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DOJ Revamps Corporate Criminal Enforcement Policies With Continued Emphasis On Compliance – Corporate Governance



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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.

IN DEPTH

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.”

COMPLIANCE MONITORS

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.

KEY TAKEAWAYS

  • 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.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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