DOJ announces new policies on corporate prosecution
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In a speech on September 15, 2022 and in a memo of the same date, U.S. Department of Justice (DOJ) Deputy Attorney General Lisa Monaco announced several new policies and issued several directives regarding the DOJ’s prosecution of corporate crime.
At a high level, two points shine through the brightest. First, DOJ is prioritizing the prosecution of corporations and employees engaged in criminal conduct. Second, companies that put the time and resources into building an effective compliance program will benefit greatly should they, nevertheless, be on the pointy end of a DOJ stick.
The Deputy Attorney General’s policies and directives concern the following subjects: (1) individual accountability; (2) history of misconduct; (3) voluntary self-disclosure; (4) appointment of monitors; and (5) evaluation of corporate compliance programs. We address the salient points regarding each issue below.
Consistent with prior initiatives, DOJ emphasized that companies must quickly produce evidence of wrongdoing by individuals in order to receive any cooperation credit from the Department. Monaco also directed prosecutors to either bring charges against individuals at the same time as a corporate resolution or have a defined plan for completing an investigation at the time of the corporate resolution. With this, the DOJ is attempting to address instances – quite common – where individual cases languish for years following a corporate resolution. Monaco also addressed DOJ’s interest in prosecuting individuals being considered by foreign jurisdictions for prosecution. In such a situation, prosecutors must now make a case-specific determination as to whether there is a significant likelihood that the individual will be subject to effective prosecution in the other jurisdiction.
History of misconduct
Almost a year ago, in October 2021, Monaco made a splash by announcing that the entire criminal history of an organization would be taken into account when determining how and whether to charge an organization. Responding to criticism of this, Monaco announced on September 15, that “dated” conduct – i.e., criminal resolutions more than 10 years old and civil and regulatory resolutions more than 5 years old – would be less relevant than more recent conduct. She also directed prosecutors to focus on whether the instant violation involved the same root cause and/or individual employees as the prior misconduct. Lastly, and perhaps seeking to put financial institutions at somewhat more ease, Monaco noted that the Department would put prior violations in context by recognizing where a corporation was operating in a more heavily regulated industry than others.
In what was perhaps the most important policy announcement by the Deputy Attorney General, the DOJ will now require each Department component which prosecutes corporate crime to develop and publish a policy that incentivizes voluntary self-disclosure. Monaco noted that the Antitrust Division and National Security Division already have such a policy, as does the Criminal Division with regard to FCPA violations. While the various components of DOJ will have some latitude in developing their policies, Monaco stated that each should contain a presumption that, absent aggravating circumstances, neither a guilty plea nor the imposition of a monitor will be required if a disclosing company cooperates with the Department’s investigation, remediates the misconduct and has an effective compliance program in place. It is worth noting that this presumption against being charged does not mean that the Department will let the corporation off the hook entirely; the Department may still insist that the company enter into a settlement with the Department, such as a Deferred Prosecution Agreement (DPA) or Non-Prosecution Agreement (NPA). This stands in contrast to the FCPA Corporate Enforcement Policy which presumes that a company meeting the above criteria will receive a declination and be subject to no enforcement action whatsoever. The Antitrust Division’s Leniency Program also promises no prosecution under certain circumstances. Thus, it will be interesting to see how the various Department components develop their self-disclosure policies and how much incentive they actually provide for companies to report themselves to DOJ.
Appointment of monitors
While the above-referenced October 2021 speech by the Deputy Attorney General affirmed that the Biden Justice Department will return to appointing corporate compliance monitors when appropriate – and more frequently than the prior administration – Monaco on September 15 announced a “non-exhaustive list” of 10 factors that should be considered by DOJ as to whether a monitor should be appointed. These include factors historically considered in the context of whether a monitor should be imposed such as: whether the company voluntarily self-disclosed the violation, cooperated with the DOJ’s investigation and remediated the misconduct. Notably, though, the 10 factors also include compliance-specific criteria which echo guidance contained in the Criminal Division’s Evaluation of Corporate Compliance Programs issued in 2020. These factors include: whether a company had adequately tested its compliance program and internal controls; whether the misconduct was made possible by an ineffective compliance program and set of controls; and whether compliance personnel were involved in or failed to adequately respond to the misconduct.
In addition, Monaco directed each Department component that does not currently have a published monitor selection process to either adopt one already in effect at other components or devise its own by the end of 2022. Additionally, Monaco is instructing prosecutors to receive regular updates from monitors and to consider the scope and – importantly – the cost of the monitor’s work.
Evaluation of compliance programs
The evaluation of a company’s compliance program has been a factor in DOJ’s assessment of whether and how to charge a company since at least the issuance of the “Holder Memo” by then-Deputy Attorney General Eric Holder in 1999. The September 15 memo makes clear that the evaluation should be of both the company’s program at the time of the violation and at the time of the resolution. Thus, while companies will be rewarded for improving their compliance program following the discovery of a violation, it will be in a better position if it had an effective program at the time of the violation.
The September 15 memo highlights two aspects of corporate governance which had not received extensive attention from DOJ prior to now and, as a result, companies may need to make changes depending on further guidance to be issued in coming months.
First, while the DOJ in the past has referenced incentives for compliant behavior with regard to employee compensation, never before has it expounded upon the subject as it has in the September 15 memo. Prosecutors are now directed to evaluate whether a company’s compensation structure incentivizes compliance, including whether it has a mechanism for clawing back compensation after the discovery of misconduct and whether it uses non-disclosure or non-disparagement clauses in compensation and severance agreements to inhibit the disclosure of criminal misconduct. The Deputy Attorney General has directed the Criminal Division to develop further guidance in this regard by the end of 2022.
Second, terming the usage of personal phones and other devices a “significant corporate compliance risk,” the Monaco noted that all corporations with robust compliance programs should have effective policies governing the use of personal devices and messaging platforms for corporate communications. Monaco has directed the Criminal Division to study best corporate practices regarding the use of personal devices and messaging apps and incorporate its learnings into the next edition of the Evaluation of Corporate Compliance Programs.
Understanding the risk/benefit analysis of cooperation, and ensuring corporate culture supports effective compliance, were two of the ten key challenges identified for investigations lawyers in 2022 in the Allen & Overy Cross-border White Collar Crime and Investigations Review.