On September 15, 2022, Deputy Attorney General Lisa O. Monaco of the Department of Justice (DOJ) delivered a speech at New York University addressing new guidance on corporate criminal enforcement. Her speech made it clear that DOJ is prioritizing investigations and prosecutions against corporate entities. DOJ's approach in this area is fundamentally grounded in individual accountability and corporate responsibility. Building off those ideas, the new guidance provides for: (1) increased focus on individual liability; (2) consideration of the full criminal, civil and regulatory record of any company when deciding the appropriate resolution; (3) expanding voluntarily self-disclosure programs across DOJ; and (4) the consideration of compensation systems that reward or deter compliance when evaluating the strength of a company's compliance program. Monaco also announced increased transparency and consistency by DOJ when determining issues related to monitors. DOJ intends these policies to communicate to corporate entities that it is "not accepting business as usual" and that personal liability and the specifics of a corporation's cooperation and integration of compliance programs will be heavily scrutinized in criminal corporate prosecutions.
Individuals who engage in corporate crime and profit from it are DOJ's top priority. However, according to DOJ, these efforts have lagged due to companies' failure to timely bring key information to DOJ. As a result, DOJ will now "require cooperating companies to come forward with important evidence more quickly." This means that companies may no longer "elect-for strategic reasons-to delay the disclosure of critical documents or information while they consider how to mitigate damage or investigate" internally because these delays imped investigations into individual actors. Accordingly:
Going 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. Gamesmanship with disclosures and productions will not be tolerated. [Emphasis added.]
Monaco explained that "[i]f a cooperating company discovers hot documents or evidence, its first reaction should be to notify the prosecutors." Now, in order to receive any cooperation credit, companies must disclose all relevant, nonprivileged facts about individual misconduct in a timely manner upon discovery.
Deputy Attorney General Monaco provided additional guidance to DOJ's prior directive to prosecutors requiring them to assess "the full criminal, civil and regulatory record of any company when deciding the appropriate resolution." After hearing commentary on issues related to contextualizing prior misconduct in order to develop a full and fair picture, DOJ determined that:
- Not all instances of prior misconduct are created equal, and criminal resolutions in the United States and those involving prior wrongdoing with the same personnel or management are the most significant;
- More dated conduct will generally be given less weight because it does not always reflect the company's current compliance;
- Consideration will be given to the nature and circumstances of the prior misconduct, including, but not limited to, whether it shares the same root cause or happened under the same management team or leadership as the prior misconduct;
- Companies with a history of compliance problems that are then acquired by a company with a proven track record of compliance will not be subject to the prior misconduct of the pre-acquired company if the problems were promptly and properly addressed post-acquisition; and
- Successive nonprosecution or deferred prosecution agreements with the same company are disfavored and any proposed offer for a successive nonprosecution or deferred prosecution agreement will be scrutinized by DOJ leadership.
Following these guidelines, Monaco made clear: "If any corporation still thinks criminal resolutions can be priced in as the cost of doing business, we have a message-times have changed."
Voluntary Self-Disclosures Programs Across Departments
Companies with strong and long-invested compliance programs who can detect misconduct and bring it to the government will be rewarded across DOJ?no longer restricted to certain programs and departments. DOJ hopes that by rewarding such companies, other companies will be incentivized to make the same investments going forward. Every department will be responsible for drafting formal policy; however each must include two common principles: (1) that DOJ will not seek a guilty plea from the company when it has voluntarily self-disclosed, cooperated and remediated misconduct, absent aggravating factors; and (2) that DOJ will not require an independent compliance monitor for companies that voluntarily self-disclose and have implemented and tested an effective compliance program before resolution. Monaco pointed to recent cases to highlight the benefit of voluntary disclosures, noting that near-future resolutions will only "reaffirm how much better companies fare when they come forward and self-disclose."
Compensation Systems Rewarding Compliance
Deputy Attorney General Monaco acknowledged "the difficult decisions and trade-offs companies face about how to invest corporate resources, structure compliance programs and foster the right corporate culture." However, she emphasized the importance of a strong company culture, especially one where compliance is integrated into the fold and "wrong-doing is rejected for the sake of profit." Therefore, to promote such a culture within companies, DOJ will now consider whether "compensation systems reward compliance and impose financial sanctions" on any member of the company for criminal acts when evaluating the strength of a company's compliance program. According to DOJ, compensation systems that "clearly and effectively impose financial penalties for misconduct can deter risky behavior and foster a culture of compliance" and those that use affirmative metrics and benchmarks to reward compliance-promoting behavior practically infuse compliance into the company culture.
Independent Compliance Monitors
In response to calls for more transparency regarding compliance monitors, DOJ released guidance on these issues. These guidelines provide insight on what to consider when deciding whether a monitor is needed, how to select one and how to best oversee the monitor's work. Further, selecting a monitor will be dictated by a documented selection process and will be tailored to the misconduct and related compliance problems. DOJ recognized its obligations to stay involved and invested with the monitor so that they stay on task and on budget.
DOJ is sharpening its enforcement tools with a hope that companies will invest resources and attention on building comprehensive and effective compliance programs that are intertwined with the company's culture. These new policies underline the benefit of such programs and the consequences companies without them will face if under investigation or seeking resolution with the government.
For More Information
If you have any questions about this Alert, please contact Frederick R. Ball, Eric R. Breslin, Brittany Pagnotta, any of the attorneys in our White-Collar Criminal Defense, Corporate Investigations and Regulatory Compliance Group or the attorney in the firm with whom you are regularly in contact.
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