United States: Pay Attention To The Man Behind The Curtain: DOJ Memorandum Adds Further Weight To CPSC Enforcement Efforts Against Corporate Officers

Last Updated: October 9 2015
Article by Erin M. Bosman, Julie Y. Park and Austin Marsh

The United States Department of Justice (DOJ) recently issued a memorandum to various enforcement agencies. The memorandum, available here, focuses on holding individuals accountable for corporate fraud and misconduct.1 The DOJ has already shown it means business. Just days after the memorandum was published, a former corporate executive was sentenced to an unprecedented 28 years in prison for his role in knowingly shipping salmonella-tainted food products in 2008.2

Coupled with the Consumer Product Safety Commission's (CPSC) increased enforcement efforts—evidenced by growing civil penalties3 and a wave of lawsuits directed at corporations4—this new DOJ edict gives CPSC another leg to stand on when dealing with manufacturers, distributors, and retailers alike. As the DOJ and CPSC take steps to delve behind the corporate façade and hold individuals both criminally and civilly liable for their transgressions, corporate actors should take note of the possibility of harsh monetary penalties or, worse, time behind bars.

The DOJ guidance, which applies to civil and criminal proceedings, encourages corporations to essentially self-report individual misconduct by offering corporate "cooperation credit." This generally means mitigated punishment for corporations that cooperate in investigations or judicial proceedings. Such "cooperation credit" is conditioned on full disclosure of individual actors' wrongdoings. Specifically, the DOJ memorandum states that for a corporation to be eligible to receive any cooperation credit, the company "must completely disclose . . . all relevant facts about individual misconduct." Only after meeting this requirement will the corporation be eligible for cooperation credit.5

CPSC already has self-reporting requirements under the Consumer Product Safety Act (CPSA) that require manufacturers, distributors, and retailers to "immediately inform" CPSC of any potential substantial product safety hazard or unreasonable risks of serious injury associated with their products. 15 U.S.C. § 2064. In addition to these reporting requirements placed on corporations, the DOJ guidance may motivate CPSC to more closely monitor the actions of individuals behind the shroud of the corporate cloak.

The DOJ guidance also encourages attorneys handling separate civil and criminal aspects of corporate investigations to routinely communicate with one another and focus on individual actors "from the inception of the investigation." The guidance further redirects civil attorneys to police corporate fraud rather than focus on damages and to do so by considering individual actors, not just the company, when determining whether or not to file suit. Factors to consider include, "whether the person's misconduct was serious, whether it is actionable, whether the admissible evidence will probably be sufficient to obtain and sustain a judgment, and whether pursuing the action reflects an important federal interest." The guidance admits that these broader considerations may not, "in the short term," provide a monetary return on enforcement investments. However, the DOJ believes this aggressive stance will ultimately "minimize corporate fraud, and, over the course of time, minimize losses to the public fisc through fraud."

For those within CPSC's crosshairs during an investigation or judicial proceeding, this may mean (1) more pointed inquiries concerning individual actions related to corporate malfeasance; (2) increased civil penalties for individual wrongdoings; (3) personal liability—civil and criminal—for individuals linked to corporate cover-ups or other offenses; and (4) more concerted suits brought by DOJ and CPSC. Indeed, the CPSA already provides for civil and criminal penalties against individuals. Even before these DOJ guidelines were published, CPSC had brought actions to hold executive level employees individually responsible for their actions under the corporate officer doctrine.6

Finally, the DOJ guidance states that, generally, corporate resolution of a dispute will not provide protection, civilly or criminally, for individual actors. Furthermore, corporate cases should not be resolved absent a "clear plan to resolve related individual cases" and delays related to corporate resolutions should not holdup the government's ability to pursue claims against individual actors. In fact, the DOJ guidance instructs that if no individuals are prosecuted at the conclusion of an investigation, "the reasons for [not bringing individual claims] must be memorialized and approved by the United States Attorney or Assistant Attorney General whose office handled the investigation, or their designees."

This rigid requirement illustrates the DOJ's expectation that a typical corporate investigation would yield enough evidence to bring claims against individual corporate actors. Although at this stage it is unclear how these directives will play out, corporate actors should be aware of the potential implications. Corporate actors looking to avoid individual liability should take care to become knowledgeable about legal requirements for their positions and not expect the corporate umbrella to shield them from liability incurred by their own actions.


1 Although the measures discussed in the DOJ memorandum are not operative law, they are offered to "guide attorneys for the government in accordance with their statutory responsibilities and federal law."

2 See McKay, R. (Sept. 21, 2015) "Former peanut company CEO sentenced to 28 years for salmonella outbreak," Reuters, available at http://www.reuters.com/article/2015/09/22/us-usa-georgia-salmonella-idUSKCN0RL24H20150922.

3 See "CPSC Penalties to Increase Beyond 'Cost of Doing Business,'" Morrison & Foerster Client Alert, March 3, 2015, available at http://www.mofo.com/~/media/Files/Articles/2015/03/150327CPSCCivilPenaltyTrendContinues.pdf; and "CPSC Imposed Record-High Penalties in 2014," Morrison & Foerster Client Alert, Nov. 11, 2014, available at http://www.mofo.com/~/media/Files/ClientAlert/2014/11/141111CPSCImposesRecordHighPenaltiesin2014.pdf.

4 See "Recall, Enforce, Repeat! CPSC and DOJ Team Up for Another Enforcement Action," Morrison & Foerster Client Alert, June 22, 2015, available at http://www.mofo.com/~/media/Files/ClientAlert/2015/06/150622CPSCandDOJ.pdf.

5 The extent of the cooperation credit granted will still depend on traditional factors such as timeliness of cooperation, proactive nature of the corporation's actions, and the diligence, thoroughness, and speed of the company's internal investigation.

6 See "CPSC Seeks to Hold Former CEO Responsible for Buckyballs® Recall," Morrison & Foerster Client Alert, May 9, 2013, available at http://media.mofo.com/files/Uploads/Images/130509-CPSC-Buckyballs.pdf.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Erin M. Bosman
Julie Y. Park
Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions