Source: https://www.justice.gov/jm/jm-4-3000-compromising-and-closing?utm_medium=email&utm_source=govdelivery
Timestamp: 2019-04-22 02:16:07+00:00

Document:
The Department of Justice prioritizes fighting corporate fraud and other misconduct because effective pursuit of civil claims protects citizens, the government, and the nation’s economy, and because expeditious and vigorous civil enforcement provides a strong deterrent to misconduct. Holding individuals who perpetrate wrongdoing accountable, in addition to corporations or business entities, is one of the most effective ways of combatting corporate misconduct. Doing so deters future illegal activity, incentivizes changes in corporate behavior, holds the proper parties responsible for their actions, and promotes the public’s confidence in our justice system.
(1) Civil corporate investigations should focus on individuals from the inception of the corporate investigation.
By focusing on building cases against individual wrongdoers from the inception of an investigation, we accomplish multiple goals. First, we maximize our ability to ferret out the full extent of corporate misconduct. Because a corporation acts only through individuals, investigating the conduct of individuals efficiently and effectively reveals the facts and extent of any corporate misconduct. Second, a focus on individuals increases the likelihood that those with knowledge of the corporate misconduct will be identified and provide information about the individuals involved, at any level of an organization. Third, by focusing on individuals from the very beginning of an investigation, we maximize the chances that the final resolution of an investigation uncovering the misconduct will include civil allegations (or criminal charges) against not just the corporation but against culpable individuals as well.
(2) Criminal and civil attorneys handling corporate investigations should be in routine communication with each other.
Early and regular communication between civil attorneys and criminal prosecutors handling corporate fraud investigations can be crucial to the Department’s ability to effectively pursue individuals in these matters. Consultation between the Department’s civil and criminal attorneys, together with agency attorneys, permits consideration of the full range of the government’s potential remedies (including incarceration, fines, penalties, damages, restitution to victims, asset seizure, civil and criminal forfeiture, and exclusion, suspension and debarment) and promotes the most thorough and appropriate resolution in every case. That is why the Department has long recognized the importance of parallel development of civil and criminal proceedings. See JM 1-12.000; JM 1-12.100.
Where civil attorneys believe that an individual identified in the course of their corporate investigation should be the subject of a criminal inquiry, that matter should promptly be referred to criminal prosecutors, regardless of the current status of the civil corporate investigation. Department attorneys should also be alert for circumstances where concurrent criminal and civil investigations of individual misconduct should be pursued. Criminal and civil investigations by the FBI or other investigative agencies should be carried out concurrently, including investigations as to the extent of the government’s damage. Care should be taken to use grand jury materials in connection with civil actions pursuant to Fed. R. Crim. P. 6(e). See United States v. Sells Engineering, Inc., 463 U.S. 418 (1983); see also 18 U.S.C. § 3322 (permitting disclosure of grand jury materials to government attorneys pursuing FIRREA civil penalty actions). Similarly, care should be taken to use the fruits of Civil Investigative Demands only as permitted by the authorizing statute, e.g., 31 U.S.C. § 3733, et seq.
(3) To be eligible for cooperation credit in a civil corporate case, a corporation must provide meaningful assistance to the government’s investigation. To earn maximum cooperation credit, a corporation must do a timely self-analysis and be proactive in voluntarily disclosing wrongdoing and identifying all individuals substantially involved in or responsible for the misconduct, without making the government compel such disclosures with subpoenas or other investigative demands.
Corporate cooperation in civil cases should be measured by how much meaningful assistance the corporation provides to the government. Meaningful assistance may include, for example, a corporation’s voluntary disclosure of misconduct, cooperation that allows the Department to identify a problem and secure a resolution without expending investigative resources that otherwise would be required, or assistance that enables the Department to pursue misconduct that otherwise would not be redressed.
A corporation that seeks to earn maximum cooperation credit generally should do a timely self-analysis and be proactive in voluntarily disclosing wrongdoing and identifying all individuals substantially involved in or responsible for the misconduct, without making the government compel such disclosures with subpoenas or other investigative demands. However, in civil cases, Department attorneys may exercise their discretion in appropriate circumstances to offer some cooperation credit to a corporation that has meaningfully assisted the government’s investigation, even absent assistance that would qualify for maximum credit, if the award of some credit for cooperation serves the public interest and furthers the administration of justice. The mere submission of legally required information, by itself, generally does not constitute meaningful assistance. Nor will the Department award any credit to a corporation that conceals involvement in the misconduct by members of senior management or the board of directors, or otherwise demonstrates a lack of good faith in its representations regarding the nature or scope of the misconduct.
The extent of the cooperation credit earned will depend on all the various factors that have traditionally applied in making this assessment (e.g., the timeliness of the cooperation, the diligence, thoroughness and speed of the internal investigation, and the proactive nature of the cooperation).
(4) Before finalizing a civil corporate resolution, the Department should carefully consider the liability of culpable individuals. The Department should preserve the ability to pursue civil remedies against those individuals, unless further action is not necessary or warranted to serve the public interest.
In instances where the Department reaches a resolution with a company before resolving matters with responsible individuals, Department attorneys should take care to preserve the ability to pursue the individuals. A Department attorney seeking to allow the release of civil claims related to the liability of individuals based on a corporate settlement must document the basis for the determination that further action against the individuals is not necessary or warranted, and must obtain written supervisory approval of the decision to allow the release of civil claims in the case.
Each Department component and U.S. Attorney’s Office may select the level of supervisory review to be required within that component or Office, consistent with their enforcement needs and circumstances.
(5) Corporate cases should not be resolved without a clear plan to resolve related individual cases before the statute of limitations expires and declinations as to culpable individuals in such cases must be memorialized and approved.
If the investigation of individual misconduct has not concluded by the time authorization is sought to resolve the case against the corporation, the corporate authorization memorandum should include a discussion of the potentially liable individuals, a description of the current status of the investigation regarding their conduct and the investigative work that remains to be done, and an investigative plan to bring the matter to resolution prior to the end of any statute of limitations period. If a decision is made at the conclusion of the investigation not to bring civil claims or criminal charges against culpable individuals, the reasons for that determination must be memorialized and approved by the United States Attorney or Assistant Attorney General whose office handled the investigation, or their designees.
Delays in the corporate investigation should not affect the Department’s ability to pursue potentially culpable individuals. While every effort should be made to resolve a corporate matter within the statutorily allotted time, and tolling agreements should be the rare exception, in situations where it is anticipated that a tolling agreement is nevertheless unavoidable and necessary, all efforts should be made either to resolve the matter against culpable individuals before the limitations period expires or to preserve the ability to charge individuals by tolling the limitations periods.
An AAG can compromise (or settle administratively) a defense claim when the principal amount of the proposed settlement does not exceed $4 million, 28 C.F.R. § 0.160(a)(3).
The Deputy Attorney General or Associate Attorney General, as appropriate, is further specifically authorized to exercise the settlement authority of the Attorney General as to all affirmative and defensive civil claims, 28 C.F.R. § 0.161(b).
The Assistant Attorney General for the Civil Division has redelegated portions of the Attorney General's authority to United States Attorneys, and also to Deputy Assistant Attorneys General, branch directors, the Director of the Appellate Staff, the Director of the Office of Foreign Litigation, the Director of the Consumer Protection Branch, the Director of the Office of Immigration Litigation, and Attorneys-in-Charge of field offices of the Civil Division. Civil Division Directive No.1-15, published in the Appendix to Subpart Y immediately following 28 C.F.R. § 0.172, 80 Fed. Reg. 31998-01 (2015), presently details those redelegations. See Civil Division Directive No.1-15, 28 C.F.R. Part 0, Subpt. Y, App.
The Deputy Assistant Attorneys General of the Civil Division are authorized to act for, and to exercise the authority of, the Assistant Attorney General with respect to the institution of suits, and acceptance or rejection of compromise offers, and the closing of claims or cases, unless any such authority is required by law to be exercised by the Assistant Attorney General personally or has been specifically delegated to another Department official.
United States Attorneys, Civil Division Branch, Office and Staff Directors, and Attorneys-in-Charge of Field Offices, are authorized, with respect to matters assigned to their respective components, (and subject to 28 C.F.R. §§ 0.160(d), and 0.164 and sections 1(e) and 4(b) of Directive 1-15, and the authority of the Solicitor General set forth in 28 C.F.R. § 0.163), to reject any offer in compromise, to accept offers in compromise of claims asserted by the United States when the gross amount of the original claim does not exceed $10,000,000, to accept offers in compromise of, or settle administratively, claims against the United States when the principal amount of the proposed settlement does not exceed $1,000,000, or to close any affirmative claim where the gross amount of the original claim does not exceed $10,000,000 . For civil fraud claims, the principal amount of the settlement is the difference between single damages (excluding interest and penalties) and the amount to be paid pursuant to the settlement, and the gross amount of the original claim is the amount of single damages; for claims involving only civil penalties, the gross amount of the original claim is the maximum amount of penalties sought. Civil Division Directive No. 1-15, 28 C.F.R. Part 0, Subpt. Y, App.
The authority described in paragraph 2 shall not be exercised (and the matter submitted to the Assistant Attorney General, Civil Division), when the proposed action, as a practical matter, will control or adversely influence the disposition of other cases totaling more than the respective amounts designated above, when a novel question of law or policy is presented, when the United States Attorney involved requests that the matter be submitted to the Assistant Attorney General, when the case is on appeal (except as determined by the Director of the Appellate Staff) or when the agency or agencies involved are opposed to the proposed action. The views of an agency must be solicited with respect to significant proposed action if the agency is a party, if it has asked to be consulted with respect to any such action, or if such action would adversely affect any of its policies. Civil Division Directive No. 1-15, 28 CFR Part 0.
United States Attorneys may delegate, in writing, the above compromise and suit authority to Assistant United States Attorneys who supervise other Assistant United States Attorneys who handle civil litigation.
The United States Attorney believes that the full amount of a claim of the United States cannot be collected in full due to the financial condition of the debtor.
There must be a real doubt as to the government's ability to collect in full.
Uncertainty as to the price which property will bring on execution sale may be treated as an uncertainty as to collection. However, claims secured by a mortgage should not be compromised until after sale of the mortgaged property, since the government is generally entitled to both the amount the property will sell for and a deficiency judgment. In the rare instance in which such a compromise may be appropriate, a thorough appraisal by an impartial appraiser is indicated, to determine the value of the mortgaged property and avoid criticism from those who may later say they would have offered more for the property.
A valid and provable claim, which can be collected, cannot be voluntarily relinquished unless necessary to prevent injustice. Compromise requires some mutuality of concession. There must be room for the play of give and take. The adequacy of the concession is to be determined by the exercise of sound discretion.
Hardship, which does not involve inability to pay, is not a proper basis for settlement.
The United States Attorney believes that, in light of his or her assessment of the litigation risk and the likely amounts involved in the event of full, partial, or no success, settlement is in the interests of the United States.
If a compromise with a going business concern necessitates the acceptance of payments over a period of time, the United States Attorney should obtain adequate security for deferred payments. It is also generally advisable for the United States Attorney to require a waiver of any and all claims which such a business concern has against the United States, including rights under the net operating loss carry forward and carry back provisions of the Internal Revenue Code, at least insofar as these are affected by the compromise proposal. In some situations, it may be advisable to require written consent for the audit of the concern's books and records. Consideration should also be given to having an independent appraisal of business assets as "forced sale" and "fair market" value, conducted at the concern's expense by an appraiser whose selection is subject to the approval of the United States Attorney. The United States Attorney should not accept a percentage of net profits in settlement or partial settlement of a claim. Such arrangements are speculative at best; policing is difficult; and there are too many ways in which the affairs of the debtor concern can be manipulated to avoid, minimize, or postpone realization of a net profit. Corporate stock should generally not be accepted in settlement or payment of a claim in favor of the United States. Managing such stock holdings places unusual burdens on client agencies. Letters of credit provide an excellent method for securing payment.
The acceptance of a plan of reorganization under the Bankruptcy Code by the United States Attorney amounts to the compromise of a claim by the United States. The same limitations and standards as described in JM 4-3.200 ggovern compromises under the Bankruptcy Code. For purposes of determining the United States Attorneys' authority to accept a plan, the term gross amount of the original claim as used in Civil Division Directive No. 1-15, means liquidation value. Liquidation value is the forced sale value of the collateral, if any, securing the claims plus the dividend likely to be paid for the unsecured portion of the claims in an actual or hypothetical liquidation of the bankruptcy estate. If the debtor fails to provide the information needed to consider the plan, or if inadequate time is allowed to obtain any required Department of Justice approvals for the compromise, the United States Attorney should file an objection to confirmation of the plan with the bankruptcy court.
The claim is uncollectible except by installment payments that debtors agree to make to the referring agency, or the claim can be enforced by other means, but such enforcement is forborne in consideration of the promise for installment payments; or the claim is presently uncollectible but has future collection potential, and the United States Attorney is not in a better position than the agency to keep the matter under surveillance.
The United States Attorney should be satisfied that, as a practical matter, the transfer will not adversely affect the chances of collection or the amount that will be collected.
The United States Attorney should consider it unlikely that the claim will be returned to him/her for further proceedings.
Whenever a United States Attorney compromises or closes a claim involving the United States pursuant to the authority as described in JM 4-3.120 , he/she should place a memorandum in the office file fully explaining the basis for the action. Upon request, a copy of this memorandum should be sent to the appropriate branch of the Civil Division. This requirement is set forth at § 2(a) of Civil Division Directive No. 1-15, published in the Appendix to Subpart Y immediately following 28 C.F.R. § 0.172.
The compromising of cases or closing of claims that a United States Attorney is not authorized to approve should be referred to the Civil Division official having the requisite approval authority. The referral memorandum should contain a detailed description of the matter, the United States Attorney's recommendation, the agency’s recommendation, where applicable; a description of the source of funds from which the judgment will be paid (e.g., the Judgment Fund or the agency’s budget), an estimate of the settlement value of the case if that value would differ were the defendant a party other than the Government, and a full statement of the reasons why compromise is in the interests of the United States. This requirement is set forth at § 2(b) of Civil Division Directive No. 1-15, published in the Appendix to Subpart Y immediately following 28 C.F.R. § 0.172 .
When a claim of the United States is compromised, the compromise should be effected and evidenced in the manner provided in this section and those that follow. No further evidence of settlement should be required, although a written settlement agreement between the debtor and the United States Attorney should be prepared. The scope of the compromise should be specifically limited to the immediate subject matter of the claim which was in fact compromised. In no case should a general release be issued to the debtor, since it is not possible to know whether the debtor owes debts to other agencies such as the Internal Revenue Service. If a compromise cannot be effected without the execution of a release, the release should be narrowly drawn, limited to the specific debt that is compromised, and should contain a specific reservation of the United States' right to proceed against other obligors.
If the compromise is made for the purpose of clearing title to a particular property, the release executed should be limited to the release of the United States' judgment lien or right of redemption as to that specific property. No release of a lien or a right of redemption should be executed without some appropriate consideration, even if the claim is questionable.
If a compromise is effected with less than all obligors, care should be taken to reserve the United States' right to proceed against, or collect from, the others. A covenant not to sue, containing a specific reservation of such right, is preferable to a release (even when specifically limited) in this situation.
In any civil matter in which the Department is representing the interests of the United States or its agencies, the Department of Justice will not enter into final settlement agreements or consent decrees that are subject to confidentiality provisions, nor will it seek or concur in the sealing of such documents. 28 C.F.R. § 50.23. Exceptions to this policy may be authorized only in rare circumstances, and only by the relevant United States Attorney or Assistant Attorney General or a more senior Department official.
If a compromise is agreed to in a case in which the United States has filed suit, dismissal of the suit with prejudice is all that is required to evidence the settlement. If the settlement is to be paid in installments, judgment may be entered, with the defendant's permission, as security for the deferred installments. However, if this procedure has not been agreed upon as part of the compromise arrangement, and it is necessary to dismiss the suit, the dismissal should be without prejudice. See Fed. R. Civ. P. 41(a). Tort suits brought on behalf of the United States should not be dismissed in such circumstances without a written waiver of limitations, since partial payments do not toll the running of the statute of limitations.
If the United States' claim has been reduced to judgment and the settlement is intended by both parties to satisfy the judgment obligation in full, a satisfaction of judgment should be filed upon full payment by the debtor under the compromise. This should be sufficient to evidence the consummation of settlement. However, if more than one obligor is bound by the judgment and the settlement is only as to one obligor's debt, only a partial satisfaction of the judgment can be executed. It is appropriate to release the judgment lien as to the settling debtor's property but not as to the property of the nonsettling debtors.
In a limited number of instances, compromises may be payable by an insurer, surety, title insurance company, or indemnitor. In such cases, the client agency should be asked to arrange for payment, or, with the agency's acquiescence, arrangements for payment can be made directly with the insurer, surety, or indemnitor. Some "sue and be sued" officials or agencies can pay claims from appropriations or revolving funds. In such cases, payment should be obtained from the client agency.
It is preferable that compromises of claims arising out of the operations of certain government corporations and the shipping operations of the Maritime Administration be handled in the same manner as claims in favor of the government. Should circumstances warrant, these claims may be compromised by entry of an order approving the compromise.
Compromises of suits under the Tucker Act (28 U.S.C. § 1346(a)(2)) and the Suits in Admiralty Claims Act (46 U.S.C. § 741, et seq.) may, in unusual circumstances, be payable from appropriated funds of the client agency. It may be necessary to enter a consent judgment upon compromise, in order to obtain payment.
Compromise of suits involving minors and other persons under legal disability, or by executors or administrators, should be approved by the local probate, orphan's, surrogate's, or other court of competent jurisdiction, where such approval is required by applicable state law.
It is preferable that the amount of proper attorneys' fees which are to be paid from the settlement proceeds be specified in the settlement agreement. If this is not done, a separate check cannot be issued payable to the attorney. Arrangements should be made for all payments of compromises to be made through the USAO, in order that the payment may be exchanged for dismissal of suit with prejudice, or an appropriate release or covenant not to sue.
Compromises of suits in excess of the United States Attorneys' delegated authority must receive explicit and advance approval through the Civil Division of the Department of Justice, regardless of whether or not the case otherwise has been delegated for direct handling to the USAO. Requests are expected to demonstrate a thorough, thoughtful exploration of any issues relating to jurisdiction, liability, and damages, with the ultimate goal of ensuring that a proposed settlement is in the best interests of the United States and that the United States has bought peace with respect to any claims that the plaintiff could bring based on the subject matter of the case. The Associate Attorney General has issued internal guidance on this.
After approval, the settlement agreement may be submitted by the United States Attorney directly to the Department of the Treasury through the Judgment Fund Internet Claims System (JFICS) (or, 1. in Postal Service cases, to the Postal Service; or 2. in Federally Supported Health Center cases, to HHS). Compromises in suits under the Federal Tort Claims Act, the Suits in Admiralty Act or the Public Vessels Act, are payable in the same manner as judgments. In no event should the settlement be submitted to Treasury, the Postal Service, or HHS prior to approval from the Civil Division, except when cases are settled within the United States Attorneys' delegated authority.
See JM 4-10.000 for the letters and forms to be used when sending compromises or settlements to the Treasury, the Postal Service, or HHS for payment.

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