With new rules in place at the Justice Department to focus on individuals in investigations of corporate misconduct, the administration is responding to long-standing criticism that those responsible for the great Recession were treated too leniently.
How will the new rules on corporate responsibility affect your company and non-profit organization?
While it remains to be seen how these new rules will affect the actions of U.S. attorneys and other enforcement officials across the country, corporate officers, including those responsible for export compliance, are now officially on notice that their actions will receive greater scrutiny.
The new rules are largely based on a September 9 memorandum on “Individual Accountability for Corporate Wrongdoing” issued to all United States Attorneys by Deputy Attorney General Sally Yates.
The six key steps outlined in the memo include: (1) corporations must provide all relevant facts relating to the individuals responsible for the misconduct; (2) criminal and civil corporate investigations should focus on individuals from their inception; (3) criminal and civil attorneys should be in regular communication with one another; (4) the Department will not release culpable individuals from criminal or civil liability absent extraordinary circumstances or approved departmental policy; (5) Department attorneys should not resolve matters with a corporation without a clear plan to provide a resolution to related individual cases; and (6) civil attorneys should focus on individuals as well as the company and evaluate whether to bring suit against an individual based on considerations beyond the individual’s ability to pay.
BIS Under Secretary for Industry and Security Eric Hirschhorn cautioned that corporate officers will face fines, imprisonment and denial of export privileges when export control violations result from deliberate acts. In speeches delivered before the annual BIS Update conferences, he noted that “BIS has typically imposed penalties on companies involved in export violations. Now when a violation is the deliberate action of an individual, we consider seeking penalties against that individual”.
Enforcement actions have, in fact, been taken against such officers in the past including the conviction of Mozaffar Kazaee in October of this year, the issuance of charging letters against the Chairman and the Vice President of a South Carolina company, and the arraignment in mid-November of Ahmad Faras Diri on charges of illegally exporting lab equipment to Syria.
How should companies and corporate officers meet these new challenges? By ensuring that export compliance fundamentals are in place in the classification of products, the training of employees, the implementation of screening, record-keeping and assessment and audit procedures, and the adoption of an Internal Compliance Program, ICP.
In regard to the latter, there are compliance templates and Risk Matrices available from many sources, including on the websites for Department of Homeland Security, U.S. Immigration and Customs Enforcement /Homeland Security Investigations, https://www.ice.gov/
Commerce Department’s Bureau of Industry and Security, BIS, https://www.bis.doc.gov/
State’s Directorate for Defense Trade Controls, DDTC, https://www.pmddtc.state.gov/
and Treasury’s Office of Foreign Assets Control, OFAC, https://www.treasury.gov/about/organizational-structure/offices/Pages/Office-of-Foreign-Assets-Control.aspx
But the consolidation of ICP requirements is still ongoing and many of these resources do not fully reflect policy changes from the Justice Department.
Companies and non-profit organizations need to review the Justice Department’s September memo, changes made to the U.S. attorney’s manual as well as the recent enforcement cases and to revise accordingly their compliance program and any related code of conduct for corporate officers.
Our consultants at the Trade Compliance Group are experts in the design and implementation of ICPs. We offer practical advice to those who manage these compliance programs on a day-to-day basis as well as to upper management, whom the U.S. Government insists bear ultimate non-delegable responsibility.
Phone: 202 621 5491