Criminal Charges More Likely In Corporate Misconduct Cases
Our recently published book on the Volkswagen cheating scandal, Leadership Lessons from the Volkswagen Saga, highlights a range of leadership issues relevant to leaders of any size organization. The focus of the book is on lessons for corporate governance, branding, crisis communications, business ethics, corporate responsibility, and leadership accountability.
However, there is one significant lesson for all leaders, particularly those in the U.S. or doing business in the U.S., that has personal repercussions.
This is that individual criminal activity is now more likely to result in individual charges and penalties than ever before. To date, the U.S. Department of Justice has taken only baby steps to implementing its relatively new policy of enforcing individual accountability for corporate wrongdoing. I suspect that we will see increased activity by the DOJ in coming months and years.
This policy was set out in September 2015 by Deputy Attorney General Sally Quillian Yates, just nine days before the EPA’s public announcement of the first Notice of Violation issued to Volkswagen. In her memo Yates writes, “One of the most effective ways to combat corporate misconduct is by seeking accountability from the individuals who perpetrated the wrongdoing. Such accountability is important for several reasons: it deters future illegal activity, it incentivizes changes in corporate behavior, it ensures that the proper parties are held responsible for their actions, and it promotes the public’s confidence in our justice system.”
The Yates Memo goes on to describe the various steps that DOJ investigators should take in any investigation of corporate misconduct, stipulating that “civil attorneys investigating corporate wrongdoing should maintain a focus on the responsible individuals, recognizing that holding them to account is an important part of protecting the public in the long term.” It also states that future criminal and civil corporate investigations should focus on individuals from the inception of any investigation.
As the first line of the Yates Memo states, “Fighting corporate fraud and other misconduct is a top priority of the Department of Justice.” Based on the DOJ actions and results with Volkswagen and other corporate miscreants in recent months, this has become obviously true.
As U.S. Attorney Barbara McQuade told a news conference in January 2017, “Corporations and individuals who cheat will be held accountable. Cheaters will not be allowed to gain an advantage over those who play by the rules.” She was speaking at a press conference announcing the DOJ’s $1B settlement with Takata.
Indications are that the new Trump administration will maintain the policies outlined in the Yates Memo. As the new administration takes over there are several corporate investigations underway started during the Obama administration, and these are not likely to be dropped before they are completed.
Additionally, in his confirmation hearings before the U.S. Senate, newly appointed Attorney General Jeff Sessions showed support for disciplining executives and employees for corporate crimes. In his testimony Sessions, who served for 12 years as a U.S. Attorney and for two years as Attorney General of Alabama before becoming a U.S. Senator stated that, “sometimes it seems to me that the corporate officers who caused a problem should be subjected to more severe punishment than the stockholders of the company who didn’t know anything about it.”
One Volkswagen engineer has pleaded guilty to three federal felony charges and is awaiting sentencing. As part of his plea bargain agreement he must cooperate with the on-going DOJ investigation into Volkswagen. Six Volkswagen executives and employees in Germany have been indicted on a range of felony charges by a U.S. federal grand jury. One has been arrested and sits jail in Michigan thousands of miles away from home awaiting his trial (though another plea bargain arrangement is expected). The other five have been advised not to leave Germany as they risk arrest and extradition to the U.S. if caught outside the country (German laws prevent them from being extradited from Germany).
This may be only the tip of the iceberg for the Volkswagen scandal, or it may be as far as DOJ investigators get. Time will tell. But in future cases of corporate malfeasance we can expect to see the DOJ aggressively pursuing both the companies involved as well as the individuals who deliberately break the law. The warning signs on this are very, very clear.
This article is partially excerpted from our book Leadership Lessons from the Volkswagen Saga, available at Amazon in both Kindle and paperback formats. Leadership Lessons from the Volkswagen Saga is the first book published on the Volkswagen emissions test cheating scandal.
Recent Comments