Corporate Crime Probes Will Ramp Up Under Biden

professed to being tough on white collar crime. Here's former Deputy Attorney General Rod Rosenstein in a speech at n y U Law School in Corporate enforcement is an important focus of our department's criminal work, as well as our civil work. Investigations of corporate fraud and corruption are essential to promote the rule of law. People who do business

in America need to know that our laws will be enforced. However, the prosecution of securities fraud, antitrust violations, and other such crimes dropped about thirty under President Trump as compared to President Obama, according to Syracuse University's Transactional Records Access Clearinghouse. My guest is Brandon Garrett, a professor Duke Law School, tell us about the prosecution of corporate crime and the

Trump administration as compared to prior administrations. Joining me is Duke University law professor Brandon Garrett tell us about the prosecution of white color crime during the Trump administration relatively speaking to prior administrations. Over the course of Obama administration, corporate prosecutions continued to rise in both number and their

size and significance. They had been doing that during the W. Bush administration, but after the financial crisis, there were just enormous number of cases of large ones to bring and corporate crime became a bigger and bigger priority at the Department of Justice. Tougher guidelines were and adopted, and that change was reflected in the multibillion dollar resolutions. The type of resolutions and moved from out of court settlements to

more in court settlements. We saw something really different when they change over to the Trump administration occurred in the first year. There are some legacy cases from the Obama administration that were large that were settled. So once those were settled, things became very quiet, very quickly. So there was an enormous drop and several penalties really through the present,

although just recently there's a JP. Morgan and the Goldman Stack settlement, which were large settlements, although they weren't much smaller than they could have been, and the changes were accompanied by changes in policy. It was the practice of the Department of Justice under the Trump administration to relax some of these rules. They highlighted how they did not want to pile on penalties, that they wanted to pursue

declinations and more leneal settlements of corporations more often. And it was largely reflected in the data that we see the places where there was more continuity in practice, where areas in which the Department of Justice really staffed up under Obama, those groups of lawyers kept doing what they were doing more so than others. The best example of that is in the foreign corrupt practices area, where there's

been someone more continuities between administrations. Is it from the top, does the Attorney General say this is what we want to do? Or is it because they put more resources in certain areas? And how does it work? Well, Many really important corporate cases are not brought at Main Justice. They are brought by the different use attorney's offices, and

in particular at the Southern District of New York. So who is the U S Attorney for the Southern District of New York really matters priorities from the tops also matter, and the Department of Justice has set a series of

guidelines for bringing corporate cases. They keep changing. Each administration has been changing those practices, and so it's usually not the Attorney General, but usually the Deputy Attorney General, the head of the Criminal Section, the head of the Criminal fraud Section, you know, fairly high up POJ leadership plays a big role in ending policies and corporate cases. And they also have tone, even if these aren't always cases that the Department of Justice itself is handling, but rather

one of the U S Attorney's offices. So when they say we don't want to see Philine on a fine, that sends a strong message to the news attorney's offices. In addition, the biggest companies tend to get a hearing at the highest levels of the Department of Justice. So the Use attorney mayweg and when you have a case US against the likes of a Wall Street bank, and they may weigh in and tell that the local use attorney you've gone too far, this fine is too big.

You know, regular people do not get that kind of a hearing normally in their criminal cases. It takes a lot of coordination to resolve major corporate cases. If you have the Attorney General and other higher ups that Department of Justice saying take it easy on corporation, then companies will know that there's no reason to set all the case until they get away in from the Attorney General.

In general, the Department of Justice has, as many have reported, become more politicized, and local use attorneys have been undermined by the Department of Justice, where the Attorney general wills have been sometimes an individual cases. There are always politics in these appointments, but do you see more of that during the Trump administration. There are serious concerns with firings of US attorneys under w. Bush, and we've seen much more of that. You know, we've also seen the reverse.

We've seen a failure to fill a lot of really important mid level positions at the Department of Justice, which has meant less confidence in the middle and a power vacuum and more of a role for the Attorney General. It also means that you have less competent and you have a hollowing out of the mid level positions. You're just not going to have the bureaucratic coordination and bandwidth

to resolve complicated cases. You know, you have corporations that can and do higher entire law firms to represent them, and when you have important unfilled positions at the d o J, you have corporations that are very well represented. And then on the prosecution side, you have no they're they're at the higher levels which are needed to finalize these complex multiparty deals. How is the prosecution of corporate crime likely to change in a Biden administration. There's a

life cycle to corporate frauds in general. When you have criminal acts conducted within an organization, negative information can stay concealed. The higher ups in some of these cases in the corporation may not know about the crimes. So if they have bad compliance, serious misconduct might stay varied within corporation.

And there hasn't been the same incentive for companies to invest in compliance during these Trump years when they know that enforcement, whether it's civil or criminal, it was not a priority, and so his conduct that was swept under the rug are not carefully investigated or not reported to the authorities may start to come out of the woodwork. And we've seen in the past that during an economic downturn, there all of a sudden comes to light wellfeasance as conduct.

There's already some reporting around fraud problematic applications for relief relating to COVID. The economy is suffering because of COVID, and when the economy suffers, there can be incentives for corporations to disguise how poorly their books are fairing. Nevertheless, it may take some time for that conduct to be investigated. I suspect that over the next several years some major

corporate investigation will come to life. There will also be more of an incentive for companies to self report to a Biden administration because they will be given credit for that. And you know, no company wants to be in the position of having been caught in the act without having

been cooperative, without having self reported. So more corporate climate come to the d o j's attention once it's clear that the d o J takes corporate clip seriously, and that was what was happening under the Obama administration, a more serious corporate climate approach. What kind of prosecutions might be the prior priorities of a Biden Justice Department. There are such a wide range of white color crimes, is

a priority to go after healthcare fraud. It is a priority to go after bank related froad securities products and to any public company is a priority to target environmental crimes, environmental disasters. Pharmaceutical companies have been prosecuted for un savory practices. Sure there will be investigations relating to efforts to profit from COVID test or vaccines. There was on savory conduct,

corn bribery, money laundering has been a big priority. They're just a host of priority areas that have been somewhat neglected in recent years. There's a lot of work for a lot of prosecutors to do, and a lot of that work also depends on investigations and referrals by administrative agencies like the SEC, like the Environmental Protection AGC, like Ocean so where you similarly had a following out of

enforcement at a range of administrative agencies. If enforcement of those agencies become small, robust pipelines to prosecutors will also be robust. That's Brandon Garrett of do Law School. Harvard can continue to consider race and its admissions decisions after a federal appeals court rule that the university isn't intentionally discriminating against Asian Americans and the policy doesn't violate the Constitution. But the case is not over yet, and the battle

over affirmative action continues in other courts. Joining me is Audrey Anderson, who heads the higher education practice at bass Baryan Sims. Audrey tell us the main points of the decision. While the First Circuit Court of Appeals upheld the District Court's finding that Harvard's affirmative action policy complies with the legal standards. So this is a victory for Harvard and being able to use race in considering applications to Harvard

College when it admits you. In making that finding, the court found that Harvard has a compelling interest in using race in terms of certain educational goals. It's trying to further in educating students. And it also found that Harvard's use of race is narrowly tailored to meeting those goals. Those are the two basic standards at the Supreme Court has set. The Court said that Harvard doesn't use quotas or engage in racial balancing. What does that mean and

what does Harvard do? What that goes to, June is the narrow tailoring. If a college university is going to use race, it has to do so in a way that is narrowly tailored to its goals. So that means that you can't just set a quota for any racial group and say we are going to admit x per cent of African American students or Hispanic students or white students.

The Court has said that you can use race as one factor among many in determining the students that will be admitted and trying to obtain a diverse students body. So what Harvard does is its admissions officers have access to information about the race of applicants if applicants choose to provide that information, and in giving applicants the overall rating, which is one factor that the admissions committee considers, the readers of applications can consider race. It's also possible in

the Harvard system. Harvard has a series of what they call tips for special considerations that applicants can be given for athletic ability or if they have a parent that works at Harvard or has donated a lot of money to Harvard. One of those tips is race, so you

can also get a tip for your racial background. So parents making large donations is actually recognized as part of the rating for the applicant Yeah, and the plane of your students for care admissions said that one of the reasons that Harvard system was unconstitutional or didn't meet the appropriate standards was that Harvard should be forced to give up some of those other tips and also give up

the use of rights. If Harvard gave up the tips for children of large donors, maybe it wouldn't have to consider race and it could still get a diverse skin body. And the court said that Harvard is allowed to pursue diversity with race conscious means and also pursue other educational goals, and it said that one of those goals can be to give special consideration to some children of large donors

in order to encourage donations to the college. According to the court's opinion, the share of admitted Asian American applicants co varies almost perfectly with the share of Asian American applicants, So the percentages are equal basically of those who are admitted in those who applied who are Asian Americans. So

what was the problem that the plaintiffs saw here? One problem that they saw was one of the ratings that applicants to Harvard get is called a personal ratings and the personal ratings for Asian American students were with certain statistical analyzes shown to be lower than for other students. So the plaintiffs argued that the only reason you would have a personal ratings that was lower for Asian American students would be based on stereotypes about Asian Americans that

were impermissible. They also complained about the fact that on what the plaintiffs like to call objective measures and the academic ratings that have to do with class ranking and performance on standardized tests, the Asian American students tended to do better. So the students who had high marks on those standards were admitted at lower rates than even white

students who scored at those same measures did. That that leads to people making arguments like, you know, if you get a really high score on the standardized test, you have to get even a higher score if you're Asian in order to get into Harvard. Now that's a very hard argument to make at Harvard, because Harvard can fill up its entering class many times over. The court pointed out that the plaintiffs hadn't presented a single Asian American

applicant who claimed Harvard discriminated against them. How could that be aren't those the plaintiffs in the case. So the plaintiff here, June is an association, Students for Fair Admission, and they did have members who were who are Asian Americans who put forward affidavits saying that they had applied to Harvard and not been admitted. They did not identify themselves,

and they did not come forward and give testimony. So courts have allowed associations like Students for Fare Admissions to have standing to bring a lawsuit on behalf of their members if they can show that they have a member who was harmed. So that you think about the N double A c P often steps forward and brings lawsuits on behalf of their members who are harmed by discrimination.

So Students for Fare Admissions would say, it's just like the N double A c P. Now, Harvard made an argument to say that the f f f A should not be allowed to bring this lawsuit because the court should have looked further to see if s f f A was really truly further in the interests of the

Asian American students it claimed to be representing. And that was a win for f f f A because the First Circuit examined that argument of Harvards and said, look a f f f A does not have to meet that special test that Harvard your arguing they need to meet. They've met the standards for associational standing and that they have shown that they have members who alleged that they have been harmed in this way, and they can go forward.

We are not going to dig below that and make them prove that their real purpose is to help Asian Americans. So the plaintiffs, the anti affirmative action groups Students for Fair Admissions, says the lawsuit is now on track to go up to the Supreme Court. Tell us about the group. F f f A is headed by Edward Blum and appears to be funded by Edward Blum, and he has brought other cases where Asian American students were not the plaintiffs, and it seems that his real goal here is just

to end affirmative action. So I don't know that Blum ever expected to win this case up until this point. I think that one's purpose here is to get the United States Supreme Court to overturn its current rulings that allow colleges and universities to use race as one factor

in admitting students. So what he has done is he has brought several suits across the country and is hoping that one of them will be accepted by the Supreme Court, and through that suit, the new membership of the Court knew since the last one of these cases was decided, will overturn the prior president and hold that colleges and universities may not use race as a factor in admitting students. The group has also brought a lawsuit against the University

of North Carolina. Will it help them if that verdict conflicts with the Harvard verdict? Exactly, You are exactly right. So the case against the University of North Carolina Chapel Hill is being tried right now in the Middle District of North Carolina, so it will be appealed. Whoever loses in the district court will appeal that case to the Fourth Circuit Court of Appeals. In the Fourth Circuit will

issue a ruling. The Supreme Court kind of standard for granting review in a case is when there is a split in authority between between the courts of appeals. However, the Supreme Court has shown an interest in granting review of cases where the courts of appeals have considered affirmative action in college admissions even when there is no split in authority. So the Supreme Court reviewed the Fisher case which was against the University of Texas at Austin. They

reviewed that case even without a split in authority. So the Court may choose to review this case from Harvard, even though right now there is no what an authority, but to kind of bolster his chances. Blum or s f f A has the case in North Carolina that's in trial right now. They also have two other cases, or at least one other case. They filed suit again against the University of Texas in Austin, and if that case is appeal, that will go to the Fifth Circuit.

And then there's a case that was originally filed by the United States against Yale University, and s f f A has recently filed a motion to be allowed to enter that case as a plaintiff against Yale. So Blum has four k or s f f A has four cases going on right now if it does go to the Supreme Court, just as Kennedy I believe was the

key to allowing affirmative action to continue. So how might this new more conservative Supreme Court look at a case on affirmative action, So June, there are actually four members of the current Court who have not had occasion to rule at Supreme Court justices on the question of race conscious college admissions programs. One of them is Justice Kagan. She was on the Court when the Court last considered um affirmative action in the Fisher case, but she refused herself.

We can expect that Justice Kagan will agree with Justices Bryer and so do Mayor and find that race can be used if the college proves they have a compelling interest and if it's narrowly tailor, so that gets you three votes. But then you have Justices Gorsuch, Kavanaugh, and Barritt that you don't know what they'll do. You have to expect that they're going to rule more in line with Chief Justice Roberts and the Justices Thomas and Alito.

The three of them, Roberts, Thomas, and Alito are all on the record as saying that they don't believe the Constitution s allows colleges and universities to use race in colleges missions. They do not believe that race can be used as a compelling interest. The colleges do not have a compelling interest in pursuing the educational benefits of a diverse student body. So, based on the other things we know about Corsach, Kavanaugh and Barrett, one would expect them

to join the views of Roberts, Thomas, and Eledo. However, let's say they agree with with with them on this, then you have to answer the question of wealth. The court has this precedence in Grutter the case from the University of Michigan from the early two thousand's and the Fisher case. So then if for sich, Kavanaugh and Barrett say, well, if this came to me in the first instance, I would say there is no compelling interests in using race

for the educational benefits of aversity. However, now I have to consider whether we are going to overrule the courts prior President the Trump administration joined the plaintiffs in the Harvard suit, and the Trump administration sued Yale. One of the highest profile actions by the Civil Rights Division during the Trump administration was that lawsuit against Yale. Will it change to the Biden administration? Change things? May? Might they drop that lawsuit against Yale? Is that why Blum wants

to join it. Maybe you got that exactly right. I'm the Biden administration could very well drop the lawsuit against Yale or try to find a way to settle it, except that Blum has now moved to become a poaintiff, And if the court allows f f F A to become a poaintiff in that Yale suit, it doesn't really matter what what the government does. I mean it earth,

but not nearly as much I will. I expect that the Biden administration UH Department of Justice will switch sides in these cases and support the use of affirmative action and college admissions. I think that they may have already said that. There was a guidance document that was put out during the Obama administration about ways that colleges and universities could, consistent with the constitution, use race in college

admissions and other actions. The Trump administration revoked that guidance, and I'm pretty sure that the Biden administration has said that one of the actions is going to take is to put that guidence back in place. So that's a really good marker of what they will do UM once there in place. But if f f F A UM is allowed to be a plaint if in the Yale case,

it doesn't really matter. You will have to fight against the private point of than for being in the Bloomberg Last Show, Audrey, that's Audrey Anderson, who has the higher education practice at Bassbarian SIMS. And that's it for the sedition of the Bloomberg Law Show. I'm June Grasso. Thanks so much for listening. Remember you can always get the latest legal news on our Bloomberg Law Podcast. You can find them on iTunes, SoundCloud, or at www dot bloomberg

dot com slash podcast Slash Law. Thanks so much for listening, and please tune into the Bloomberg Laws Show every evening at ten pm Eastern right here on Bloomberg Radio.