White-Collar Enforcement in the Biden Era: Where We Were, Where We’re Going
By Zach Terwilliger, Branden Stein, and John Greil
We are now almost two months into the Biden administration, and its new federal law enforcement priorities. The administration has already signaled certain departures from the Trump era with respect to white-collar enforcement, and there is reason to believe that changes are on the horizon, at least in the areas of COVID-19 pandemic fraud, antitrust and environmental law in addition to a number of policy updates that will impact enforcement matters.
While in-house counsel are already used to staying abreast of changes in the law, the early days of a new administration provide a particularly salient inflection point demanding enhanced focus. Competent outside counsel can assist in ensuring that in-house counsel are not inadvertently focused on “fighting the last battle” while the world changes around them.
Where We Were
Former Attorney General William Barr succinctly stated in 2019 the priorities of the Trump-era Department of Justice when he articulated a focus “on violent crime, drugs, immigration, and national security.” Cracking down on COVID-19 pandemic fraud also featured prominently in the administration’s final year. The number of white-collar defendants charged per year declined an estimated 26% to 30% from the Obama to the Trump era. Similarly, while the Obama administration levied $14.15 billion in corporate penalties in its final 20 months, the Trump administration levied $3.4 billion in its first 20. This trend did not hold true across the board, however. For instance, DOJ set records for the highest number of individuals charged with violations of the Foreign Corrupt Practices Act in 2017, 2018 and 2019.
Where We Are Going
The new administration is unlikely to share the same enforcement priorities and relatively business-friendly orientation of Trump’s. Although many of the priorities and policy initiatives of the Biden administration remain to be formalized, it is possible to draw rational inferences about what to expect.
White-collar enforcement activity will likely increase under Biden. Companies may see DOJ return to a culture that prizes prosecution of individual corporate executives and relies less on deferred prosecution agreements. It is also reasonable to expect an increased emphasis on the imposition of corporate monitors.
Prosecuting fraud related to the COVID-19 pandemic is almost certain to remain a priority. The Paycheck Protection Program emerged both as a necessary resource for struggling businesses and a massive source for potential fraud enforcement activities. In 2020 alone, DOJ’s Fraud Section charged 97 individuals involving over $260 million in PPP-related cases. The acting head of the Civil Division has identified pandemic-related fraud as the top priority of the Civil Division’s False Claims Act enforcement, stating he expects the “effort to translate into significant cases and recoveries.”
It is also reasonable to expect a brisk acceleration in antitrust enforcement. Criminal antitrust cases during the Trump administration were about a third as common as they were under Obama, and criminal antitrust fines declined from over $1 billion each year in 2012-14 to a low of $67 million in 2017. During his confirmation hearing last month, Attorney General Merrick Garland told the Senate Judiciary Committee, “antitrust was my first love in law school and I firmly believe that the antitrust laws are the charter of American economic liberty. I am committed to vigorously enforcing the antitrust laws in all sectors of the economy.” One particular area that could see an uptick is criminal antitrust enforcement in labor markets and employment agreements. In October 2016, the Federal Trade Commission and DOJ issued guidance informing employers that “no-poach” agreements between employers would be subject to criminal prosecution, and then-candidate Joe Biden echoed this message in the run-up to the election, tweeting: “It’s simple: companies should have to compete for workers just like they compete for customers.”
Enforcement of environmental rules is also likely to see more vigorous enforcement. The Biden campaign promised to create an Environmental and Climate Justice Division within DOJ, and indicated it wants to increase the number of criminal anti-pollution prosecutions.
New statutory tools may also be deployed. For example, the Trump administration withdrew a January 2017 Obama administration opinion, which concluded that the Migratory Bird Treaty Act prohibits the “incidental” taking of birds. The Biden administration will likely revert to the Obama administration’s position, which could have a significant impact on industries that employ equipment such as wind turbines, electric transmission lines, or oil field pits.
Finally, a number of policies and practices within DOJ affecting enforcement are poised for a change in the new administration. Trump issued a pair of executive orders prohibiting DOJ from issuing guidance documents purporting to have a binding effect on the public, and forbidding federal agencies from bringing enforcement actions based solely on guidance documents. Biden rescinded those executive orders on his first day in office.
Another policy that will likely be amended under Biden is the Trump administration’s abandonment of the practice of requiring a defendant, as part of a settlement agreement, to pay money to third parties not directly harmed by the violation. In June 2017, then-Attorney General Jeff Sessions issued a memorandum generally prohibiting third-party settlement payments, and that policy was published as a final rule in December 2020. While Garland was equivocal when asked about the practice during his confirmation proceedings, Biden during his first day in office issued a “non-exclusive list of agency actions that heads of the relevant agencies will review,” in which the only DOJ action listed was the ban on third-party payments.
The DOJ’s policy regarding its consideration of its own role in certain qui tam actions is also worthy of close attention. In January 2018, DOJ’s Fraud Section issued the “Granston Memo,” instructing DOJ attorneys to take a more active role in FCA qui tam actions, both in terms of intervention and seeking dismissal. By December 2020, DOJ moved to dismiss approximately 50 qui tam actions, even though it had averaged only one or two dismissals per year since the FCA was amended in 1986 to increase incentives for whistleblowers. The Biden administration has not yet taken visible action to roll back the Granston memo.
These are only some of the most significant areas where in-house counsel should be expecting meaningful change, but there are sure to be others. Now more than ever, the federal government’s policy and enforcement machinery remains a moving target, and it is crucial for companies to adopt an attitude of informed agility. Experienced outside counsel can provide the edge needed to keep busy in-house counsel from finding themselves in a situation where they are caught blindsided.
Reprinted with permission from the “March 12, 2021” edition of the “The National Law Journal”© 2020 ALM Media Properties, LLC. All rights reserved.
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