DOJ Revamps Corporate Criminal Enforcement Policies with Continued Emphasis on Compliance
At a September 15, 2022, speech at New York University School of Law, US Deputy Attorney General (Deputy AG) Lisa Monaco announced several new policies intended to further the aggressive stance the US Department of Justice (DOJ) has taken under the Biden administration to corporate criminal enforcement.
The DOJ’s landmark new policies are focused on encouraging and enticing companies to self-report criminal violations and cooperate in DOJ investigations. They include:
First, for the first time, every DOJ component that prosecutes corporate crime will have to develop a formal program to incentivize voluntary self-disclosure. Importantly, the DOJ will not seek a guilty plea when a company has voluntarily self-disclosed, cooperated in the DOJ’s investigation and remediated misconduct.
Second, companies seeking cooperation credit need to come forward and disclose important evidence to the DOJ quickly. Companies—and prosecutors evaluating those companies—will now be “on the clock.” Undue or intentional delay in providing information and documents will result in a reduction or outright denial of cooperation credit.
Third, the DOJ will now formally encourage companies to hold in escrow or claw back compensation from executives and employees responsible for wrongdoing.
Deputy AG Monaco provided additional guidance with respect to significant changes announced in October 2021, including on how prior criminal, civil and regulatory misconduct by companies will be evaluated when deciding an appropriate resolution, and how and when monitors should be imposed.
Deputy AG Monaco also announced that the DOJ would seek an additional $250 million in targeted resources for corporate criminal enforcement and other corporate crime initiatives.
While Deputy AG Monaco continued to emphasize—as she did in speeches in October 2021 and March 2022—that the DOJ’s No. 1 priority remains individual “accountability” and prosecutions, the recent announcement is the latest in a series of ambitious steps taken by the DOJ under the Biden administration to further the Department’s ongoing and increasing emphasis on misconduct at the corporate level. Taken collectively, the mixture of carrots, sticks and potential additional resources demonstrates the DOJ’s continued focus on pursuing corporate wrongdoing and the need for companies to proactively assess their compliance programs and ensure they are well-positioned to respond to the DOJ’s boundary-shifting approaches.
New DOJ- Wide Voluntary Self-Disclosure Program
Among the more significant changes, every DOJ component that prosecutes corporate crime will, for the first time, be required to have a documented policy that incentivizes voluntary self-disclosure. Deputy AG Monaco highlighted the success of a handful of self-disclosure programs that several DOJ components have already developed, such as the long-standing Antitrust Division Leniency Program and the Foreign Corrupt Practices Act (FCPA) unit’s self-reporting program. She also stated that if a DOJ component does not have such a formal, documented policy, they must draft one. In support of this policy, she noted that the DOJ’s “goal is simple: 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.”
Deputy AG Monaco also announced several broad principles that will apply to each component’s voluntary self-disclosure policies. Most notably, voluntary self-disclosure will, in many cases, allow companies to avoid criminal prosecution altogether. “Absent aggravating factors, the Department will not seek a guilty plea when a company has voluntarily self-disclosed, cooperated and remediated misconduct.” Deputy AG Monaco also foreshadowed that in the coming months the DOJ would announce resolutions that demonstrate the benefits of corporate self-disclosures, as opposed to companies that chose not to self-disclose and cooperate with the DOJ.
Voluntary Self- Disclosure: Speed is of The Essence
In another significant change, Deputy AG Monaco declared that DOJ will now put companies seeking cooperation credit “on the clock” and that companies seeking to cooperate—including those that have voluntarily self-disclosed information or documents—must come forward with that evidence more quickly. Noting that “speed is of the essence,” she added that if a “cooperating company discovers hot documents or evidence, its first reaction should be to notify the prosecutors.” Any undue or intentional delays in production of information or documents to the DOJ will result in a reduction or outright denial of cooperation credit.
Corporate Compensation Systems Reflecting Corporate Values
DOJ prosecutors will now consider a company’s compensation structure when evaluating the strength of its compliance program. Specifically, Deputy AG Monaco instructed prosecutors to consider whether a company’s compensation system rewards compliance-promoting behavior and imposes financial sanctions on employees or executives who direct or supervise acts and/or omissions that contribute to a criminal violation. Further, prosecutors must consider a company’s actions relating to compensation after learning of the misconduct, including whether “a company actually claws back compensation or otherwise imposes financial penalties.” She indicated that the Department’s Criminal Division will develop further guidance on rewards for companies that employ clawback or similar arrangements by the end of 2022.
History of a Company's Misconduct
Noting that between 10% and 20% of large corporate criminal resolutions involve “repeat offenders,” Deputy AG Monaco announced additional guidance about how prior criminal, civil and/or regulatory records will now be considered by prosecutors when deciding how to resolve a criminal violation. Prior misconduct that led to US criminal resolutions and wrongdoing that involves the same personnel and/or management as the misconduct currently under review will be considered highly relevant and significant. Importantly, older conduct—criminal resolutions occurring more than 10 years before the current conduct under investigation and civil or regulatory resolutions occurring more than five years before the current conduct under investigation—will be afforded less weight. The nature and circumstances of prior misconduct, as well as a company’s history when compared to others similarly situated in the same industry, will also be important considerations. Lastly, Deputy AG Monaco remarked that the DOJ “will disfavor multiple, successive non-prosecution or deferred prosecution agreements with the same company.”
After the DOJ signaled its intentions to expand the use of independent compliance monitors earlier this year, Deputy AG Monaco acknowledged that there remains a need to clarify the monitorship process in a number of ways. The DOJ is taking a number of steps that will make the monitor process more transparent, including by providing clear factors that prosecutors will consider in determining whether a monitor is appropriate and to establish consistent standards for the process of selecting a monitor. Most notably, the DOJ is focused on improving efficiency and ensuring that every monitorship is appropriately tailored in scope and duration. The DOJ will confirm that the monitor, the DOJ and the company subject to the monitorship are in agreement on the monitor’s scope and work plan at the outset of the process. Prosecutors may also consider reducing the length of monitorships in response to prompt compliance improvements, in addition to the option to extend a monitorship. The DOJ plans to be more hands-on in “monitoring the monitor,” which will likely help keep monitorship engagements on track and within scope.
The DOJ’s new policies reflect an attempt to both incentivize and pressure companies to self-report criminal violations and cooperate in DOJ investigations. Importantly, the new policy seems to incentivize quick cooperation not just in DOJ investigations but against a company’s own executives. These are often complex cases and take time to develop facts and defenses, but Deputy AG Monaco affirmed that the DOJ will insist that voluntary self-disclosures happen quickly and that speed is of the essence.
It remains unclear what practical impact these ambitious policies will have. Although additional DOJ resources have been directed at pursuing these time-intensive and complex investigations, we have yet to see the resulting increase of actual corporate criminal enforcement activity from the Department. Without that, some companies may still decide that quick voluntary disclosures are not in their best interests. In addition, until there is a demonstrated track record or predictability that cooperating companies are receiving a meaningfully more favorable resolution, the new guidance may not cause many more companies to rush to cooperate. And companies will still have to carefully weigh the costs and benefits of voluntary self-disclosure.
The devil will be in the details. The offered carrot in the new DOJ leniency program is significant—a no-plea deal for a corporate criminal violation—but questions still remain. How much self-reporting and cooperation is needed to cross the threshold to earn this benefit from the DOJ? And if the threshold is crossed, it remains uncertain how much credit a company will actually receive. In addition, while the Antitrust Division’s leniency and FCPA unit’s voluntary disclosure programs were highlighted as model examples, each DOJ component has been tasked with drafting their own corporate leniency type program. We will keep an eye out to see how uniform and consistent the programs are in practice.
The clear import of Deputy AG Monaco’s ongoing policy statements is that compliance matters. The DOJ could not be clearer; the Department will be taking a hard look at compliance programs and expects them to be robust. The emphasis on early self-reporting is intended to further incentivize companies to have strong compliance programs that identify and address misconduct before the DOJ does. For those organizations that have not already done so, it is time to reassess the compliance program; for organizations that have recently reviewed and updated their programs, it is critical to take a hard look at Deputy AG Monaco’s most recent comments—including those about executive compensation—to ensure that they are being considered in compliance program design and implementation.
Ben Curtis and Caitlyn Campbell also contributed to this article.