During the 2020 campaign, former President Trump frequently called himself the “law and order president.” However, based upon a review of statistics from his time in office, his attention appears to have been focused on something other than white-collar criminal and regulatory enforcement. Now that the Biden administration has taken the helm in Washington, the Department of Justice (DOJ) is expected to place renewed emphasis on prosecuting white-collar crime.
August 2020 reporting published by Bloomberg that analyzed publicly available data from DOJ and Syracuse University, determined the average number of white-collar defendants charged by federal prosecutors was down 26% in the first three years of the Trump presidency compared to the average under President Obama. Bloomberg’s reporting also found that fines imposed on corporations fell 76% between the last 20 months of the Obama administration and the first 20 months of the Trump administration. Why? It is the prerogative of the executive branch to set the priorities of DOJ, and the tea leaves appear to be hinting that white-collar enforcement is about to make a major comeback under the Biden administration.
Early Policy Change
On January 29, 2021, just days into the Biden presidency, DOJ formally announced a change to its official Policy on Charging and Sentencing. It reversed the Trump administration’s May 10, 2017 policy statement requiring federal prosecutors to charge “the most serious, readily provable offense.” Instead, the Biden administration modeled its policy vision after that of President Obama’s DOJ, adopting its language of “ensur[ing] that decisions about charging, plea agreements, and advocacy at sentencing are based on the merits of each case and reflect an individualized assessment of relevant facts.” While that does not overtly mention a renewed focus on bringing more white-collar cases, the move marks a return to a policy in place in 2010 when white-collar prosecutions reached all-time highs in the United States.
The Obama administration was responsible for a seismic shift in the way corporate wrongdoing was prosecuted and the types of punishments sought for corporate misconduct. A return to those Obama-era policies at DOJ likely means a renewed focus on white-collar investigations, and those types of punishments.
In the so-called “Yates Memo,” dated September 9, 2015, then-Deputy U.S. Attorney General Sally Yates spelled out the Obama administration’s vision for corporate accountability. Its hallmark was a move away from large fines and penalties easily absorbed by corporate treasuries, and toward individual accountability for board members and company executives directly responsible for the wrongdoing. This policy, the Obama administration claimed, would punish wrongdoers without hurting employees and shareholders who were innocent bystanders. Early indicators suggest we are headed for a hard pivot back in that direction.
The Trump administration dedicated vast federal resources to combatting violent crime, with a particular emphasis on gangs and immigration violations, but presided over a marked decline in new white-collar case filings. Coupled with a conservative-minded deregulation agenda, Trump’s DOJ brought fewer white-collar prosecutions than any administration in recent history. According to data compiled by Syracuse University, white-collar prosecutions fell to a 25-year low in 2020, with DOJ bringing only half the white-collar cases it did just nine years earlier in 2011.
Multiple Indicators
Predictions of a surge in white-collar prosecutions under President Biden are not exclusively attributable to a return to Obama-era policies, or any particular factor. History is also instructive. In 2011, the last time white-collar prosecutions reached all-time highs, the nation was emerging from its last major financial crisis, no doubt coloring DOJ’s priorities at the time. A decade after the explosion of white-collar cases we saw in 2011, the United States is in the throes of yet another unprecedented financial crisis, this one brought about by the COVID-19 pandemic. It is a target-rich environment for prosecutors. Trillions of dollars of government-backed forgivable stimulus loans have made their way into the national economy, and with each passing day the government moves closer to fending off further economic calamity with additional government stimulus. When the government funds economic stimulus at the levels it has in response to COVID-19, you can bet there will be stringent enforcement of alleged fraud and abuse to follow.
Deregulation also contributes to declines in criminal and non-criminal white-collar enforcement. The Trump administration rolled back regulations in virtually every arena, from the financial markets to the environment. The first month of the Biden presidency, with dozens of executive actions intended to reverse Trump-era policies, portends that the next several years will be fertile ground for a significant uptick in white-collar enforcement activity.
DOJ, like any law enforcement agency, has finite resources. Political appointees largely control its leadership and play a significant role in shaping how its limited resources are used. While resources will always be allocated to respond to events worthy of federal law enforcement attention, the proactive areas of DOJ’s focus arise from the strategic priorities of the country’s leadership, starting with the president. Over the next four years, new priorities will emerge, but looking in at the new administration a little over a month into President Biden’s term, trends in white-collar criminal and regulatory prosecutions and compliance have emerged.
We’ll discuss three leading areas of focus tomorrow in Part 2 of the series: Zeroing In: Early Trends in White-Collar Fraud Prosecution Under the Biden Administration.
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