Assistant Attorney General Leslie R. Caldwell Delivers Remarks at the New York City Bar Association’s Fourth Annual White Collar Crime Institute

Good morning, and thank you, Karen [Patton Seymour] for that warm welcome.  I want to thank the New York City Bar Association for the opportunity to address the Fourth Annual White Collar Crime Institute.  As a proud alumna of the City Bar, it is an honor to speak before so many familiar and distinguished practitioners.

For the past year, it has been my privilege to lead the Criminal Division of the U.S. Department of Justice and its 600 dedicated prosecutors throughout 17 unique sections.  Every day, our prosecutors investigate and bring criminal cases, develop criminal law and sentencing policies and promote the rule of law and law enforcement cooperation throughout the world.  As you know, while most U.S. Attorney’s Offices other than the Southern and Eastern Districts of New York focus on crime that affect their respective districts, the Criminal Division – together with our partners in various U.S. Attorney’s Offices – frequently prosecutes cases that have national and often global significance.

Today, I will discuss several recent cases of global scope that will illustrate the value to companies of complete cooperation when a company decides to cooperate with the government’s investigation.  I will also address the increasing cooperation that occurs among regulatory and law enforcement agencies, domestically and abroad, who have been partners in the department’s efforts in achieving accountability for corporate misconduct.  And I’ll tell you about our efforts to increase transparency and make the value of cooperation, and the consequences of non-cooperation more clearly apparent to companies and their counsel.

The department has long made clear the benefits of cooperation, should a company choose to cooperate.  Most companies have no obligation to cooperate with the Department of Justice.  And it’s a decision for the company whether or not to cooperate, but if a company decides to cooperate, then we expect that cooperation to be candid, complete and timely.  Our recent case filings have set forth both the advantages of cooperation as well as the real and sometimes severe consequences for non-cooperation and foot-dragging.  Still, I recognize that questions remain about both the value of cooperation and the department’s expectations.

As you all know, the basic parameters we consider in deciding what to do about corporate wrongdoing are in the Principles of Federal Prosecution of Business Organizations, also known as the Filip Factors.  Cooperation obviously is a key factor.  And the Filip factors do give guidance about what we expect corporate cooperation should include. 

We expect that when a company learns about potential criminal wrongdoing, it will investigate.  What that investigation should look like will depend on the nature of the misconduct.  Whether to engage internal or outside counsel, how narrow or broad, those are the company’s decisions in conjunction with outside advisors.

A recent CFO magazine article described companies spending hundreds of millions of dollars on investigations.  The article suggested that the government caused Avon, Siemens and Wal-Mart to spend that amount of money. 

We will not tell you how to, or how much to investigate.  You decide.  But from our point of view, a good investigation should focus on the problem at issue, determine the scope of that problem and investigate accordingly, and also focus on what compliance or cultural shortcomings allowed that problem to exist.

While every internal investigation will be unique, and depend on the scope of misconduct and the size and nature of the corporation, there are a few aspects that are universal:

• We expect you to learn the relevant facts, assuming they are learnable.
• If you choose to cooperate with us, we expect that you will provide us with those facts, be they good or bad.
• Importantly, that includes facts about individuals responsible for the misconduct, no matter how high their rank may be.
• We expect timely provision of evidence.  What does that mean?  That doesn’t mean you need to call us on day one.  In most cases it is in everyone’s interest for there to be an orderly internal investigation.  Exact timing varies with the facts, but once companies know the facts, we do not expect them to delay providing them to us.

A company’s cooperation can be particularly helpful where the criminal conduct continued over an extended period of time, and the culpable or knowledgeable personnel and/or the relevant documents may be dispersed or located abroad.  The difficulty of investigating under these circumstances makes your cooperation especially useful to us.  Cooperation in these cases means helping to remove and overcome the barriers to identifying and producing the relevant information that we need to conduct a meaningful investigation.  A company can do this by:

• Making relevant documents available where the department would otherwise have difficulty in obtaining them, either through protracted litigation or other compulsory process.
• This is especially true for evidence that is located abroad.  While we recognize there may be some real legal hurdles to the provision of some types of data and information, subject to foreign law, your first instinct when providing cooperation should be “how can I get this information to the government?”  It should not be a kneejerk invocation of foreign data privacy laws designed to shield critical information from our investigation. 
• We have taken recent steps to increase our knowledge of foreign data privacy laws, and we will question what we think are overbroad assertions about those laws.

Now, as you can see, these crucial internal investigative steps require thoughtful and thorough diligence.  However, it does not require the company’s employees to act like FBI agents.  And a company’s outside counsel can still be zealous advocates for their client while also cooperating fully with the government’s investigation.

As I said, we also do not require, or want, a company to embark on an unnecessarily broad or costly investigative frolic and detour.  This is about thoughtful, reasonable steps to provide the department with a full and accurate picture of what happened.  So if a company discovers, for example, an FCPA violation in one country, we expect the company to conduct enough investigation to fully understand those facts, but absent a reason to do so, we do not expect the company to provide us with a clean bill of health for the entire company worldwide.  We’re not asking companies to boil the ocean.  And we won’t give you credit for doing so if it is not warranted.  In fact, it slows us down, costs you money and delays resolution.  Open discussions with our prosecutors can help you focus your internal investigation so that you do not spend time and energy finding and providing us with facts that are irrelevant to resolving the liability for the misconduct at hand and unrelated conduct we haven’t asked you to examine.

Let me tell you what else cooperation does not mean:  Compliance with our subpoenas is not cooperation.  Public relations talking points are not cooperation.  A whitewash about the facts of any individual’s involvement is not cooperation.  We do not want you to decide to withhold information about what seems on its face to be wrongdoing just because you or your clients are able to imagine a hypothetical scenario in which there could be an innocent explanation for the conduct.

Simply put, if you choose to cooperate and are seeking full cooperation credit, expect to tell us all relevant information and make sure that we get the information we need quickly.  If you do that, there is a real chance that the company might not be prosecuted at all – not just an NPA or DPA – but a declination.  PetroTiger is an example of a company that self-reported and fully cooperated with the department’s investigation of a scheme to secure a $39 million oil services contract through bribery of Colombian officials.  We learned about this misconduct through voluntary disclosure by PetroTiger.  The general counsel and one of the company’s CEOs were charged with bribery and fraud.  As you likely know, the department declined to prosecute the company, even though we clearly could have done so.

Of course, a company can choose not to cooperate.  But I believe everyone in this audience is quite aware that when companies do not cooperate in the face of a government investigation, the consequences may be severe.  Two recent examples stand out:

Last year, in a case brought by the Criminal Division’s Asset Forfeiture and Money Laundering Section together with the U.S. Attorney’s Office of the Southern District of New York, BNP Paribas pleaded guilty to conspiracy to violate U.S. sanctions imposed against Sudan, Iran and Cuba.  During the investigation, BNPP not only failed to cooperate with our investigation at the outset, but affirmatively hindered the investigation by dragging its feet, based in part on assertions regarding data privacy laws.  BNPP’s intransigence thwarted the department’s ability to bring charges against responsible individuals and satellite banks.  Along with the severity and pervasiveness of its criminal misconduct, as we said in the papers filed in court, BNPP’s lack of cooperation was a key factor in the decision to seek a parent company guilty plea.  Just two weeks ago, here in the Southern District of New York, BNPP was sentenced to a five-year term of probation, and ordered to pay a total of $8.9 billion – the largest financial penalty ever imposed in a criminal case.  Not only did BNPP commit severe criminal acts, even after its compliance team and outside counsel sounded the alarm, but then, it hindered our investigation and our ability to prosecute the individuals who engaged in that wrongdoing.  As a result, BNPP paid a heavy price.

Similarly, the department’s prosecution of French power and transportation company Alstom for FCPA violations also demonstrates the perils of non-cooperation.  Alstom chose not to cooperate for years before finally seeing a different path forward.  The Criminal Division pursued an extensive investigation without the company’s cooperation, leading to the prosecution of four executives and charges and guilty pleas by the company and its consortium partner Maurbeni.  Alstom paid a $772 million penalty – the largest in the history of the FCPA.

The plea agreement explicitly set forth many of the factors considered by the department in reaching this resolution beyond the underlying criminal activity: specifically, we cited Alstom’s failure to voluntarily disclose misconduct, even though it was aware of it, and the company’s refusal to fully cooperate with our investigation for years until they saw the writing on the wall as their top executives began to be charged.

I’ve spoken this morning about two ends of the cooperation spectrum, but my sense is that in most situations, a company’s cooperation might fall somewhere in between.  Cooperation by Alstom came too late for the company to earn credit.  But that might not always be the case.

Our resolutions lately and going forward have detailed explanations of our considerations of the Filip Factors.  That transparency is a priority for me and I believe it sends a clear message to corporate wrongdoers – you will know exactly the value of early and complete cooperation.  The recent resolution with Deutsche Bank over LIBOR manipulation is a prime example.  This case was brought by the Criminal Division’s Fraud Section along with the Antitrust Division’s New York Field Office.

Just last month, Deutsche Bank’s UK subsidiary, DB Group Services (UK) Limited, pleaded guilty to wire fraud for its role in manipulating the London Interbank Offered Rate (LIBOR).  Parent company Deutsche Bank AG entered into a three-year Deferred Prosecution Agreement.  The company admitted its role in manipulating LIBOR and participating in a price-fixing conspiracy.  The department imposed a total penalty of $775 million and required Deutsche Bank to retain a corporate monitor for three years.  This was the largest penalty imposed by the Department of Justice to date in the LIBOR investigation, and is also the first time in a LIBOR case that the department has imposed a monitor on a bank.

Deutsche Bank’s cooperation fell somewhere in between Alstom and PetroTiger.  And I believe we let everyone know exactly where and what the result was.  The DPA itself spelled out the factors we took into consideration, including a detailed description of what Deutsche Bank did right in terms of cooperation, and where they fell short.

One of the relevant considerations that we weighed and described in the DPA was that while Deutsche Bank did not initially self-disclose its misconduct, upon being alerted to the investigation by the department and other regulatory authorities, they launched an internal investigation and collected and organized voluminous evidence and data that saved the department significant resources.  They also facilitated the department’s interviews of current and former employees, including foreign personnel.  As noted above, this is the minimum we expect and need from cooperation. 

But you can’t do the minimum in terms of cooperation and expect the maximum in terms of credit.

The DPA reached with Deutsche Bank described in detail the ways in which the Bank’s eventual cooperation fell short:

• Deutsche Bank was slow to cooperate fully with the department’s investigation and did not produce certain information in a timely manner, including key information related to their Euro traders. 
• We also discovered that two executive level managers knew that the bank had purposely withheld certain information from the department.
• Deutsche Bank also suffered from various preservation, collection and production errors, including the inadvertent destruction of thousands of hours of potentially critical audio recordings due to the negligent execution of certain discovery holds. 

But one particular example of a cooperation shortcoming by Deutsche Bank deserves to be underscored:

• Deutsche Bank was not, by comparison to other institutions that we have resolved LIBOR cases with, particularly proactive in its investigation and disclosure. 

For example, there was significant conduct by Deutsche Bank that we learned about, not from Deutsche Bank, but from the other institutions.  The lesson here is – if you don’t cooperate fully and don’t disclose fully – someone else just might do so, and possibly to your detriment.  That is not a good position to be in.  And those other actors may receive the cooperation credit that you yourself could have received.  In other words, while no one is insisting that companies cooperate with a smile, we do expect diligent, candid and timely efforts.

In the end, while the Bank’s cooperation at the outset was lackluster, it improved over time and the ultimate resolution expressly took that into account.  One factor that we took into account in giving Deutsche Bank some credit for cooperation was its eventual provision to us of information about the conduct of specific individuals.

In the public filings and our announcement of the resolution, we detailed where Deutsche Bank’s cooperation was helpful, and where it came up short.  I hope this enhanced transparency will be instructive to other similarly situated entities as they compare themselves with companies who have resolved misconduct.

I’ve discussed cooperation by companies with the department, but also wanted to address cooperation between the Department of Justice and our enforcement and regulatory partners.

The world has gotten a lot smaller since I was last in government.  There is a lot more cooperation and coordination among regulators and law enforcement worldwide.  In fact, we were first tipped off to Alstom’s conduct by a European regulator.  Deutsche Bank and our other LIBOR cases also are examples of cases that had the benefit of a wide-ranging cooperative effort among various enforcement and regulatory agencies both here in the United States and abroad.  In the United States, we worked with the CFTC’s Division of Enforcement; in Europe, the United Kingdom’s Financial Conduct Authority, the Serious Fraud Office, Germany’s BaFIN, the European Central Bank and the Dutch Public Prosecutor’s Office; and other foreign and domestic partners.

Early and effective coordination with regulators and other law enforcement agencies, to the extent permissible, is critical to ensuring the efficient use of resources and the best ultimate outcome, while also making sure that the investigations remain separate and follow the mandates of each agency.  Parallel investigations maximize our potential to secure the appropriate resolution, whether it be criminal prosecution, financial penalties, restitution, asset forfeiture or federal program exclusion or debarment.

We have heard concerns expressed about regulatory piling on.  We agree that there is the potential for unfairness when a company is asked to pay for things over and over again.  Different regulators obviously have different interests and these are legitimate.  And companies that voluntarily operate in multiple countries obviously know that by doing so, they subject themselves to those countries’ laws and regulatory schemes.  That said, we are trying to address this concern so that companies are not punished unfairly.  That is often easier said than done.

The department and our law enforcement and regulatory partners regularly share information as appropriate.  When a company provides different information to one of our partners, or declines to provide information that it has provided to us, that hinders the overall law enforcement effort.  And we’ll consider that when it is time to evaluate the Filip Factors.

Complete cooperation by a company across the board with both the department and our regulatory partners greatly increases the likelihood for a coordinated, simultaneous resolution of multiple investigations in a timely and orderly fashion, which should ultimately benefit all parties.  But this coordinated outcome cannot be achieved if a company slow-walks an investigation, tries to play one regulator against another or is not as equally forthcoming in its cooperation with our regulatory partners.

The message I hope all of you will take away from today’s remarks is that candid, timely and factually complete cooperation will be taken into serious consideration when we make a decision about whether or not – as well as how – to charge a corporation.  Conversely, lack of candor, delay and factual omissions in cooperation with the department or our law enforcement partners will severely hamper your client’s ability to attain cooperation credit.

We will continue to strive to be more transparent in setting forth the factors, considerations and rationales behind our resolutions.  We expect you will be able to counsel your clients with concrete examples of how cooperation or the lack thereof played out in determining the final resolution.  We will also work with our enforcement and regulatory partners on parallel proceedings and coordinate and streamline as appropriate, but just remember that requires your cooperation with them as well as us.

We are pounding the pavement on cooperation and transparency, not just in our court filings, but through opportunities such as addressing the White Collar Crime Institute this morning.  Thank you for the honor of delivering the keynote address this year, and I look forward to answering any questions that you might have.