Key Takeaways
- Deputy Attorney General (Deputy AG) Lisa Monaco signaled that the Department of Justice (DOJ or Department) will take a more aggressive approach to corporate criminal enforcement, including an emphasis on individual accountability, stricter requirements for corporate cooperation credit, and heightened scrutiny on successive non-prosecution or deferred prosecution agreements (NPAs or DPAs) for recidivist companies.
- In order to receive cooperation credit, companies will be required to produce relevant documents and records more quickly, particularly when such disclosures relate to the investigation or prosecution of individuals.
- Deputy Attorney General Monaco urged companies to self-report and announced that the DOJ will expand incentive programs for voluntary self-disclosure. Absent aggravating factors, prosecutors will decline to seek guilty pleas for companies that self-report misconduct and fully cooperate.
- When evaluating the strength of a company’s compliance program, the DOJ will consider whether companies have policies that reward compliance-promoting behavior and deter, or impose financial penalties for, misconduct through the use of compensation clawback provisions.
Overview
In prepared remarks delivered at New York University School of Law on Sept. 15, Deputy AG Monaco announced significant updates to the DOJ’s corporate criminal enforcement policies.
Deputy AG Monaco’s announcement coincided with the release of a Department-wide memorandum instructing prosecutors on the implementation of the policy revisions. These policy updates come one year after Deputy AG Monaco announced a renewed focus on corporate crime and the formation of the Corporate Crime Advisory Group in October 2021.
Deputy AG Monaco focused on five key components of the policy updates.
1. Individual Accountability
Deputy AG Monaco described individual accountability as the DOJ’s “number one priority” and announced policy changes designed to expedite investigations and prosecutions of culpable individuals.
As part of the effort to facilitate timely individual investigations, the DOJ will now require companies to produce relevant information and records more quickly in order to receive cooperation credit. Deputy AG Monaco warned that “[g]amesmanship with disclosures and productions will not be tolerated” and that “undue or intentional delay in producing information or documents—particularly those that show individual culpability—will result in the reduction or denial of cooperation credit.” As outlined in the DOJ memorandum accompanying Deputy AG Monaco’s remarks, failure to produce relevant information “swiftly and without delay” will jeopardize a company’s eligibility for cooperation credit. This policy builds on the Department’s guidance from October 2021, which required companies to provide “all non-privileged information about individuals involved in or responsible for the misconduct at issue” in order to receive cooperation credit.
Deputy AG Monaco stated that both corporate counsel and prosecutors should feel that they are “on the clock” to expedite individual investigations under the new policy. Prosecutors will seek to pursue individual charges before or at the same time as reaching a resolution with the company. When entering into a criminal resolution with a company before the conclusion of an individual investigation, prosecutors must develop an investigative plan with a timeline for completion of any remaining work.
2. Corporate Recidivism
Deputy AG Monaco announced additional guidance on how prior corporate misconduct will be evaluated by prosecutors. The Department will not consider all instances of prior misconduct equally but rather will focus on prior criminal resolutions occurring in the past 10 years and involving the same personnel or management. Less weight will be given to prior misconduct committed by an acquired entity, so as not to discourage the acquisition of companies with histories of misconduct by companies with a track record of compliance. Prosecutors will also consider the facts and circumstances surrounding the prior misconduct and whether the misconduct reflected broader cultural or compliance weaknesses. Additionally, prosecutors will consider a company’s track record in the context of similarly situated companies.
Part of the new guidance includes increased scrutiny when entering into NPAs and DPAs for companies with a history of misconduct. Deputy AG Monaco made it clear that the Department will disfavor successive NPAs or DPAs for the same company, warning companies that “[i]f any corporation still thinks criminal resolutions can be priced in as the cost of doing business, we have a message—times have changed.”
3. Voluntary Self-Disclosure
Deputy AG Monaco highlighted the importance of prompt self-disclosure. In an effort to promote early cooperation, every DOJ component involved in corporate criminal prosecutions will implement an incentive program for voluntary self-disclosure. Furthermore, in the absence of aggravating factors, the Department will not seek a guilty plea if the company voluntarily self-reports, cooperates fully, and remediates the misconduct. The DOJ will also decline to impose a monitor for cooperating companies that have put in place and tested a compliance program by the time of resolution.
While each Department component will provide guidance on what constitutes aggravating factors, involvement by executive management in the misconduct, significant profit to the company as a result of misconduct, and the pervasiveness of the misconduct all constitute aggravating circumstances that could warrant a criminal resolution even where the company has self-reported under the existing Foreign Corrupt Practices Act Corporate Enforcement Policy. The aggravating factors exception thus provides the Department a fairly significant carveout to the policy of not seeking guilty pleas for companies that self-report.
4. Corporate Compensation and Personal Devices
In discussing the role of corporate culture in deterring misconduct, Deputy AG Monaco urged companies to adopt compensation policies that promote compliance. The Department’s evaluation of corporate compliance programs will now take into consideration whether corporate compensation policies offer incentives for compliance and deter misconduct through financial penalties such as clawback provisions for individuals involved in misconduct. Deputy AG Monaco praised such policies for “shift[ing] the burden of corporate financial penalties away from shareholders—who frequently play no role in misconduct—onto those more directly responsible.” Importantly, prosecutors will consider not just the adoption of deterrence policies but also the extent to which those policies have been followed in practice.
In addition to the expectation that corporations will have corporate compensation policies to incentivize compliance, prosecutors evaluating compliance programs will assess whether companies have policies governing the use of personal devices — such as smartphones, tablets and laptops — and third-party messaging apps, including encrypted and ephemeral messaging services. Prosecutors will consider whether companies seeking cooperation credit have instituted policies to ensure that data from personal devices and messaging services can be retrieved. In the Department-wide memo, Deputy AG Monaco directed the Criminal Division to “further study best corporate practices regarding use of personal devices and third-party messaging platforms and incorporate the product of that effort into the next edition of its Evaluation of Corporate Compliance Programs, so that the Department can address these issues thoughtfully and consistently.”
5. Independent Compliance Monitors
Citing the need to “reduce suspicion and confusion about monitors” and increase transparency, Deputy AG Monaco announced new guidance for prosecutors, outlining factors to determine whether a monitor is appropriate, the selection of monitors, and advice on the continued review of monitors.
Conclusion
In light of the increased focus on corporate criminal investigations and prosecutions, we can expect existing cases to gain speed and new actions to be initiated swiftly and aggressively. Companies would be well advised to consider implementing clawback policies that provide financial disincentives for employees who engage in misconduct. Additionally, because of the Department’s emphasis on the prompt disclosure of relevant information when evaluating cooperation credit and the significant benefits that could result for an entity that cooperates, it is critical that companies have a plan and are prepared to provide documents and information on an expedited basis should they opt to pursue the route of voluntary self-disclosure.
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