Earlier this month, Deputy Attorney General Lisa Monaco delivered remarks outlining the Department of Justice’s (DOJ) new policies on corporate criminal enforcement. The remarks were published in a DOJ memorandum the same day (September 15, 2022). The extensive plan signals a tougher stance on corporate crime, but provides companies an incentive to further cooperate with DOJ investigations. The DOJ announcement focused on five areas: individual accountability, a company’s history of corporate misconduct, voluntary self-disclosure, the use of compliance monitors, and corporate culture.
The DOJ’s memorandum states that the “first priority in corporate criminal matters is to hold accountable the individuals who commit and profit from corporate crime.”1 For companies that choose to cooperate, the DOJ will consider the promptness of their cooperation when issuing cooperation credit, and the “undue or intentional delay in producing information or documents, particularly documents that should individual culpability,”2 will result in a reduction or denial of such credit. Accordingly, the DOJ will require that companies under investigation prioritize the production of documents necessary for the determination of individual accountability.
Companies with a History of Misconduct
Consistent with guidance issued last year, the memorandum reiterates that DOJ prosecutors should consider the entirety of a company’s criminal, civil, and regulatory history – including domestically and internationally – when determining an appropriate resolution for corporation misconduct. The remarks from last week expand on the prior guidance by providing additional insight on how the DOJ will evaluate the compliance history of a corporation when deciding the proper resolution for current misconduct.
Moving forward, “recent” criminal resolutions in the United States as well as prior wrongdoing involving the same personnel or management as the current misconduct will be flagged as the most significant and severe.3 By contrast, “dated conduct,” meaning criminal resolutions that have occurred more than 10 years before the conduct currently under investigation, as well as civil and/or regulatory resolutions that took place more than five years before the current misconduct, will be accorded less weight.4 Past misconduct of a corporation will be viewed by DOJ through the lens of a company’s industry, with the memorandum highlighting, “[c]orporations operate in varying regulatory and other environments, and prosecutors should be mindful when comparing corporate track records to ensure that any comparison is apt.”5 For example, a company in a highly regulated industry will be measured against other companies within that same industry in order to fully measure the severity of misconduct.
Finally, Department officials will more closely scrutinize any proposals for non-prosecution agreements (NPA) and deferred prosecution agreements (DPA), if a company has at least one prior NPA or DPA. The DOJ hopes that this measure will ensure a more holistic approach to corporate recidivism.
The DOJ encourages companies to come forward with their misconduct and to look at self-disclosure as an indicator of healthy compliance culture. In fact, the DOJ memorandum states “Department policies and procedures must ensure that a corporation benefits from its decision to come forward to the Department and voluntarily self-disclose misconduct…[a]nd Department policies and procedures should be sufficiently transparent such that the benefits of voluntary self-disclosure are clear and predictable.”6
Notably, absent aggravating factors, the DOJ will not seek a guilty plea where a company voluntarily discloses conduct, remediated the wrongdoing, and fully cooperated with the DOJ. Additionally, when a defendant has implemented and tested a remedial compliance program, DOJ may not seek nor require a compliance monitor. The reason for this policy is to “reward those companies whose historical investments in compliance enable voluntary self-disclosure and to incentivize other companies to make the same investments going forward.”
Independent Compliance Monitors
Corporations are aware of the burden that compliance monitors can put on resolving allegations of criminal misconduct. The DOJ, conscious of corporate frustration, announced new guidance for prosecutors related to the selection and oversight of compliance monitors. Under the new guidance, “the need for a monitor and the scope must depend on the facts and circumstances of the particular case,” and prosecutors will now be required to consider a non-exhaustive list of 10 factors in determining whether a monitor is appropriate, including, inter alia: the company’s self-disclosure of the conduct, the scope and pervasiveness of the conduct, the implementation and testing of an effective corporate compliance program, and whether the company faces unique risks or compliance challenges as a result of the region or business sector in which the company operates.7 The guidance is intended to address the concerns surrounding the suspicion and confusion related to compliance monitors.
Corporation Compliance Policies, Procedures, and Culture
In addition to the updated policies addressed above, the DOJ memorandum highlights the continued importance of an effective compliance program and ethical corporate culture stating that corporate compliance “can have a direct and significant impact on the terms of a corporation’s potential resolution with the Department.”8
Adding to the list of factors to consider when reviewing a corporate compliance program, the memorandum emphasizes the importance of a company’s compliance-driven compensation system stating that “[c]ompensation systems that clearly and effectively impose financial penalties for misconduct can incentivize compliant conduct.”9 The memorandum directs the Criminal Division to draft new guidance regarding how to incentivize the use of compensation structures to prevent individual wrongdoing by the end of 2022.
To address the need for corporate compliance policies that can meet the technological demands of the 21st century, the DOJ will, as part of its review of a corporation’s compliance policies and culture, look to whether the company has implemented effective policies and procedures governing the use of personal devices and third-party messaging platforms to ensure business-related electronic data and communications are preserved.
The DOJ views a robust compliance program as an essential element of good business, and clients should do the same. As the DOJ begins implementing these corporate enforcement policies, clients should be devoting their resources and focusing their efforts on creating a strong compliance program.
- Implement Policies and Procedures Related to Self-Disclosure: Deputy Attorney General Monaco’s remarks solidified that self-disclosure is the safest way to potentially avoid prosecution for corporate misconduct. With the assistance of counsel, companies should design and implement policies and procedures detailing when self-disclosure may be appropriate and which adequately consider the benefits of the same. Companies should work with counsel to navigate the complex and overlapping legal issues and to achieve the greatest cooperation credit possible.
- Promote a Culture of Compliance: The DOJ has repeatedly emphasized the importance of maintaining a “culture” of compliance within an organization, including: drafting compensation policies and procedures which promote compliance, maintaining an effective and tailors compliance program, appropriately resourcing and staffing a compliance department, and emphasizing compliance from the highest-levels of the organization.
- Review Historical Company Misconduct: Corporate leadership should consider looking back on their company’s past misconduct to determine whether the root causes of those wrongdoings are still present within the company. Companies with violations that mirror past misconduct will face particularly stiff sanctions from the government.
- Update Compliance Policies and Procedures: The recent guidance from DOJ makes clear that the Department will consider the effectiveness of corporate compliance policies by, in part, reviewing whether such compliance protocols take technological advancements into consideration. Additionally, the DOJ has called on the various US Attorney’s Offices to draft internal guidelines which may differ based on the relevant jurisdiction. Corporations should regularly review their compliance policies and procedures to ensure they are updated appropriately and comply with any requirements of the jurisdictions in which they do business.
- Cooperation With the DOJ: Where the DOJ has initiated an investigation of a corporation, the company should work closely with counsel to ensure it is proactively and appropriately cooperating. Undue delays and “gamesmanship” will be viewed negatively by the Department and could result in reduced cooperation credit and/or harsh penalties. Companies must ensure they are protecting their rights and zealously advocating their positions while, at the same time, cooperating with DOJ, as appropriate.