The New Attorney General and You

Certainly, continued prosecutions in the financial sector will be at the top of the new Attorney General's list of priorities, despite the mainstream press's fascination with marijuana. There is, of course, the challenge of doing what her predecessor is regularly criticized for not doing ' bringing Wall Street into the modern age of compliance and ethics. In addition, however, Ms. Lynch led President Obama's Financial Fraud Enforcement Task Force. She has reiterated the “no company is too big to jail” mantra of her predecessor, and her office has obtained some of the largest fines ever, including $1.9B from HSBC for money laundering. Ms. Lynch also negotiated the largest ever False Claims Act (FCA) settlement ($1B) against Bank of America in a case relating to mortgage fraud.

Unsurprisingly, Ms. Lynch will also carry forward the tradition of emphasizing the power and importance of corporate compliance programs. “Should a corporation not engage in preventive behavior ' criminal charges will be brought,” she likes to say. But she adds that what really matters is how companies deal with problems when they arise, and she does understand that they will arise. However, to escape a criminal plea, corporate and outside counsel must have good answers at the ready when it comes to explaining what happened after the Corporate Compliance Officer pulled the alarm lever.

The Attorney General is unlikely to bow to pressure from Congress and non-governmental organizations to refrain from or dispense with deferred prosecution agreements and non-prosecution agreements. It has become fashionable to attack these agreements as a means of “letting the fat cats off the hook with a wrist slap.” Ms. Lynch, however, has strongly defended such agreements during her confirmation hearings and elsewhere, in part based upon her “textbook” experience with Ralph Lauren. During the course of making improvements to its compliance program and internal controls, the company discovered payments to Argentinean customs officials and promptly disclosed them to the DOJ. The company and the DOJ then entered into a non-prosecution agreement by which the company paid a modest fine and pledged to continue its self-improvement. As Ms. Lynch observed, the DOJ did not “decline” prosecution in the case. If anything, her tenure may be a good time for the white collar bar to fight back with the notion that, in the past, companies in positions similar to that of Ralph Lauren would have received a full declination rather than an NPA or DPA, the latter of which may even include a monitor.

What Matters in Her Background?

In a self-deprecating way, prosecutors often refer to battles over which jurisdiction will prosecute a case as “rat fights.” As the U.S. Attorney for the Eastern District of New York, Ms. Lynch was immediate neighbor to the vaunted Southern District of New York, featuring Mary Jo White and Preet Bharara. It is a certainty that Ms. Lynch has been in a good number of such “rat fights” during her tenure. It is also a certainty that she lost most, if not all, of them and she recently has said as much. Might that affect how she sees the Southern District? Perhaps. If so, another important posting to watch will be her replacement in the Eastern District of New York. The EDNY is likely to be significantly busier, so you may want to check your roster of counsel for former prosecutors from there.

Ms. Lynch is also well known for a strong relationship with law enforcement departments and investigating agencies. She cleverly made this a priority when installed in the Eastern District. It's clever because reinvigorated investigators with high morale are going to boost the number and scope of cases to be brought. The upshot for those of us who are representing companies is that it might be an especially good time to dust off our standard policy memoranda on responding to a “knock at the door” and on handling the execution of search warrants.

Additionally, it must be noted that the new Attorney General is not a “beltway insider.” Her nomination reflects a deliberate choice to avoid someone whose past government service may have been controversial or otherwise might have served as a source of ammunition for a confirmation fight. As a “beltway outsider,” and a non-joiner, Ms. Lynch is less likely to be swayed by high-profile counsel or presentations by her former colleagues than others might have been. She says that she is committed to due process, so she may hear you and your client out, but you are unlikely to advance your cause by bringing in the $1,500-an-hour big name who claims to be her close confidant.

Finally, based on public statements and interviews, there is zero chance Ms. Lynch will seek to rein in the exercise of extra-territorial jurisdiction. Expect the standard arguments about international comity, duplicate punishments and manufactured jurisdictional hooks to fall on deaf ears.

Conclusion

Companies, and their counsel, are caught unfortunately unawares when they fail to attend to shifts in the prosecutorial winds. Certainly that has been true for United States-based companies doing business abroad, as well as for Wall Street, whose complex machinations previously seemed impenetrable to enforcement agencies. We would all do well to study Ms. Lynch's early days in office.

Jeffrey T. Green is a partner and member of the White Collar Group, Sidley Austin LLP, Washington, DC.

Loretta Lynch, formerly United States Attorney for the Eastern District of New York, likely will be the newly confirmed Attorney General of the United States by the time you read this. As spectacle, a changing of the guard is always worthy of note. But for others who are embroiled in or worried about investigations, the change may matter a great deal.

Should you care? Yes. The Attorney General's Office sets enforcement priorities. Even if you never have a chance to speak with the new Attorney General on official business, the various heads of the criminal sections in Main Justice with whom you will speak are likely to be her choice, and therefore will share her enforcement priorities.

What Are Her Likely Priorities?

Certainly, continued prosecutions in the financial sector will be at the top of the new Attorney General's list of priorities, despite the mainstream press's fascination with marijuana. There is, of course, the challenge of doing what her predecessor is regularly criticized for not doing ' bringing Wall Street into the modern age of compliance and ethics. In addition, however, Ms. Lynch led President Obama's Financial Fraud Enforcement Task Force. She has reiterated the “no company is too big to jail” mantra of her predecessor, and her office has obtained some of the largest fines ever, including $1.9B from HSBC for money laundering. Ms. Lynch also negotiated the largest ever False Claims Act (FCA) settlement ($1B) against Bank of America in a case relating to mortgage fraud.

Unsurprisingly, Ms. Lynch will also carry forward the tradition of emphasizing the power and importance of corporate compliance programs. “Should a corporation not engage in preventive behavior ' criminal charges will be brought,” she likes to say. But she adds that what really matters is how companies deal with problems when they arise, and she does understand that they will arise. However, to escape a criminal plea, corporate and outside counsel must have good answers at the ready when it comes to explaining what happened after the Corporate Compliance Officer pulled the alarm lever.

The Attorney General is unlikely to bow to pressure from Congress and non-governmental organizations to refrain from or dispense with deferred prosecution agreements and non-prosecution agreements. It has become fashionable to attack these agreements as a means of “letting the fat cats off the hook with a wrist slap.” Ms. Lynch, however, has strongly defended such agreements during her confirmation hearings and elsewhere, in part based upon her “textbook” experience with Ralph Lauren. During the course of making improvements to its compliance program and internal controls, the company discovered payments to Argentinean customs officials and promptly disclosed them to the DOJ. The company and the DOJ then entered into a non-prosecution agreement by which the company paid a modest fine and pledged to continue its self-improvement. As Ms. Lynch observed, the DOJ did not “decline” prosecution in the case. If anything, her tenure may be a good time for the white collar bar to fight back with the notion that, in the past, companies in positions similar to that of Ralph Lauren would have received a full declination rather than an NPA or DPA, the latter of which may even include a monitor.

What Matters in Her Background?

In a self-deprecating way, prosecutors often refer to battles over which jurisdiction will prosecute a case as “rat fights.” As the U.S. Attorney for the Eastern District of New York, Ms. Lynch was immediate neighbor to the vaunted Southern District of New York, featuring Mary Jo White and Preet Bharara. It is a certainty that Ms. Lynch has been in a good number of such “rat fights” during her tenure. It is also a certainty that she lost most, if not all, of them and she recently has said as much. Might that affect how she sees the Southern District? Perhaps. If so, another important posting to watch will be her replacement in the Eastern District of New York. The EDNY is likely to be significantly busier, so you may want to check your roster of counsel for former prosecutors from there.

Ms. Lynch is also well known for a strong relationship with law enforcement departments and investigating agencies. She cleverly made this a priority when installed in the Eastern District. It's clever because reinvigorated investigators with high morale are going to boost the number and scope of cases to be brought. The upshot for those of us who are representing companies is that it might be an especially good time to dust off our standard policy memoranda on responding to a “knock at the door” and on handling the execution of search warrants.

Additionally, it must be noted that the new Attorney General is not a “beltway insider.” Her nomination reflects a deliberate choice to avoid someone whose past government service may have been controversial or otherwise might have served as a source of ammunition for a confirmation fight. As a “beltway outsider,” and a non-joiner, Ms. Lynch is less likely to be swayed by high-profile counsel or presentations by her former colleagues than others might have been. She says that she is committed to due process, so she may hear you and your client out, but you are unlikely to advance your cause by bringing in the $1,500-an-hour big name who claims to be her close confidant.

Finally, based on public statements and interviews, there is zero chance Ms. Lynch will seek to rein in the exercise of extra-territorial jurisdiction. Expect the standard arguments about international comity, duplicate punishments and manufactured jurisdictional hooks to fall on deaf ears.

Conclusion

Companies, and their counsel, are caught unfortunately unawares when they fail to attend to shifts in the prosecutorial winds. Certainly that has been true for United States-based companies doing business abroad, as well as for Wall Street, whose complex machinations previously seemed impenetrable to enforcement agencies. We would all do well to study Ms. Lynch's early days in office.

Jeffrey T. Green is a partner and member of the White Collar Group, Sidley Austin LLP, Washington, DC.