Key Takeaways
- On Oct. 14, the Manhattan district attorney (DA) announced the creation of the Manhattan District Attorney’s Office’s (the Office) first Corporate Crime and Antitrust Task Force (the Task Force).
- The Task Force will focus on complex investigations targeting fraud and misconduct by corporations and executives, including antitrust violations, healthcare and consumer fraud.
- The goal of the Task Force is to hold organizations fully accountable for corporate criminal liability, deter misconduct and spur systemic reform across New York City, and it signals further local involvement in white collar investigations and prosecutions.
- Companies should expect increased criminal antitrust enforcement, heightened scrutiny of overall compliance programs and an increased focus on senior-level management.
Key Details
In his Oct. 14 press release, DA Alvin Bragg announced the creation of the Task Force, which he described as a continuation of his efforts to protect everyday New Yorkers as “corporate entities often inflict equal or greater harm than individuals.” Bragg explained that “our goal is systemic accountability. Our Task Force will doggedly pursue the big picture: the high-level actors, corporations, and structures that enable and profit from crime at the expense of New Yorkers.”[1] The Task Force will continue the Office’s practice of “looking upstream to identify the structures and entities that enable and profit from crime.”
The Task Force “will take a deep dive into the systems and structures that serve as breeding ground for crime.” The Task Force is being led by veteran prosecutor Matthew Bogdanos and will be staffed with approximately five assistant DAs and two investigative analysts. The Task Force will avail itself of the Office’s resources, including career investigators, forensic accountants and the Office’s Financial Intelligence Unit.
Bragg’s decision to expressly include antitrust as part of the local prosecutor’s corporate crime mandate is significant, and corporate and individual criminal liability is in play. Historically, criminal antitrust enforcement has been within the purview of the U.S. Department of Justice’s (DOJ) Antitrust Division, with the Antitrust Bureau of the New York Attorney General’s Office traditionally enforcing antitrust laws at the local level. The Task Force institutionalizes this capability inside one of the more active local prosecutor’s offices and signals another avenue for criminal antitrust investigations and enforcement in New York. Any criminal antitrust enforcement by the Office would be under the Donnelly Act (N.Y. General Business Law § 340 et seq.), which largely mirrors Section 1 of the Sherman Act. The creation of the Task Force is also the latest example of local involvement in white collar crime enforcement occurring across the U.S. as well as an increase in state involvement in investigating criminal antitrust cases.[2]
Beyond increased local involvement in antitrust investigations, the Task Force has broader implications for the white-collar world. Bragg’s focus on “high-level actors, corporations, and structures that enable and profit from crime” mirrors themes seen in the DOJ’s recently announced Corporate Fraud Enforcement Priorities, which signal increased enforcement of individual accountability.[3]
What Companies Should Know and What Can They Do Now
With the Office signaling strong corporate enforcement in the areas of antitrust violations, healthcare and consumer fraud, companies should review their existing compliance policies and procedures to ensure that the policies are tailored to federal enforcement priorities. Companies – particularly those with a New York nexus (this is significant given the concentration of corporate headquarters, financial institutions, investors, healthcare businesses, technology businesses and interstate commercial activity there) – should also evaluate upstream exposure, ensure proper third-party diligence and reevaluate existing compliance infrastructure. The New York nexus has broader implications for white collar crime in general, as it creates the possibility of parallel inquiries with the federal government and overall increased coordination among enforcement authorities, heightening overall investigative risk.
There is strong reason to believe that the Task Force may be willing to pursue complex corporate investigations whenever the transactions touch New York’s banking infrastructure if the underlying conduct hurts New Yorkers. Under previous DAs Cyrus Vance and Robert Morgenthau, the Office brought substantial sanctions evasion cases against major foreign financial institutions in parallel with federal authorities.[4] These cases were premised on the allegations that the banks routed prohibited U.S.-dollar transactions through New York financial institutions while concealing the involvement of sanctioned countries and entities. The Office has long viewed the use of New York’s financial system as a sufficient jurisdictional hook for significant corporate misconduct. Although the Office already has robust white collar capabilities through its Major Economic Crimes Bureau and Rackets Bureau, among others, the Task Force seems designed to integrate existing capabilities while adding a more centralized focus on corporate criminal liability and executive accountability.
With regard to antitrust, we will see how (or if) the Task Force collaborates with the Antitrust Division, but companies should no longer view criminal antitrust investigation as exclusively federal.[5]
Finally, it’s worth noting that the Office does not currently have a whistleblower program. This has several implications for white collar investigations when compared with current federal whistleblower programs.[6] First, without a whistleblower program, the mechanisms to encourage insiders and/or companies to come forward are not as robust. Second, the lack of monetary incentives may shrink the potential pool of individuals reporting wrongdoing. Third, where an investigation relates to an alleged conspiracy – such as antitrust – there may be less incentive for an individual inside the alleged conspiracy to come forward.
The BakerHostetler White Collar, Investigations and Securities Enforcement and Litigation team is composed of dozens of experienced individuals, including numerous attorneys who have served in the DOJ and at the Securities and Exchange Commission (SEC). Our attorneys include four former U.S. attorneys, several former assistant U.S. attorneys and unit chiefs, and attorneys who have served in the SEC’s Division of Enforcement. Our team has extensive experience in defending regulatory investigations and litigation; conducting enterprise-wide, business-line and regulatory area-specific risk assessments; and providing compliance counseling.
BakerHostetler’s Cartel and Government Antitrust Investigations Task Force and its State Attorney General Enforcement, Investigations and Litigation team have extensive experience in proactive antitrust compliance counseling, regulatory investigations and litigation. The task force includes former DOJ prosecutors and state assistant attorneys general, as well as attorneys who are members of both the Antitrust and Competition team and the White Collar, Investigations and Securities Enforcement and Litigation team, including former members of the Office. Please feel free to contact any of our experienced professionals if you have questions about this alert.
[1] https://manhattanda.org/d-a-bragg-launches-new-corporate-crime-and-antitrust-task-force/
[2] https://ag.ny.gov/about/about-office/economic-justice-division
[3] https://www.bakerlaw.com/insights/doj-announces-corporate-fraud-enforcement-priorities-companies-take-note/
[4] https://www.reuters.com/article/world/us/manhattan-da-launches-major-economic-crimes-bureau-idUSTRE61I3EJ/
[5] See https://www.bakerlaw.com/insights/ag-watch-ohio-ag-joins-state-antitrust-enforcement-trend-law360/
[6] See https://www.bakerlaw.com/insights/doj-antitrust-division-announces-first-ever-whistleblower-reward-just-six-months-after-launching-rewards-program/; see also https://www.bakerlaw.com/insights/dojs-new-comprehensive-approach-will-fight-fraud-from-all-angles/
