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When Aggressive Business Practices Can Get You Indicted

The blog, news and resources of Bieser Greer

November 11, 2016

When Aggressive Business Practices Can Get You Indicted


“If only it were all so simple!  If only there were evil people somewhere insidiously committing evil deeds, and it were necessary only to separate them from the rest of us and destroy them.  But the line dividing good and evil cuts through the heart of every human being.  And who is willing to destroy a piece of his own heart?”                                                       -Alexandr Solzhenitsyn

Twenty or thirty years ago, fraud and white collar criminal prosecutions were widely viewed as rare, happening only to the very few businesses that engaged in clearly shady practices.  The regulations were fewer and the rules more bright-line. Today, if only it were all so simple!  The average federal investigator or regulatory agent believes that fraud, or at least non-compliance, takes place in every business organization.  The line between aggressive, hard-charging business practices and white collar criminal activity has narrowed to the point where strict compliance with fair dealing standards and state and federal regulatory schemes is necessary to avoid being hauled into court by a prosecutor.

Regulators, investigators, and prosecutors are watching.  In September 2015, United States Deputy Attorney General Sally Yates, author of a memo outlining rules and priorities for federal prosecutors, reaffirmed the commitment of the Department of Justice to “hold lawbreakers accountable regardless of whether they commit their crimes on the street corner or in the boardroom.”   That means cases involving corporations and similar entities will not be resolved by the DOJ unless there is a clear plan to pursue and resolve cases against individuals in the corporation, in particular owners and executives of those businesses.  There has been a clear shift in recent years towards holding business executives and owners individually responsible for wrongdoing rather than simply fining or otherwise sanctioning their corporation.

So, whether you are a small business owner, an executive in a larger corporation, or an employee with decision-making authority, it makes sense to try to keep an eye on the line between “good and evil,” understanding that even well-intentioned people can unwittingly cross it.  Consulting experienced and competent inside or outside counsel is one traditional way to get a handle on which business practices are within the bounds of the law and which are not.  But since consulting with an experienced white collar/government regulatory expert is not always feasible, what can you do to avoid crossing the line?

First, create a corporate culture stressing ethical conduct, and be sure to document your company’s efforts in that regard.  Regulators’ and prosecutors’ decisions to bring civil or criminal enforcement actions (and the severity of any criminal sentence or civil penalty) are influenced by their assessment of a company’s documented efforts to comply with the law.  Second, consider performing your own routine internal audits or compliance investigations.  Performing at least an annual audit/internal review can assist in identifying problems before they become too big or too complex to control.  Finally, every business should conduct training and awareness programs at all levels, from Boards of Directors and senior management to line employees and staff.

Today’s business world operates in an increasingly complex maze of rules and regulations.  Health care organizations must be aware of the risks of running afoul of countless laws and regulations including HIPAA, the False Claims Act, Stark and Anti-Kickback rules, and a bevy of other health care related fraud concerns.  Government contractors face Foreign Corrupt Practices Act issues that are subject to Department of Justice investigations and enforcement proceedings.  Securities brokers and representatives must comply with a complex set of FINRA and SEC regulations. And disgruntled customers can claim deception and elevate what would otherwise be a civil matter to a criminal matter with charges of wire fraud, mail fraud, money laundering and conspiracy. Obviously those sorts of charges, or even the possibility of such charges, can do irreparable damage to a company’s goodwill and fatal injury to its business.

Be aggressive, but be smart.  An experienced attorney can be an invaluable resource to you to ensure that the line—between solid, aggressive business practices and an investigation, indictment or other government inquiry—is not crossed.

* This is an advertisement. The information provided here is for informational purposes only and should not be considered legal advice. You should consult an attorney for legal advice regarding your particular situation.