(Photo: Diego M. Radzinschi/ALM)

Business advocates reacted cautiously but happily after the U.S. Department of Justice announced its new policy to end “piling on” enforcement penalties against companies.

Deputy Attorney General Rod Rosenstein's explanation of the policy, in his May 9 remarks to the New York City Bar Association's White Collar Crime Institute, said companies in highly regulated industries such as banking and pharmaceuticals were too often assessed multiple fines by various agencies and governments for the same misconduct.

“In reaching corporate resolutions, the department should consider the totality of fines, penalties, and/or forfeiture imposed by all department components as well as other law enforcement agencies and regulators in an effort to achieve an equitable result,” Rosenstein said.

Some corporate lawyers reacted cautiously because the policy is not binding or enforceable, warned Marjorie Peerce, a veteran corporate litigator at Ballard Spahr.

But also they reacted happily because “this gives us an opportunity to advocate with Justice that it should stand down on imposing duplicate penalties,” Peerce explained.

She pointed out the language in the DOJ policy that included “all department components” and forfeitures. “Since there is mandatory restitution for all federal fraud convictions,” she said, “people often get hit by the same penalty twice when they pay both restitution and forfeiture. I am certainly going to use the argument in my cases that you [prosecutors] can no longer knee-jerk seeking both forfeiture and restitution.”

Marjorie Peerce. (Photo: Lauren Welles)

She cited another provision that says the department will no longer threaten to prosecute a company or any defendant criminally unless it reached a suitable (i.e., big civil penalty) with another agency.

“If it [the provision] prevents them from using that heavy sledgehammer, it's a really good thing,” Peerce added.

When multiple agencies are involved, the new policy “also gives us an ability to say you 'guys got to all talk. You can't operate in vacuums,'” she said.

Besides corporate counsel, the new policy was also music to the ears of lawyers at the U.S. Chamber of Commerce's Legal Reform Institute.

Rosenstein said that fairness concerns over duplicate penalties were coming from within the DOJ itself. But general counsel and the Chamber's Institute for Legal Reform have long complained about unfair “over-enforcement” and piling on.

In fact, Rosenstein seems to have taken a page right out of an ILR playbook.

A May 2016 report, Enforcement Gone Amok: The Many Faces of Over-Enforcement in the United States, offered many examples of what the ILR called over-enforcement abuses and piling on. Most of the examples were banks and drug companies, including the then-record $13 billion paid by JP Morgan Chase & Co. in 2013 to DOJ and various other federal and state agencies for the same misconduct surrounding sales of mortgage-backed securities.

“We've actually been talking about this since 2014,” said attorney Harold Kim, executive vice president for ILR. “We held a summit on what we then called serial enforcement and perpetual prosecution. It is encouraging and heartening to see the [Justice] Department finally do something.”

Kim said general counsel won't know for sure how much impact the policy will have until DOJ begins applying it to cases. “What's notable is that the policy changes were implemented directly in the U.S. Attorney's Manual,” he said.

Kim said since last year DOJ has “really been addressing concerns that the business community has raised, such as stopping diversion of settlement funds to third parties and placing a greater emphasis on [recognizing] company compliance programs.”

The new policy, he added, “is another prime example of how they are trying to bend down the curve on over-enforcement. It's a great step.”

Or, as Stetson College of Law professor Ellen Podgor put it on her white collar crime blog, “Corporate investors, directors, and officers should be drinking champagne to toast this policy change.”