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The Department of Justice (DOJ) Criminal Division is casting a wider net to try to encourage companies to self-report criminal conduct and cooperate with DOJ investigations. A recent revision to Criminal Division policies presents new opportunities for companies whose conduct may have made them ineligible for previous leniency programs to receive more favorable outcomes from the Criminal Division. 

The Criminal Division’s Corporate Enforcement Policy (CEP) guides the use of discretion by DOJ prosecutors in charging and resolving violations of federal criminal law, such as the Foreign Corrupt Practices Act. The CEP had provided for favorable resolution or even declination, where companies voluntarily self-disclosed misconduct to the Criminal Division, cooperated with the DOJ’s investigation, and took remedial steps to resolve and prevent the criminal conduct. In fact, under the previous CEP, there was a presumption that DOJ would decline to prosecute if a company voluntarily self-disclosed, fully cooperated, and timely and appropriately remediated. But there was no presumption of declination where “aggravating circumstances” were present. Aggravating circumstances could include involvement by an executive in the misconduct, recidivism, or significant profit to the company.

Under the recently revised CEP, however, the Criminal Division will offer incentives to companies that may not have qualified for declination or a favorable resolution in the past. Under the prior policies, where aggravating factors were present, companies may have considered self-disclosure and determined that disclosing to the DOJ was not worth the risk. This is true, for example, where a company may have prior violations of the law and would be considered a recidivist and ineligible for declination or substantial leniency. Under the revised CEP, however, even companies with aggravating factors, like recidivism, may be eligible for declinations. Similarly, the revised CEP encourages companies to cooperate with the DOJ even where those companies do not self-report, by recommending a significant reduction in a guidelines calculation when companies provide extraordinary and timely cooperation and appropriately remediate their conduct.

The revamped Corporate Enforcement Policy was announced on January 17, 2023 by Assistant Attorney General (AAG) Kenneth Polite, and provides greater incentives for companies to report their own misconduct to federal prosecutors and cooperate in DOJ investigations in return for possible declination and large discounts on potential fines. In late 2022, Deputy Attorney General Lisa Monaco had directed the DOJ take a tougher stance in enforcing corporate crime and bolster the DOJ’s voluntary self-disclosure policies. In revising and strengthening its CEP, the Criminal Division answered that call.

The revised CEP continues the Criminal Division’s long-standing focus on the touchstones of voluntary self-disclosure, cooperation, and remediation.

Overview of CEP Revisions

On January 17, 2023, AAG Polite, outlined the new policies during a speech at Georgetown University Law Center. The Criminal Division enhanced incentives for companies to cooperate by committing to recommend as much as a 75% reduction in fines for companies depending on their (a) voluntary self-disclosure, (b) cooperation, and (c) remediation of the corporate misconduct. The CEP explicitly defines those three (3) phrases:

Voluntary Self-Disclosure: Disclosure must be made to the Criminal Division; there must be no preexisting obligation to disclose the misconduct; disclosure occurs prior to an imminent threat of disclosure or government investigation; misconduct disclosed within a reasonable time; and all relevant facts disclosed.

Full Cooperation: Timely disclosure of all non-privileged facts relevant to the wrongdoing at issue; proactive cooperation; timely voluntary preservation, collection, and disclosure of relevant documents and information; de-confliction of internal investigation with the Criminal Division’s investigation; and making company officials and employees with relevant information available for interviews by the Criminal Division.

Timely and Appropriate Remediation: Thorough analysis of causes of underlying conduct; implementation of effective compliance and ethics program; appropriate discipline of employees; appropriate retention of business records and prohibition of improper destruction of business records; and any additional steps that demonstrate recognition of seriousness of company’s misconduct.

The revised CEP also arms federal prosecutors with a greater range of options to distinguish among companies that commit corporate crimes and their varying levels of disclosures, cooperation, and remediation. The DOJ recognized that where aggravating factors (such as a past violation of the law) were present, companies may not have been incentivized to disclose. Likewise, where companies had not self-disclosed because, for example, a whistleblower approached the government before management was made aware of the issues, companies, may not have seem extraordinary cooperation as beneficial.

According to the Criminal Division, the revised CEP seeks to address those issues by providing incentives to companies to cooperate and remediate, even where aggravating factors are present or voluntary disclosure did not occur.

If aggravating factors, such as prior criminal conduct, are present, a company may still receive a declination.

Even if aggravating circumstances are present, prosecutors may offer declination if the company can demonstrate the following three (3) factors:

  • The voluntary self-disclosure was made immediately upon the company becoming aware of the allegation of misconduct;
  • At the time of the misconduct and at the time of the disclosure, the company had an effective compliance program and system of internal accounting controls that enabled the identification of the misconduct and led to the company’s voluntary self-disclosure; and
  • The company provided extraordinary cooperation with the Criminal Division’s investigation and undertook extraordinary remediation.

These factors go beyond the long-standing touchstones of disclosure, cooperation, and remediation. Instead, to receive a declination in the presence of aggravating factors, a company must not merely self-disclose, but immediately self-disclose. It must not merely provide full cooperation, but extraordinary cooperation. And, it must not merely remediate the issue; it must demonstrate that it had at the time, and continues to have, a compliance program to detect the wrongdoing.

If a company cannot receive a declination, and aggravating factors are still present, the Criminal Division may nonetheless agree to a significant reduction in the Sentencing Guidelines calculation.

Where there are aggravating circumstances and a declination is not warranted, the revised CEP contains incentives for companies to enter into a criminal resolution. If a company voluntarily self-discloses, fully cooperates, and remediates, but cannot meet the standard for a declination, the Criminal Division:

  • Will accord, or recommend to a sentencing court, a reduction of at least 50% and up to 75% off of the low end of the U.S. Sentencing Guidelines fine range, except in the case of a criminal recidivist. In the case of a recidivist, the reduction will generally not be from the low end of the range, and Prosecutors will have discretion to determine the starting point within the range based on the facts and circumstances of the case. The previous potential maximum reduction from the Guidelines calculation was 50%.
  • Will generally not require a corporate guilty plea—including for criminal recidivist—absent multiple or egregious aggravating circumstances.

If a company does not self-disclose, the revised CEP provides significant incentives for the company to provide full cooperation and undertake timely and appropriate remediation.

  • If a company did not voluntarily self-disclose, but fully cooperated and timely and appropriately remediated, the company will receive, or the Criminal Division will recommend to a sentencing court, up to a 50% reduction of the low end of the fine range.
  • In the case of a criminal recidivist, the reduction will likely not be off of the low end of the range, and prosecutions will have discretion to determine the starting point within the range and the appropriate reduction.

Key Takeaways

The revised CEP expands the Criminal Division leniency policies to encourage companies to report their own misconduct. It further incentivizes companies to police themselves and make investments in corporate compliance that help achieve a culture of compliance.

As AAG Polite’s remarks make clear, the Criminal Division is aware that under the previous version of the CEP, the Criminal Division may not have sufficiently incentivized self-disclosure of criminal conduct or cooperation with the DOJ. In particular, where aggravating circumstances were present, such as where a company would be considered a recidivist, companies may have determined it was more prudent to remediate the conduct and hope it never came to the government’s attention. The revised CEP demonstrates an effort by the Criminal Division to change that calculus and make self-disclosure and cooperation more appealing to companies.  

As the revised CEP goes into effect, companies should continue to devote resources to creating a robust compliance program, and should keep in mind the important factors considered by the DOJ when resolving corporate criminal matters:

  • Self-Disclosure: Upon discovery of corporate misconduct, the companies should consult with outside counsel to navigate the legal issues and consider the risks and benefits of self-disclosure to the Criminal Division.
  • Cooperation: Companies should work closely with counsel to ensure proper coordination with the Criminal Division once it has initiated an investigation into corporate malfeasance.
  • Remediation: Companies should ensure that their compliance programs clearly outline policies and procedures for conducting root causes analyses, and, where appropriate, remediation to address criminal conduct.

Buchanan’s corporate compliance and white-collar crime practice groups stand ready to help develop a robust corporate compliance program and navigate the DOJ’s revamped CEP.