By Chris Prentice
03/02/23
Lisa Monaco, deputy U.S. attorney general, speaks during the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) Police Executives Forum in Washington, D.C., U.S., on Friday, May 6, 2022. Sarah Silbiger/Pool via REUTERS REUTERS
The U.S. Justice Department is rolling out a new policy aimed at pushing the cost of corporate crime into the pockets of executives, the latest in a series of changes at the agency under President Joe Biden.
The agency's criminal division will give discounts on fines for companies that seek to claw back compensation from corporate wrongdoers, Deputy Attorney General Lisa Monaco said at a conference on Thursday. Any company seeking to resolve a U.S. investigation will also have to implement a plan to include compliance goals as part of compensation and bonuses.
"Our goal is simple: to shift the burden of corporate wrongdoing away from shareholders, who frequently play no role in misconduct, onto those directly responsible," Monaco said at an American Bar Association conference in Miami.
Companies often pay fines to U.S. authorities to resolve investigations into wrongdoing, a practice that some say further harms shareholders but leaves corporate executives unscathed.
"Clawbacks are not a new idea but our view is that they have never really been deployed effectively or regularly," Marshall Miller, principal associate deputy attorney general at the Justice Department, told Reuters in an interview along the sidelines of the conference.
The three-year pilot program will give discounts tied to the size of the clawback on penalties, and firms will get to retain a portion of that money even if they are unsuccessful in clawing back compensation provided they try to in good faith, Miller said.
"If you are going to create a culture that calls out misconduct and promotes compliance, you need people to have skin in the game," Miller said.
The Securities and Exchange Commission last year dramatically expanded the scope of its clawback powers, which were created in 2002.
Monaco's "strong warning to 'step up and own up' is a clear shot across the bow of corporate America for non-disclosing companies," said John Carney, co-leader of BakerHostetler's White Collar, Investigations and Securities Enforcement and Litigation team.
"Balancing the threat of prosecution with the allure of not seeking 'a guilty plea from a corporation' that comes forward could be the deciding factor in self reporting."
NATIONAL SECURITY IMPLICATIONS
Monaco on Thursday also detailed a plan to dedicate more resources to corporate crime with national security implications.
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The Justice Department will hire more than 25 new prosecutors to investigate sanctions evasion, export control violations and similar economic crimes, including a new position of chief counsel for corporate enforcement within the agency's national security division.
The agency alongside the Treasury and Commerce Departments issued a warning to industry on complying with export controls and sanctions against Russia and Belarus.
The U.S. Justice Department is rolling out a new policy aimed at pushing the cost of corporate crime into the pockets of executives, the latest in a series of changes at the agency under President Joe Biden.
The agency's criminal division will give discounts on fines for companies that seek to claw back compensation from corporate wrongdoers, Deputy Attorney General Lisa Monaco said at a conference on Thursday. Any company seeking to resolve a U.S. investigation will also have to implement a plan to include compliance goals as part of compensation and bonuses.
"Our goal is simple: to shift the burden of corporate wrongdoing away from shareholders, who frequently play no role in misconduct, onto those directly responsible," Monaco said at an American Bar Association conference in Miami.
Companies often pay fines to U.S. authorities to resolve investigations into wrongdoing, a practice that some say further harms shareholders but leaves corporate executives unscathed.
"Clawbacks are not a new idea but our view is that they have never really been deployed effectively or regularly," Marshall Miller, principal associate deputy attorney general at the Justice Department, told Reuters in an interview along the sidelines of the conference.
The three-year pilot program will give discounts tied to the size of the clawback on penalties, and firms will get to retain a portion of that money even if they are unsuccessful in clawing back compensation provided they try to in good faith, Miller said.
"If you are going to create a culture that calls out misconduct and promotes compliance, you need people to have skin in the game," Miller said.
The Securities and Exchange Commission last year dramatically expanded the scope of its clawback powers, which were created in 2002.
Monaco's "strong warning to 'step up and own up' is a clear shot across the bow of corporate America for non-disclosing companies," said John Carney, co-leader of BakerHostetler's White Collar, Investigations and Securities Enforcement and Litigation team.
"Balancing the threat of prosecution with the allure of not seeking 'a guilty plea from a corporation' that comes forward could be the deciding factor in self reporting."
NATIONAL SECURITY IMPLICATIONS
Monaco on Thursday also detailed a plan to dedicate more resources to corporate crime with national security implications.
IBT Fast Start - Let the best of International News come to you
Sign up and stay up to date with our daily newsletter.
You can unsubscribe at any time. By signing up you are agreeing to our Terms of Service and Privacy Policy.
The Justice Department will hire more than 25 new prosecutors to investigate sanctions evasion, export control violations and similar economic crimes, including a new position of chief counsel for corporate enforcement within the agency's national security division.
The agency alongside the Treasury and Commerce Departments issued a warning to industry on complying with export controls and sanctions against Russia and Belarus.
Education Department moves to make leaders of failing private colleges personally liable for unpaid government debts
BY LEXI LONAS - 03/02/23
AP Photo/Evan Vucci
Education Secretary Miguel Cardona is pictured in the Roosevelt Room of the White House on Aug. 24, 2022.
The Education Department announced Thursday it is implementing formal guidance to determine when leaders of failing private colleges would be personally liable for unpaid government debts.
Officials said under the authority of the Higher Education Act (HEA), the department can make leaders of private colleges that are failing “to operate in a financially responsible way to assume personal liability” if there are unpaid debts owed to the government.
The new measure enacts certain criteria to be used when determining if leaders deserve to be held personally liable for the debt, according to an announcement from the agency.
They listed three main factors to determine personal liability for unpaid debts: if there was any previous legal action against the institution for not following federal student aid rules, if there were previous concerns of major compliance issues with the college or if compensation for executives at the school has hurt the finances of the institution.
The agency “anticipates” they will enforce personal liability on individuals from private colleges “that pose the largest financial risk to the United States.”
The department said the authority to implement these actions is under a “long-standing provision” of the HEA but the agency “did not have a practice” for enforcing it previously.
Making the individuals personally liable would allow the government to charge them with liabilities not paid for by the private college they represent such as school closures or student loan borrower defense discharges.
The agency gives borrower defense discharges to students who have been defrauded by their institutions.
An example includes the Department of Education saying it would discharge millions of dollars in student loans for those who went to Corinthian College after the school was found to have lied about job placement rates and the ability to transfer credits.
“The Biden-Harris Administration is canceling the loans of more than a million borrowers cheated by for-profit colleges,” Under Secretary of Education James Kvaal said. “But too often, the owners and executives of these colleges escape liability.”Michael Steele on Marjorie Taylor Greene: ‘Just shut the hell up’Former Trump ICE director on border separations: ‘They chose to separate themselves’
“Congress gave the Department the authority to make college owners and operators personally responsible for these losses in certain circumstances and we are going to use that authority to hold them accountable, defend vulnerable students, protect taxpayer dollars, and deter future risky behavior,” he added.
This is just one of several actions taken by the federal government to go after institutions that aren’t providing financial benefits to their students.
In January, the department introduced a regulatory proposal that would allow it to make a list of colleges where students are burdened with high costs of debts with little financial value.
Education Secretary Miguel Cardona is pictured in the Roosevelt Room of the White House on Aug. 24, 2022.
The Education Department announced Thursday it is implementing formal guidance to determine when leaders of failing private colleges would be personally liable for unpaid government debts.
Officials said under the authority of the Higher Education Act (HEA), the department can make leaders of private colleges that are failing “to operate in a financially responsible way to assume personal liability” if there are unpaid debts owed to the government.
The new measure enacts certain criteria to be used when determining if leaders deserve to be held personally liable for the debt, according to an announcement from the agency.
They listed three main factors to determine personal liability for unpaid debts: if there was any previous legal action against the institution for not following federal student aid rules, if there were previous concerns of major compliance issues with the college or if compensation for executives at the school has hurt the finances of the institution.
The agency “anticipates” they will enforce personal liability on individuals from private colleges “that pose the largest financial risk to the United States.”
The department said the authority to implement these actions is under a “long-standing provision” of the HEA but the agency “did not have a practice” for enforcing it previously.
Making the individuals personally liable would allow the government to charge them with liabilities not paid for by the private college they represent such as school closures or student loan borrower defense discharges.
The agency gives borrower defense discharges to students who have been defrauded by their institutions.
An example includes the Department of Education saying it would discharge millions of dollars in student loans for those who went to Corinthian College after the school was found to have lied about job placement rates and the ability to transfer credits.
“The Biden-Harris Administration is canceling the loans of more than a million borrowers cheated by for-profit colleges,” Under Secretary of Education James Kvaal said. “But too often, the owners and executives of these colleges escape liability.”Michael Steele on Marjorie Taylor Greene: ‘Just shut the hell up’Former Trump ICE director on border separations: ‘They chose to separate themselves’
“Congress gave the Department the authority to make college owners and operators personally responsible for these losses in certain circumstances and we are going to use that authority to hold them accountable, defend vulnerable students, protect taxpayer dollars, and deter future risky behavior,” he added.
This is just one of several actions taken by the federal government to go after institutions that aren’t providing financial benefits to their students.
In January, the department introduced a regulatory proposal that would allow it to make a list of colleges where students are burdened with high costs of debts with little financial value.
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