The Inbox – No Fall Guys Allowed

| Zuckerman Spaeder Team

The Justice Department issued a memo to United States attorneys nationwide that might have Wall Street executives shifting nervously in their seats. The memo signifies a new focus as it instructs both civil and criminal prosecutors to pursue individuals, not just their companies, when conducting white collar investigations. According to The New York Times, the memo is a “tacit acknowledgement” that very few executives who played a role in the housing crisis, the financial meltdown, and other corporate scandals have been punished by the Justice Department in recent years. Typically when a company is suspected of wrongdoing, the company settles with the government after supplying the authorities with the results of its own internal investigation. This paradigm has led to corporations paying record penalties, while individuals usually escape criminal prosecution. Deputy U.S. Attorney General Sally Q. Yates authored the memo and articulated the Justice Department’s new resolve. “Corporations can only commit crimes through flesh-and-blood people. It’s only fair that the people who are responsible for committing those crimes be held accountable.” To achieve this end, U.S. attorneys are directed to focus on individuals from the beginning, and will refuse “cooperation credit” to the company if they refuse to provide names and evidence against culpable employees. And don’t think about naming a fall guy to take the blame. Ms. Yates said the Justice Department wants big names in senior positions. “We’re not going to be accepting a company’s cooperation when they just offer up the vice president in charge of going to jail.” We’ll have more on the Yates Memo and its potential implications in weeks to come.

Martin Shkreli, a chief executive of Turing Pharmaceuticals, came under intense scrutiny this week when his company acquired the anti-parasitic drug Daraprim and increased its price by roughly 5,000% from $13.50 per pill to $750. Criticism came as swiftly as the price hike, and curious observers of the controversy moved quickly to uncover pieces of Mr. Shkreli’s past. According to The New York Times, Mr. Shkreli’s former company Retrophin sued him in Manhattan federal court last month for breaching his duty of loyalty to the company. The Times said that before launching that suit Retrophin settled an unrelated lawsuit with a former employee after discovering that Mr. Shkreli engaged in a social media attack against the former employee and his family. CNBC reported that Mr. Shkreli allegedly hacked the former employee’s social media accounts and threatened his family over text message and Facebook. Mr. Shkreli was subsequently removed as CEO. While Mr. Shkreli’s business decision to escalate the drug’s price is relatively common in the world of pharma, his almost instantaneous rise to infamy might not be. In an apparent response to the backlash, not to mention a nod to the power of the Internet, Mr. Shkreli recently announced that he will lower the drug’s price to a yet undisclosed amount.

Giorgio Armani Corp., the purveyors of style and haute couture du jour, received the drab news of an impending lawsuit during New York Fashion Week, according to New York Daily News. The fashion house’s former General Counsel, Fabio Silva, a Mexican national, sued the company in New York state court alleging workplace discrimination. According to his complaint, Mr. Silva filed a grievance against the Chief Financial Officer after he repeatedly made denigrating remarks about Mexico and Mr. Silva’s “trustworthiness.” He says that the company did not formally address his complaint, but did refuse him a pay increase despite a favorable performance review, an act that Mr. Silva says constitutes retaliation. Months later, when Mr. Silva was diagnosed with cancer, he relayed the news to Human Resources, and according to the complaint, was fired minutes later. Needless to say, Mr. Silva’s version of the events is most unflattering to his former employer.

Information provided on InsightZS should not be considered legal advice and expressed views are those of the authors alone. Readers should seek specific legal guidance before acting in any particular circumstance.

As the regulatory and business environments in which our clients operate grow increasingly complex, we identify and offer perspectives on significant legal developments affecting businesses, organizations, and individuals. Each post aims to address timely issues and trends by evaluating impactful decisions, sharing observations of key enforcement changes, or distilling best practices drawn from experience. InsightZS also features personal interest pieces about the impact of our legal work in our communities and about associate life at Zuckerman Spaeder.

Information provided on InsightZS should not be considered legal advice and expressed views are those of the authors alone. Readers should seek specific legal guidance before acting in any particular circumstance.