United States: Department Of Justice Official Provides Fresh Guidance On What Constitutes An Effective Corporate Compliance Program

When can a corporation's compliance program help stave off indictment? Or at least secure it more lenient treatment from the Department of Justice when resolving a case? DOJ has given fresh guidance on this issue for our clients, signaling what we see as a new emphasis in evaluating corporate compliance. That guidance came in October 7, 2014 remarks by Marshall L. Miller, the Criminal Division's Principal Deputy Assistant Attorney General (PDAAG)1

DOJ bases its corporate charging and resolution decisions on the Principles of Federal Prosecution in the U.S. Attorneys' Manual, and specifically on the nine so-called Filip factors the Manual lists. Filip factor 5 advises companies that DOJ considers "the existence and effectiveness of the corporation's pre-existing compliance program" in evaluating whether to indict a company or give it a break in a resolution. And the Manual has long warned that "prosecutors may consider whether the corporation has established corporate governance mechanisms that can effectively detect and prevent misconduct." USAM 9-28.800. But there was little formal indication of what things DOJ deems most critical in assessing corporate compliance programs when making charging decisions. Until now.

The most effective corporate compliance programs, according to the PDAAG, are those that have procedures designed to (1) "uncover wrongdoing" and (2) "expose individuals responsible for criminal behavior." The PDAAG makes no bones about it: a company's "ability to use compliance to uncover misconduct and, just as importantly, identify wrongdoers is central to [DOJ's] evaluation of a compliance program." Viewing a program's effectiveness through the lens of how well its procedures find and cough up culpable individuals may not surprise those watching the changes in DOJ's approach under the new Criminal Division head, Assistant Attorney General Leslie Caldwell. And the PDAAG's comments are consistent with his recent comments that full credit under Filip factor 4 ("the corporation's willingness to cooperate in the investigation of its agents") will be forthcoming only to companies that make their own "extensive efforts to secure evidence of individual culpability the first thing" they discuss when meeting with DOJ and also "the last thing."2 Companies "will pay a price when they ask for cooperation credit" under Filip factor 4 if they conduct investigations "that serve to spread corporate talking points rather than secure facts relating to individual culpability."3

So for all practical purposes, Filip factors 4 and 5 are two sides of the same coin, at least under DOJ's recently stated views about what is primary or central to its analysis. A company will get full cooperation credit only if it turns over the culpable individuals and its compliance program will be considered effective only if it has mechanisms that allow for the identification of those culpable individuals. In contrast, the PDAAG noted the example of two banks that "actively hampered the Department's efforts to prosecute the responsible individual executives and employees" and, as a result, paid the "historic price" of "parent-level guilty pleas and multi-billion dollar penalties."4

The PDAAG summed up DOJ's outlook concisely: a "compliance program's ability to uncover wrongdoing and the responsible individuals, coupled with a corporation's decision to disclose that information to the government, is significant in our evaluation of the compliance program and the company's overall posture with the government."5

Mr. Miller also usefully highlighted some of the key hallmarks of an effective compliance program and described what DOJ considers "a few primary strengths and weaknesses" it has observed in such programs.6 Some key hallmarks he emphasized are:

  • High-level commitment. In addition to "widespread prophylactic and training mechanisms," effective compliance programs "need to have appropriate stature within corporations." That means sufficient resources as well as "teeth and respect." The program must be "more than a pile of papers or an entry on a website." One sign DOJ looks for is whether "compliance executives sitting in true positions of authority at a corporation" are "reporting directly to independent monitoring bodies like internal audit committees or boards."
  • Scaling up. A major weakness DOJ has noted is "the failure to expand compliance programs to meet the needs of growing corporations—particularly global corporations." An effective program not only "grows with the company" after iterative risk reassessment, but also manages to "bridge the geographic divides and cultural gaps exposed by global corporate expansion." It will do a global company no good to create a "culture of compliance" if it fails to ensure it "extend[s] beyond U.S. borders."
  • Fair discipline and enforcement. Compliance must be incentivized and violations disciplined. But the company's disciplinary "response must be even-handed." That means it will not satisfy DOJ if a company fires "low-level employees who implemented bad conduct" but leaves "without sanction" the "bosses[] who did nothing to stop the conduct—and may even have directed it."

CONCLUSION

Mr. Miller's comments are a timely reminder of the importance of having an effective compliance program that is up-to-date and fully implemented, as well as the dire consequences of failing to maintain such a program.

His remarks provide a transparent and unequivocal warning to companies that they disregard the DOJ guidance on compliance programs at their peril.

Footnotes

1 Remarks by Principal Deputy Assistant Attorney General for the Criminal Division Marshall L. Miller at the Advanced Compliance and Ethics Workshop in New York sponsored by the Practising Law Institute on October 7, 2014 ("October 7 speech").

2 Remarks by Principal Deputy Assistant Attorney General for the Criminal Division Marshall L. Miller at the Global Investigation Review Program in New York on September 17, 2014 ("September 17 speech").

3 September 17 speech.

4 October 7 speech.

5 October 7 speech.

6 In the October 7 speech, the PDAAG referred to the section entitled "Hallmarks of Effective Compliance Programs" in the Foreign Corrupt Practices Act Resource Guide published by the DOJ and SEC in 2012 and noted that its principles "apply universally."

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.

Authors
Eugene Illovsky
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
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
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.

Disclaimer

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.

General

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