Justice Dept. Shifts on New Fraud Prosecutor

The Justice Department is apparently changing course on its recently announced new assistant attorney general for fraud investigations, telling Congress that the person holding the job will report to the deputy attorney general’s office — not directly to the White House, as the White House had previously said.

According to an article published Wednesday afternoon in Bloomberg, Justice Department officials sent a revamped org chart to House budget appropriators on Jan. 16. That chart depicted the assistant attorney general for fraud (whomever that person might be; President Trump hasn’t nominated anybody yet) as working within the Justice Department and reporting to deputy attorney general Todd Blanche. That’s the traditional reporting relationship for the 11 “AAGs” the Justice Department is allowed to have under federal law.

That reporting relationship is also fundamentally different from what Vice President J.D. Vance described when he first announced the fraud AAG two weeks ago. Vance expressly said this person would report directly to him and President Trump, a radical break from Justice Department norms.

Vance’s words immediately fueled fears that Trump would use the new prosecutor — and his or her wide purview, since “fraud targeting government programs” could encompass all sorts of personal and corporate conduct — as a vehicle for weaponized enforcement against Trump’s political enemies. (To that point, Vance said the fraud AAG’s first mission would be to prosecute welfare fraud cases in Minnesota, where Trump is currently picking fights with Democrats and dark-skinned immigrants.)

Anyway, on paper at least, now the Justice Department seems to be backing away from that specter of vindictive and weaponized enforcement. Then again, neither the Justice Department nor the White House have made any comment on this supposed retreat — and even if they did, why should anyone believe a word they say? If Trump wants this new fraud AAG to target his political enemies, he can just as easily make that request through Blanche or attorney general Pam Bondi. It’s not like they’ll say no, or even care about the ethical impropriety involved.

There’s Still a Fraud Section

To make matters even more confusing for corporate compliance and legal teams, the Justice Department still has a Fraud Section within the Criminal Division. They’re the folks who typically enforce the Foreign Corrupt Practices Act, the False Claims Act, and other criminal statutes important to corporations — including criminal schemes to defraud government programs.

According to other press reports, those prosecutors in the Fraud Section have been told their office and staff will “remain entirely intact.” So if the Fraud Section is still doing its thing, what is this new AAG for fraud supposed to do?

Leave you confused, certainly. The rest is unclear.

Another important detail here is whether this new Fraud Enforcement Division will follow the same corporate enforcement policy principles adopted by the Criminal Division, home to the Fraud Section.

The Corporate Enforcement Policy, as you might recall, virtually guarantees a declination to prosecute if an organization voluntarily self-discloses, cooperates in the ensuing investigation, and remediates the underlying control weaknesses. The guaranteed declination part was announced by this very Trump 2.0 Administration last year. There’s even a flowchart!

Except, technically speaking, the Corporate Enforcement Policy is a policy adopted by the Criminal Division. So in theory, this newfangled, co-equal Fraud Enforcement Division could decide it’s going to follow its own policy, whatever that might be.

(I’m not even sure I understand all this correctly, but then again, the Justice Department has never proposed an idea as hare-brained as this. If anyone has any insights they’d care to share, you can email me at [email protected] or reach me securely on Signal at RadicalCompliance.16)

So while I don’t doubt the accuracy of Bloomberg’s story, it still leaves compliance and legal teams stuck with the fundamental rules of the Trump 2.0 Administration: Nobody knows anything, and none of this might come to pass.