Mercy for good apples when they expose bad apples
For American executives who spot fraud and financial misconduct among workers and then quickly report it, the U.S. Justice Department has a refreshing message: Your alertness to right-doing can bring a reward 鈥� in mercy.
Federal prosecutors were recently handed expanded powers to be lenient toward companies that voluntarily report wrongdoing by individual employees in a 鈥渢imely鈥� manner, make amends to those wronged, and shape up internal rules 鈥� hotlines, audits, etc. 鈥� to expose white-collar crime. The accused individuals are then prosecuted, not the company, preventing a hefty fine or forfeiture. Shareholders and employees also benefit from the avoidance of some kinds of negative fallout, such as bankruptcy.
Yet the biggest result so far, according to Jay Clayton, the U.S. attorney for the Southern District of New York 鈥� which includes Wall Street 鈥� has been faster and greater detection of fraud. 鈥淭hat鈥檚 what the American people want from their companies and their justice department,鈥� he told the Financial Times.
"If you know [about fraud], and you don鈥檛 tell us, that鈥檚 bad," he told a conference May 13.聽
Such conditional leniency in enforcement is not necessarily new. Yet it is now being refined as prosecutors discover that most firms much prefer honesty and accountability in their work culture. The new rules also strike a finer balance between mercy and justice that helps a firm better expose a crime, allowing for correction, restitution, and renewal, rather than mere punishment.
The new federal incentives for voluntary self-disclosure also put a greater focus on individual justice (rather than collective penalties) and on restoring the victims of a crime. One potentially larger result: greater public confidence in the integrity of the financial markets.
鈥淭he self-reporting program rests on a simple principle: prompt corporate disclosure and cooperation in rooting out and remedying wrongdoing is in the best interest of victims, shareholders, employees, and our markets generally,鈥� wrote U.S. Attorney Clayton.
Mercy can go a long way to save companies when they expose wrongdoing and realize the reality that honesty helps build a business.
