A new sheriff is in town — and that means the potential for big changes ahead for white-collar criminal enforcement in terms of specific areas of focus and volume of investigations.
White-collar probes are expected to rise now that President Biden is in the White House, reversing a trend that saw the prosecution of white-collar crimes decline significantly under President Trump.
The average annual number of white-collar defendants declined between 26% and 30% during President Trump’s first three years in office compared with the average under President Obama, according to a Bloomberg analysis of data from the Department of Justice (DOJ) and Syracuse University.
The Trump administration focused far more of its resources on immigration, opioids, violent crime, and national security, and far less on policing Wall Street fraud, environmental fraud, and other types of white-collar crime. Now the pendulum is swinging back.
But where will the Biden administration focus its energies, and what should companies be doing to minimize the threat of attracting criminal prosecution? V&E+ recently sat down with two partners from V&E’s Government Investigations and White Collar Defense practice, Zach Terwilliger and Fry Wernick, to talk about what’s ahead.
Both Terwilliger and Wernick have an inside perspective on government investigations and prosecutions of white-collar crimes. Terwilliger has held several high-ranking positions at DOJ, including serving as the Senate-confirmed U.S. Attorney for the Eastern District of Virginia. Wernick formerly served as Assistant Chief of DOJ’s Criminal Fraud Section and supervised DOJ’s Foreign Corrupt Practices Act (“FCPA”) unit. Here’s what they had to say.
What leads you to believe we will see an increase in white-collar enforcement activity?
The decline of white-collar criminal enforcement activity under the past administration means a correction is likely coming. “There’s a perception that there’s a lot of ground to make up,” Terwilliger said.
The pandemic and the market volatility that followed is another factor. History shows that financial downturns often lead to a rise in white-collar crime and white-collar prosecutions.
What can we infer from President Biden’s key personnel
Both Attorney General Merrick Garland and Deputy Attorney General Lisa Monaco are former federal prosecutors who have signaled in their statements a commitment to increased enforcement. Monaco has significant experience prosecuting white-collar crime, having worked as a federal prosecutor in Washington.
Attorney General Garland, during his confirmation process, pledged to pursue “vigorous enforcement of the Foreign Corrupt Practices Act and other federal anti-corruption laws.” Deputy Attorney General Monaco, answering questions during a confirmation hearing, said one of her priorities would be ensuring that DOJ is “focused on the equal application and the equal protection of our law when it comes to everything from consumer protection to combating environmental degradation.”
Others chosen by President Biden to head agencies with the authority to initiate criminal prosecutions are also expected to focus on white-collar crime.
Rohit Chopra, a commissioner of the Federal Trade Commission, who’s been nominated to head the Consumer Financial Protection Bureau (“CFPB”), is expected to bring new teeth to the watchdog agency. Chopra, a staunch consumer advocate, helped create the CFPB in the wake of the 2008 financial crisis.
“He’s very much known as an Elizabeth Warren acolyte and someone who is dedicated to bringing stronger enforcement to that agency,” Wernick said.
Will CEOs be targeted more so than they were under the Trump administration?
Companies may see DOJ return to a culture that prizes prosecution of individual corporate executives, which can help bolster the ability of DOJ to prosecute companies, including through deferred prosecution agreements.
Are you seeing evidence of increasing white-collar criminal enforcement activity in your practice?
“We’ve seen more frequent and probing requests from DOJ, the SEC, FTC, and other agencies on various matters,” Wernick said. “We’re seeing a more energized approach by the prosecutors and regulators in these cases.”
“We’re also seeing a large increase in congressional investigations being brought, particularly by Democrats who now control both chambers,” he added. “They seem to be emboldened in a number of areas, especially in the environmental space and the energy regulatory space.”
What are some areas where you expect the government to focus its energies?
Enforcement of environmental rules is among the areas likely to see more vigorous enforcement. “There is a general feeling, at least from the perspective of Washington regulators, that there are corporate entities that are maximizing profitability at the expense of the environment,” Terwilliger said.
Coronavirus pandemic-related fraud is also expected to be a major focus. In the past year, Congress passed some of the biggest relief plans in U.S. history. Those relief plans created tremendous opportunity for fraud. Now it’s time to expose that fraud and reimburse taxpayers.
“Any time you have increased government spending in Washington, it’s always ‘how do you pay for it?’ Well, we’re going to pay for it by ferreting out the waste, fraud, and abuse,” Terwilliger said.
Antitrust will also likely be a focus. The DOJ’s Procurement Collusion Strike Force is searching for red flags of collusion and is training others within the government to identify possible signs of misconduct.
DOJ is also looking at “no-poach” agreements where companies agree not to poach each other’s employees. Back in 2016, DOJ and the FTC stated that no-poaching and wage-fixing agreements among employers could be investigated as criminal matters, and now the government is making good on its word.
“We’re starting to see the first criminal cases emerge, and it appears as though they’re in a variety of industries,” Terwilliger said. “The antitrust division is extremely focused on bringing these criminal cases, even where you’re talking about seemingly innocuous conversational agreements.”
What about FCPA enforcement?
While white-collar criminal enforcement activity overall declined under President Trump, one outlier was FCPA enforcement. Since 2015, DOJ’s FCPA unit has increased from 19 to 39 prosecutors. In 2020 alone, DOJ and the SEC brought FCPA enforcement actions against 12 companies and imposed financial penalties totaling a record $6.4 billion.
“Under the Trump administration, there were increased resources and increased dedication to bringing FCPA cases,” Wernick said.
The momentum will likely continue. The Biden administration recently announced a new focus on battling corruption. In a memo, the White House calls for the DOJ and other federal agencies to establish new programs, and to add resources aimed at rooting out corruption in the U.S. and abroad.
Given your expectations for increased white-collar criminal enforcement activity, what advice would you give companies?
“In an environment where the ground is shifting below your feet, you need both learned counsel and an appropriately tailored compliance plan,” Terwilliger said.
“It’s not enough that you have a good lawyer,” he added. “You need somebody who understands Washington. Experienced counsel can provide you with an edge and prevent you from being caught blindsided.”
Click here to learn more about what’s ahead for white-collar enforcement under the Biden administration.