Prosecutors in the Boardroom: Using Criminal Law to Regulate Corporate Conduct

7. Collaborative Organizational Prosecution

154 | 7 Collaborative Organizational Prosecution Brandon L. Garrett This chapter begins a discussion about the merits of “regulation by prosecution” by framing the increasingly close but complex relationship between prosecutors and regulators in corporate cases. The Supreme Court has held that parallel administrative and criminal penalties against the same firm do not raise double jeopardy issues.1 As a result, corporations may face parallel proceedings by civil regulatory authorities and criminal prosecutors in the same matter, including in multiple jurisdictions. Commentators have long debated the significance of such blurring of the civil and criminal distinction . Less examined has been the institutional relationship between civil and criminal enforcers as they adjudicate organizational cases. One might argue that as a normative matter, although they are vested with overlapping authority, civil and criminal enforcers should try to maintain separate roles, where prosecutors enforce criminal prohibitions and civil authorities employ a broader regulatory function. However, this chapter questions any rigid institutional distinction between civil and criminal enforcement. The relationship between federal regulators and prosecutors has grown surprisingly close, and a largely collaborative approach has emerged, in three respects that this chapter describes. First, single prosecutions can have a deterrent effect extending beyond the single case. When settling a prosecution with one firm in a deferred or nonprosecution agreement, prosecutors typically require that the firm adopt compliance reforms, a subject that I have written about previously and termed as efforts to accomplish “structural reform.”2 Such actions are forward-looking, and thus more like a regulation in the sense that future conduct is altered, than an action seeking merely to penalize past criminal conduct.3 The settlement of a single prosecution can influence the conduct of other similarly situated firms. After all, they know that prosecutors have in the past rewarded certain types of compliance reforms and cooperation. Fed- Collaborative Organizational Prosecution | 155 eral prosecutors also promote broader deterrence. They issue guidelines stating the goals and purposes of organizational prosecutions, and in doing so, prosecutors say they hope to “send a message” to influence change in “corporate culture.” Prosecutors also regularly give speeches announcing such goals to industry groups. Regulatory agencies have adopted parallel civil enforcement approaches that reward similar compliance and cooperation by firms. In that sense, regulators and prosecutors operate in tandem. Second, prosecutors and regulators collaborate in joint adjudication. What has been little recognized is that many federal organizational prosecution agreements were negotiated jointly with regulatory agencies. Many were first investigated by regulators and then referred to federal prosecutors, although the precise nature and scope of the collaboration are typically not public.4 While such broad-reaching agreements do not constitute “regulation” in the sense that an entire industry is bound by a rulelike norm, they do create a structural reform approach for remedying violations. They should not, however , typically be seen as an extension of the underlying adjudicatory goals of the agency. While there may be close collaboration in individual cases, referrals are not typically made in any consistent or strategic way. Agencies often refer matters on an informal and ad hoc basis, and prosecutors retain discretion to initiate matters on their own. Enforcement dynamics are further complicated where regulators or prosecutors may or may not have a clear agenda in an area and where one actor or another may have greater resources, expertise, or independence. Criminal adjudication, because it is far more infrequent, may not as clearly announce enforcement priorities in the way that regulatory agencies often do through adjudication. Further, prosecutors have not typically consciously sought to use criminal adjudication to accomplish regulatory goals. Prosecutors are divided between state and federal offices with considerable autonomy. As a result, criminal adjudication does not usually exhibit regulatory priorities of prosecutors, much less those of regulators. However, regulators and prosecutors use an informal collaborative approach to increase the deterrent effect of adjudication and to preserve their discretion, flexibility, and resources. Third, in some unusual cases prosecutors adopt a different and specific regulatory goal—general deterrence of all organizations situated similarly to the target entity, perhaps even entire industries, by using adjudication to cement a rulelike norm or industry reform. In literature citing tort cases as examples of “regulation through litigation,” commentators have focused on mass tort cases targeting entire industries and often negotiating global settlements that include regulatory changes outside the rule-making process.5 In 156 | Brandon L. Garrett the past few years, as organizational prosecutions have increased in...