U.S. prosecutors are imposing giant fines and imprisoning managers when regulatory compliance problems arise. Know how to protect your company and yourself when a legal crisis hits.
At some time, every senior manager in the United States should expect to confront a serious allegation that his or her company and some of its managers have committed a crime. At issue is more than the increasingly severe fines levied against corporations; personal liberty is also at stake as jail sentences for managers are becoming longer and more commonplace. This trend is reflective of the larger legal trend stressing greater “individual” responsibility in business regulation.
The author explains the key arenas of legal accountability and offers guidance for managing a legal crisis and for staying out of trouble in the first place.
In years past, a company faced with an allegation of criminal activity often had a one-dimensional strategy — avoid any finding of guilt. Today, that strategy is rarely used, because companies are responding to more complex considerations governing accountability: the seriousness of the alleged crime, the liability of individual managers for personal criminal conduct, and civil liability for directors accused of not paying sufficient attention to compliance concerns.
Companies that prosecutors target must quickly overcome the initial shock and come to grips with the realities of public vilification and release of confidential information. They should act promptly to avoid additional legal problems such as evidence tampering, decide who will be in charge of guiding the company through the crisis, and assess what went wrong and who is responsible. Companies should also take steps to shield the public from any further harm and consider what further disclosures may be necessary.
Executives should keep in mind the following guidelines for staying out of trouble: be careful of the company you keep, create a strong regulatory compliance program, and understand the regulatory environment in which you operate. Corporate directors should assess, with the aid of counsel, the company’s vulnerabilities. And both should avoid some common miscues: misinterpreting the trend toward deregulation as leniency, assuming government customers are less watchful than private ones, and believing agencies won’t make the effort to prosecute smaller companies.
The article also offers suggestions to help individual managers who have been targeted by government prosecutors.