The Compliance Monthly: The Government’s Prioritization of Information Over Sanction

As part of Temple Law’s Faculty Spring Colloquium Series, Professor Veronica Root Martinez presented her paper: The Government’s Prioritization of Information Over Sanction: Implications for Compliance. In her paper, Professor Martinez examines the government’s failure to pursue the full range of sanctions against corporations and its impact on ethics and compliance programs. She offers an alternative explanation to the view that federal prosecutors and regulators are simply unwilling enforcers. Instead, Professor Martinez posits that the government’s enforcement strategy reflects a willingness (purposeful or not) to trade leniency in exchange for information.

Why has the government preferred to pursue information over sanctions? Professor Martinez reviews law and economics scholarship about incentivizing corporate self-policing and historic Department of Justice policies that balance punishing corporations with conducting effective investigations. The prioritization of information collection is reflected in cooperation credits that enable government investigations and post-resolution oversight that includes the ongoing provision of information. Most significantly, Professor Martinez emphasizes the government’s arguments in court against the public disclosure of information including reports by independent compliance monitors. The critical question is whether the benefits of prioritizing information outweigh the potential decreased deterrent effect of more lenient enforcement policies.

Professor Martinez concludes that the government has not utilized collected information to maximize its understanding and evaluation of compliance best practices. Although the Obama Administration established an internal compliance expert to advise and assist prosecutors, the Trump Administration shifted to a decentralized approach leaving individual prosecutors to assess if a compliance program is effective. As a result of the movement of individual prosecutors between government and private practice, institutional knowledge may be lost. Professor Martinez also highlights the government’s failure to maximize the benefits of collected information through collaborations with industries on best compliance practices. By keeping valuable information hidden, the government misses the opportunity to restrain corporate misconduct on a broad basis and to facilitate public-private sector dialogues about potential compliance enhancements.

Although Professor Martinez has argued for more stringent sanctions in other scholarship, this paper offers important insights on the prioritization of information over sanction and, more importantly, the necessity of maximizing the use of information to encourage, rather than impede, ethics and compliance programs across industries and corporations.

“Creating proper incentives for firms to engage in effective ethics and compliance activity requires a number of complex and interrelated decisions by public and private actors. This article focuses on the use of information, which intersects with several other policies and procedures utilized by the government. I greatly enjoyed discussing the piece with the faculty at Temple Law. Their engagement with the piece—both during and after the workshop—has helped me to think through other facets of the problem in an incredibly helpful manner!”

You can download the full article here.

Beatrice Raccanello (LAW ’10) serves as the Director of the Center for Compliance and Ethics. Her interest in compliance started in 2015 when she was a member of the Steering Committee of the Center for Compliance and Ethics to assist with the initial launch. She is eager to continue leading Center activities in providing student and professional education programs, fostering academic research and thought leaderships, and advancing the public-private sector dialogue in this rapidly evolving area.

Professor Jon Smollen is a Practice Professor of Law and the Executive Director of the Center for Compliance and Ethics at Temple Law School. Prior to coming to Temple, Professor Smollen served as Executive Vice President and Chief Compliance Officer for Endo International, a global pharmaceutical company. He has also worked as an Attorney Advisor to Federal Trade Commissioner Thomas B. Leary.

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