In recent remarks on successive days, Department of Justice (DOJ) Deputy Attorney General Lisa Monaco and DOJ Assistant Attorney General Kenneth Polite announced significant changes to the DOJ's corporate criminal enforcement policies. These changes, announced first by Monaco on September 15, 2022, are “a mix of incentives and deterrence” designed to speed up investigations and establish additional rules and guidelines for companies facing investigation by the DOJ.1 Monaco touted these changes as “giving general counsels and chief compliance officers the tools they need to make a business case for responsible corporate behavior.” Polite delivered similar remarks the next day, providing additional information about the significant changes Monaco announced.2 Under these new policy changes, the DOJ plans to “do more and move faster” in response to corporate crime.
Chief among the changes are the following:
- Cooperating Companies Need to Speed Up: Companies will be expected to disclose important evidence more quickly—especially evidence relating to individual wrongdoers. Delayed disclosure will result in reduction or complete denial of cooperation credit.
- The DOJ's Evaluation of Prior Misconduct: When evaluating a company's past misconduct, the DOJ will focus most heavily on any recent criminal resolutions. Older conduct—more than ten years old for criminal resolutions and more than five years old for civil and regulatory issues—will carry less weight. In addition, the DOJ will now disfavor multiple, successive deferred-prosecution (DPAs) and/or non-prosecution agreements (NPAs) with the same company.
- Empowering Companies to “Do the Right Thing”: All the DOJ divisions that prosecute corporate criminal activity will now have voluntary self-disclosure programs. Those programs must follow common principles, including avoiding guilty pleas for companies that voluntarily self-disclose, cooperate with the DOJ, and remediate misconduct.
- Compensation Counts: When evaluating the strength of a company's compliance program, the DOJ will consider whether a company's compensation system imposes sanctions for misconduct—such as clawback provisions and the escrowing of compensation. The DOJ will “evaluate what companies say and what they do.”
- Monitor the Monitors: The DOJ is implementing new measures to increase transparency and consistency in corporate monitorships, including guidance for prosecutors on how to identify a need for a corporate monitor, select a monitor, and oversee a monitor's work.
The changes to the DOJ's corporate enforcement policy—described in detail below—strengthen and clarify DOJ policy initiatives announced by Monaco, Polite, and Attorney General Merrick Garland over the past year.3 Those initiatives include a requirement that companies seeking cooperation credit from the DOJ provide information on all individuals involved in the misconduct at issue, not just those “substantially involved,” as was the standard under the previous administration.
In Monaco's October 2021 speech, she promised that the changes she announced were “only the first steps” of a more aggressive approach to the investigation and prosecution of companies and the individuals who work for those companies.
SIGNIFICANT CHANGES TO DOJ CORPORATE ENFORCEMENT POLICIES
In Monaco's remarks, she first reiterated that individual accountability remains the DOJ's top priority, stating that “[w]hether wrongdoers are on the trading floor or in the C-suite, we will hold those who break the law accountable.” But there has been an overall decline in corporate criminal prosecutions in the last decade, which Monaco ascribed to temporal hurdles and other impediments prosecutors face.4 One way the DOJ intends to “do more and move faster” is to require cooperating companies to come forward with “important evidence”—particularly facts showing individual culpability—more quickly. Monaco noted that some companies delay disclosure of such information while conducting their own internal investigations or mitigating damage, but such efforts may now present other risks to cooperating companies. Specifically, Monaco stated that, “[g]oing forward, undue or intentional delay in producing information or documents—particularly those that show individual culpability—will result in the reduction or denial of cooperation credit.” This new requirement operates in addition to the existing requirement to provide all relevant, non-privileged information about individual misconduct. Monaco did not make clear how the DOJ will determine what constitutes “undue and intentional delay.” But she noted that the “first reaction” of a company discovering relevant documents or evidence should be to notify prosecutors. This suggests companies will have limited time to act in order to avoid reduction or denial of cooperation credit. Companies should therefore consider timely disclosure obligations carefully when deciding how to address newly discovered misconduct or newly discovered evidence in an existing matter.
Second, Monaco returned to one of the key changes announced last year—the DOJ's commitment to considering a company's full criminal, civil, and regulatory record when resolving a case. Under the new policy, the DOJ will give the greatest weight to criminal resolutions in the United States and misconduct by the same personnel or management. But, because past actions may not reflect a company's current culture, criminal resolutions more than ten years old and civil or regulatory resolutions more than five years old will carry less weight than more recent resolutions. Finally, prosecutors will also “consider the nature and circumstances of the prior misconduct,” including facts indicating weaknesses in the compliance culture and whether a company's misconduct makes it an outlier amongst its peers in highly regulated industries.
Significantly, Monaco stated that the DOJ did not want to discourage acquisitions resulting in reformed and improved compliance structures. Thus, where a company with compliance problems is acquired by a company with a proven record of compliance, the DOJ will not treat the post-merger company as a “recidivist” if the compliance problems are “promptly and properly addressed post-acquisition.”
Monaco also had a strong message for repeat offenders hoping for a non-prosecution agreement (NPA) or a deferred-prosecution agreement (DPA): companies cannot “assume that they are entitled to an NPA or DPA, particularly when they are frequent flyers.” Instead, the DOJ will now disfavor multiple, successive NPAs or DPAs with the same company. Monaco stressed the DOJ's willingness to bring charges and require guilty pleas, saying, “If any corporation still thinks criminal resolutions can be priced in as the cost of doing business, we have a message—times have changed.”
Third, Monaco reiterated the DOJ's commitment to incentivizing voluntary self-disclosure and its goal of “rewarding companies whose historical investments in compliance enable voluntary self-disclosure.” Recognizing the success of such programs in certain parts of the DOJ—for example, the Criminal Division's program for disclosures of FCPA violations—Monaco announced that every DOJ division that prosecutes corporate crime will have a formal policy that rewards voluntary self-disclosure. The policies must clearly explain what constitutes self-disclosure and identify the “concrete benefits” of self-disclosure. All DOJ voluntary self-disclosure policies must also follow common principles. Most importantly, the DOJ will not seek guilty pleas or require an independent compliance monitor for companies that voluntarily self-disclose, cooperate, and remediate misconduct. In short, the DOJ will “expect good companies to step up and own up to misconduct.”
There is some tension between the DOJ's voluntary self-disclosure policies and its new NPA/DPA policy—specifically, that a company with a history of misconduct might be ineligible for declination, and therefore has little incentive to voluntarily self-disclose. Recognizing this tension, Polite clarified in his remarks that prior misconduct will not “necessarily mean an automatic guilty plea” absent other aggravating factors like “deeply pervasive conduct” or misconduct raising a threat to national security. Polite further announced that the Criminal Division will consider other aggravating factors, including executive management involvement in the misconduct, “significant profit to the company from the misconduct, [and] pervasive or egregious misconduct.” Thus, even with a history of misconduct, as long as these aggravating factors are not present, a company that cooperates, expeditiously remediates the misconduct, and makes a timely, voluntary self-disclosure may still earn a DPA. Given the DOJ's broader assessment of prior misconduct, companies with significant histories of prior misconduct should note Polite's message and carefully consider all of the other avenues for cooperation and timely self-disclosure to maximize their chances of earning a DPA. Companies should also ensure that their formal, documented compliance policies incentivize voluntary self-disclosure and consider whether their compliance programs have any weaknesses that mirror past misconduct.
Fourth, Monaco explained that the DOJ will look favorably on compensation plans that reward compliance and penalize misconduct. Monaco specifically mentioned financial sanctions, such as compensation clawbacks, for employees “whose direct or supervisory actions or omissions contributed to criminal conduct.” But she noted the DOJ would evaluate not only “what companies say [but also] what they do, including whether, after learning of misconduct, a company actually claws back compensation or otherwise imposes financial penalties.” By the end of the year, the Criminal Division will develop guidance on just how to weigh such compensation plans in corporate criminal investigations. The DOJ”s message is clear; the companies without such compensation plans will be viewed less favorably when DOJ makes resolution decisions.
Fifth, Monaco described the DOJ's efforts to make corporate monitorships more transparent and less confusing. By the end of the year, the DOJ will provide new guidance to prosecutors on recognizing the need for a corporate monitor, selecting a monitor, and overseeing the monitor.
Perhaps the most important message Monaco had for companies is this one: “[W]e're not done.” For instance, Polite raised two points of future Criminal Division focus. First, the DOJ is considering best practices guidance for companies using personal devices and third-party messaging systems, particularly those with ephemeral messaging options. Second, the Criminal Division is looking for ways to shift the burden of corporate financial penalties away from shareholders onto those directly responsible. Monaco hinted at future enhancements to debarment and suspension programs, as well as the DOJ's plan to ask Congress for $200 million for increased resources for corporate criminal enforcement. According to Monico and Polite, the DOJ is significantly increasing its focus on corporate crime and “won't accept business as usual.”
1 Press Release, DOJ, Deputy Attorney General Lisa O. Monaco Delivers Remarks on Corporate Criminal Enforcement (Sept. 15, 2022), https://www.justice.gov/opa/speech/deputy-attorney-general-lisa-o-monaco-delivers-remarks-corporate-criminal-enforcement.
2 Press Release, DOJ, Assistant Attorney General Kenneth A. Polite Delivers Remarks at the University of Texas Law School (Sept. 16, 2022), https://www.justice.gov/opa/speech/assistant-attorney-general-kenneth-polite-delivers-remarks-university-texas-law-school.
3 See DOJ Announces Major Changes in Corporate Enforcement Policies,” Oct. 29, 2021, https://www.winston.com/en/thought-leadership/doj-announces-major-changes-in-corporate-enforcement-policies.html; AAG Polite Warns of Rigorous DOJ Scrutiny, Urging Companies to Beef up Compliance Programs,” Dec. 16, 2021, https://www.winston.com/en/investigations-enforcement-and-compliance-alerts/aag-polite-warns-of-rigorous-doj-scrutiny-urging-companies-to-beef-up-compliance-programs.html; DOJ's Initiatives for Ramping Up White Collar Enforcement Reveal Focal Points for Reducing Corporate Risk,” Mar. 23, 2022, https://www.winston.com/en/investigations-enforcement-and-compliance-alerts/dojs-initiatives-for-ramping-up-white-collar-enforcement-reveal-focal-points-for-reducing-corporate-risk.html.
4 Monaco's statements on turning around the decline in corporate prosecutions echo Garland's comments earlier this year that the DOJ's interest in prosecuting corporate crime was “waxing again.” Garland also announced the DOJ's intention to increase the accountability of individuals, increase resources, and expand the DOJ's use of data analytics.
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