senate’s stalled confirmations are slowing down the promised increase in corporate enforcement capacity. The top prosecutor vacancies leave offices in the hands of holdovers and career staff, who may be less likely to embrace policy shifts like Monaco’s corporate crime crackdown. Polluter-friendly Senate Republicans like Sens. Bill Cassidy (R-La.) and Cynthia Lummis (R-Wyo.), meanwhile, are blocking the confirmation of Biden’s top environmental law enforcement nominees.
Corporate criminal investigations take a long time even when the DOJ is operating at full capacity. Cases involving multinational corporations accused of fraud, breaking international anti-bribery laws, and violating antitrust laws are complex and labor-intensive. Years often pass between when an investigation into a particular instance of corporate crime begins and the case’s conclusion. For example, the criminal investigation into Walmart’s violations of the Foreign Corrupt Practices Act began under President Obama and was concluded seven years later by the Trump DOJ in 2019.
The slow pace of corporate criminal investigations – combined with the slow pace of nominations and confirmations – means the Trump administration’s soft-on-corporate-crime enforcement policies are having a holdover effect on the Biden administration’s enforcement numbers. Additionally, the disruptions brought on by the COVID-19 pandemic on top of the factors already mentioned are likely exacerbating the slowed pace of policy change and any increase in enforcement capacity. Nevertheless, the new enforcement policies mean it is likely that fiscal year 2021 will be the low point in terms of corporate crime enforcement.
Whether the necessary increase in corporate crime enforcement will be sufficient for deterring corporate crime remains to be seen. A Harvard Business School analysis recently concluded that major firms are engaging in misconduct at least twice a week. The annual cost of corporate and white-collar crime to Americans is estimated at between $300 and $800 billion a year (street crime costs about $16 billion). The fact that Biden’s DOJ is finally changing policies to make enforcing the law against these most powerful of lawbreakers a priority is a sign of progress. Each step away from the recent state of rampant impunity among the most powerful and well-connected is a step worth celebrating.
Conclusion
Structural obstacles have so far prevented the DOJ from rapidly matching its bold rhetoric with a wave of new corporate prosecutions. These obstacles, thankfully, are overwhelmingly transient – and their transient nature is reason for optimism. The DOJ’s increased reliance on leniency agreements was the result of policy choices. Now, under new leadership, top DOJ officials have made it clear from their policy choices that they recognize that declining corporate enforcement – and the resulting age of corporate impunity – is a serious problem. Allowing corporate crime to go unpursued and unpunished is not an option. Rampant corporate crime means Americans are at increased risk of being victimized by businesses putting the pursuit of profit above the law, and faith in the American justice system, which so often brings the harshest consequences down on the most powerless defendants, is undermined. Obstacles or no obstacles, the DOJ must zealously pursue its new polices with the resources that it has. Federal cases must be investigated and corporate crimes must be prosecuted. Just as criminal cases are built one fact at a time, the annual corporate prosecution numbers will be restored one case at a time. Those corporate prosecutions will add up to become the proof of the progress the results from the new enforcement policies.