On September 15, 2022, Deputy Attorney General Lisa Monaco announced updated guidelines for the U.S. Department of Justice’s (“DOJ”) corporate criminal enforcement in a speech at New York University Law School. Monaco previously announced in October 2021 that DOJ would take a tougher stance on white collar crime. Shortly thereafter, Monaco formed an advisory group to evaluate potential changes to existing DOJ policies to facilitate DOJ’s more aggressive approach. The advisory group solicited feedback from defense counsel, executives, compliance personnel, law professors, and others during its review. Last week’s announcement and a DOJ memo released the same day were the culmination of nearly a year’s work and included both incentives and warnings for businesses and individuals. The new guidance updates existing DOJ guidance in the following areas:
- Individual Accountability
- Expedited Investigations and Prosecutions
- Prior Misconduct
- Department-Wide Incentives for Voluntary Disclosure
- New Guidelines for Compliance Monitors
- New Guidance for Assessing Corporate Compliance Programs
The policy revisions apply across the DOJ, and while some of the announcements supplement or clarify existing guidance, others establish new policies, e.g., guidance on evaluating a corporation’s compensation plans. DOJ indicates that the new guidance will be incorporated into DOJ’s existing, publicly available policy manual, the “Justice Manual,” but that for now, prosecutors are instructed to employ the Justice Manual’s existing “Principles of Federal Prosecution of Business Organizations,” in conjunction with the October 2021 and these recently announced policy updates.
Individual Accountability
Under the new guidance, individual accountability is DOJ’s “top priority.” This signals a return to an approach announced in 2015 by former Deputy Attorney General Sally Yates, requiring companies to disclose all relevant facts about individual wrongdoing in order to seek credit for its cooperation. This policy was somewhat relaxed under the Trump administration. Under the new policy, DOJ will also prioritize prosecuting individuals before resolving related corporate cases. To the extent that prosecutors wish to resolve a corporate case first, DOJ leadership must approve a comprehensive plan for the resolution of the related individual case(s). As explained further below, DOJ is also placing an added onus on companies to police their own personnel via compliance programs and financial incentives and penalties.
Expedited Investigations and Prosecutions
In addition to emphasizing individual accountability, DOJ’s new strategy also involves speeding up investigations and prosecutions. Monaco said in her speech that the new guidance “should push prosecutors and corporate counsel alike to feel they are on the clock to expedite investigations, particularly as to culpable individuals.” DOJ will require that companies disclose evidence of misconduct more quickly than in the past. Monaco warned companies that failing to promptly disclose to DOJ evidence of individual misconduct could bar them from receiving credit for cooperation, or at least reduce the credit they would receive. Companies that delay disclosing evidence so that they can conduct internal investigations will not be exempt from this policy. Thus, companies must expedite their own internal investigations and promptly disclose evidence in order to receive cooperation credit.
Prior Misconduct
Monaco announced last year that even unrelated prior misconduct would be considered during corporate prosecutions. Last week, Monaco reiterated that policy last week, but she also clarified that past misconduct from many years ago would not carry as much weight as more recent misconduct. Specifically, Monaco said that criminal resolutions more than ten years old and regulatory or civil resolutions more than five years old would have less impact on DOJ’s treatment of new alleged misconduct.
However, Monaco added that DOJ would not continue to enter into repeated deferred prosecution or non-prosecution agreements with companies with which DOJ previously entered into such agreements.
Under the new policy, successive deferred prosecution or non-prosecution agreements will require approval from DOJ leadership. Where one company acquires another company with a history of misconduct, the acquiring company will remain responsible for the acquired company’s actions, but prosecutors will afford the acquiring company leniency if the acquiring company has taken steps to address the misconduct and/or implement appropriate compliance improvements.
Department-Wide Incentives for Voluntary Disclosure
In keeping with DOJ guidance consistently issued to companies, Monaco encouraged companies to self-report any and all misconduct. Companies have long been incentivized with leniency in exchange for prompt self-disclosure and remedying of the misconduct, while also threatened with criminal prosecution for failing to self-disclose. However, not all DOJ components have formal leniency or incentive programs. Monaco announced last week that all DOJ components involved in corporate enforcement will have an individualized program to incentivize self-disclosure going forward. All such programs will incorporate common principles, such as not pursuing guilty pleas where a corporation self-reports, cooperates, and remediates wrongdoing, absent aggravating factors. Additionally, DOJ will not implement monitorships where a company implemented an effective compliance program prior to resolution with DOJ. However, the programs may offer otherwise differing levels of incentives or leniency.
New Guidelines for Compliance Monitors
In a speech last fall, Monaco announced that prosecutors would have authority to require a monitor in corporate resolutions. Last week, Monaco announced that prosecutors will be tasked with supervising monitors and the DOJ memo sets forth additional policies to guide prosecutors in determining whether a monitor is appropriate, how to select a monitor, and how to supervise appointed monitors. Specifically, the new policy includes ten criteria for assessing whether a monitor is needed. Additionally, the new policy requires that monitors are selected through a documented selection process. Finally, prosecutors must take specific steps to supervise the monitor. This includes setting forth the monitor’s scope of work and related responsibilities in a formal work plan, continuing to supervise the monitor throughout the monitorship, and reevaluating the need for the monitor and/or the duration of the monitor’s appointment based on the circumstances. To the extent that components of DOJ do not have formal policies regarding monitor selection, they must adopt such policies by the end of 2022.
New Guidance for Assessing Corporate Compliance Programs
DOJ will also consider whether corporate compliance programs reward compliance and impose financial sanctions on employees, executives, or directors whose direct or supervisory actions or omissions contributed to criminal conduct. Monaco stated in her speech last week that “[c]ompensation systems that clearly and effectively impose financial penalties for misconduct can deter risky behavior and foster a culture of compliance.” For example, companies can discourage misconduct by including language in employment or compensation agreements that allow the company to claw-back compensation in the event of misconduct. Additionally, the new DOJ guidance instructs prosecutors to look at whether companies have effective policies and procedures governing personal devices and third-party applications, particularly messaging applications, to ensure preservation of company-related communications and data. DOJ will look not only at the policies in place, but also at the actions taken by the company to enforce such policies.
Takeaways
Overall, the new DOJ corporate criminal enforcement guidance attempts to provide clarity for companies regarding DOJ’s enforcement through a “carrot and stick” approach, although the requirement that each DOJ component to formulate its own policies and practices in certain areas has the potential to muddy the waters. With DOJ taking a tougher stance on corporate enforcement, companies should review the updated guidance and their existing compliance programs, policies, and procedures and consider whether the existing programs, policies, and procedures should be revised or if new ones should be implemented. Companies should invest in and develop robust compliance programs that deter, detect, and address misconduct quickly and appropriately. Given the new DOJ emphasis on speed, companies must be prepared to investigate potential misconduct and make decisions as to whether to self-disclose quickly. Companies suspecting or facing allegations of wrongdoing, or facing investigation or prosecution by DOJ or other enforcers, should consult with qualified counsel as soon as practicable.
https://www.anticorruptionblog.com/us-department-of-justice/4041/
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