USA Law and Practice Contributed by: Emily Hughes, Charles Kalil, Cori Lable and Ryan Raybould, Kirkland & Ellis
Officers and directors of an entity must often promptly investigate possible wrongdoing to fulfil their legal and fiduciary obligations. For example, statutes such as the Sarbanes-Oxley Act (the “SOX Act”) require enti - ties to establish procedures for employees to report possible wrongdoing. Failing to investigate reports of possible misconduct can subject both the leadership of an entity and the entity itself to liability. Internal investigations can be affected by various data protection and labour laws, including the Health Insurance Portability and Accountability Act (HIPAA) and state-specific laws, such as the Illinois Biometric Information Privacy Act. These laws regulate the han - dling and disclosure of sensitive information, including medical records, biometric data and other personally identifiable information. Companies are not universally obligated to share findings of internal investigations with enforcement authorities. Disclosure does not prevent prosecu - tion, and companies must consider the implications of disclosure in their unique circumstances. However, voluntary disclosure of investigation findings can sig - nificantly influence an enforcement action’s outcome – such as securing a more favourable resolution. 2.6 Prosecution Prosecutors have broad discretion in choosing whom to prosecute and which charges to bring, but both the DOJ and SEC guidance govern when cases can be brought. Prosecutors are also bound by state-level ethics rules. For example, with business entities, DOJ prosecu - tors weigh various culpability factors pursuant to the “Principles of Federal Prosecution of Business Organi - zations”, also known as the “Filip Factors” (named for then-Deputy Attorney General Mark Filip). Simi - larly, the SEC’s Seaboard Report outlines elements of corporate conduct that can play a significant role in whether the Commission pursues an enforcement action. Prosecutors may charge by indictment, complaint or information. Criminal indictments must be approved by a grand jury – which nearly always approves pros - ecutors’ requests. Criminal complaints must set forth
adequate probable cause for a charge and be signed by a judge. Complaints provide authority for an arrest but must be followed by an information or indictment within a set period. For felony violations, a defendant has a waivable right under the Constitution to indict - ment by a grand jury, which, if waived, can result in the filing of information detailing the charge. 2.7 Deferred Prosecution Deferred prosecution agreements (DPAs) and non- prosecution agreements (NPAs) are mechanisms by which a company or individual can avoid prosecution in exchange for a commitment to abide by an agree - ment for a period of time. If the signatory successfully complies with the agreement’s terms, the government will either: • not file charges (NPAs); or • move to dismiss the charges (DPAs). Courts must approve DPAs, whereas courts are not involved in approving NPAs. Consequences for breaching these arrangements can be severe. The government may extend the company’s obligations under the agreement, or otherwise it may terminate the agreement and prosecute the company. Government use of a DPA or an NPA depends on a variety of factors including the company’s co-opera - tion, the pervasiveness of the conduct, remediation, self-disclosure, collateral consequences and other criteria. DPAs and NPAs are negotiated between the prosecution and the defendant, and may include an acknowledgement of wrongdoing or admitting rel - evant facts, co-operation in ongoing investigations (including of culpable individuals), ongoing compli - ance obligations (and sometimes monitoring), ongo - ing reporting obligations, fines, penalties or business reforms. 3. White-Collar Offences 3.1 Criminal Company Law and Corporate Fraud In addition to the crimes described throughout 3. White-Collar Offences , RICO criminalises conduct that is part of a “pattern of racketeering activity” to
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