Key Takeaways
- On March 1, 2023, the Assistant Attorney General (“AAG”) for the Criminal Division of the U.S. Department of Justice (“DOJ”), Kenneth A. Polite, Jr., issued a revised memorandum on the imposition and selection of monitors for companies entering into resolutions with the Criminal Division (the “Polite Memo”).
- The Polite Memo both updates and clarifies prior DOJ policy in the following areas:it (1) clarifies that monitors are not disfavored and will be used in appropriate circumstances; (2) lists additional factors for prosecutors to consider when determining whether to impose a monitor; (3) articulates DOJ’s commitment to focusing on diversity and inclusion when evaluating monitor candidates; and (4) increases the period from two to three years before a monitor can be employed by, or affiliated with, the monitored entity.
- Although the Polite Memo does not significantly change prior DOJ guidance regarding the selection of monitors, the memo’s revisions reflect the Criminal Division’s sharper focus on whether a business organization has voluntarily disclosed wrongdoing and implemented appropriate remedial measures. Together, these changes provide additional clarity for the monitor selection process.
Background on Selection of Monitors in Criminal Division Matters
The Polite Memo builds upon an October 2018 memorandum issued by former AAG Brian A. Benczkowski (the “Benczkowski Memo”) and follows a series of recent announcements regarding revisions to the Criminal Division’s Corporate Enforcement Policy, most recently in September 2022 and January 2023. The revisions reflected in the Polite Memo are largely consistent with the Criminal Division’s past approach to monitorships as set forth in the Benczkowski Memo and as implemented in recent years. For instance, the Polite Memo reaffirms that imposition of a monitorship should be considered on a case-by-case basis and may not be required in those instances where a business organization demonstrates that it has a “tested, effective, adequately resourced, and fully implemented” compliance program. The Polite Memo also makes no changes to the monitor selection and approval process set forth in the Benczkowski Memo, which includes the continued involvement of, and review by, the Criminal Division’s Standing Committee on the Selection of Monitors, the AAG, and the Office of the Deputy Attorney General. Rather, the Polite Memo offers additional factors to provide further transparency into the consideration and selection process of monitors by Criminal Division prosecutors.
No Presumptions For or Against Monitors
While not representing a significant change to the Criminal Division’s recent practices, the Polite Memo makes clear that “prosecutors should not apply presumptions for or against monitors.” This wording represents a tonal shift from the Benczkowski Memo, which some interpreted as disfavoring monitors, in part due to language stating that “the imposition of a monitor will not be necessary in many corporate criminal resolutions” and “only” where there is a demonstrated need for or benefit from a monitor—language now absent from the Polite Memo. Instead, the Polite Memo follows a line of announcements and memoranda issued by Deputy Attorney General Lisa Monaco, who in October 2021 stated, “[t]o the extent that prior Justice Department guidance suggested that monitorships are disfavored or are the exception, I am rescinding that guidance. Instead, I am making clear that the department is free to require the imposition of independent monitors whenever it is appropriate to do so.” The Polite Memo reflects this clarification and is consistent with memoranda issued in October 2021 and September 2022, both of which make clear that the Criminal Division will impose monitors “as appropriate” without “any presumption in favor of imposing one.”
Expansion of Factors for Consideration in Making Monitorship Decisions
The Polite Memo expands the list of non-exhaustive factors that prosecutors should consider when assessing the need for a monitor. Building on factors outlined in the Benczkowski Memo, and consistent with the Criminal Division’s Corporate Enforcement Policy, the additional factors focus on the extent to which a company has cooperated with the Criminal Division’s investigation. In addition to the factors previously identified, including the nature and pervasiveness of the misconduct and whether a company has implemented and tested improvements in its compliance program, the Polite Memo instructs prosecutors to consider whether:
- The business organization acted in a manner that was consistent with DOJ’s voluntary self-disclosure policy;
- The acts by compliance personnel or the failure of compliance personnel to act contributed to the underlying misconduct;
- The company properly investigated the misconduct and implemented adequate and necessary remedial measures;
- The company's risk profile, at the time of resolution, reduces the likelihood of recidivism;
- The company faces any unique risks or compliance challenges due to the nature of its industry, customers, and/or geographic profile; and
- The company is subject to oversight from industry regulators or is receiving a monitor from another domestic or foreign enforcement authority or regulator.
Reinforced Commitment to Diversity, Equity, and Inclusion in Monitor Selection Process
The Polite Memo reinforces the Criminal Division’s commitment to diversity, equity, and inclusion and provides that “any submission or selection of a monitor candidate” by the business organization or the Criminal Division should adhere to those principles. Citing to a recent plea agreement entered by Glencore Ltd., among others, the Polite Memo notes that corporate agreements, including guilty pleas, non-prosecution agreements, and deferred-prosecution agreements will include language reflecting the Criminal Division’s commitment to diversity and inclusion and the Criminal Division may reject a monitorship candidate based on those grounds.
Extension of Cooling-Off Period
In an effort to avoid potential conflicts of interest, the Polite Memo expands the cooling-off period, the time during which the monitor may not be employed by or affiliated with the monitored entity (in any employment, consultant, agency, attorney-client, auditing, or other professional relationship with the Company, or any of its subsidiaries, present or former affiliates, successors, directors, officers, employees, or agents acting in their capacity), from two to three years. In addition, consistent with the Criminal Division’s practice since 2018, the exclusionary period, as well as the underlying requirements for selecting each monitorship candidate, applies not only to the monitor but to the monitor team conducting the monitorship, including the individuals employed by the monitor’s firm, as well as any other “personnel or entities assisting in the monitorship,” which could include third-party auditors and consultants paid to perform services in connection with the monitorship.
Conclusion
Overall, while the Criminal Division’s approach to the selection and imposition of monitors remains largely unchanged, the Polite Memo adds helpful clarity to the process. In particular, business organizations can expect that prosecutors will consider the company’s voluntary self-disclosure, cooperation, and remediation efforts when assessing the need for a monitor. Although no factor by itself may be dispositive, the Criminal Division has indicated it is less likely to impose a monitor in those situations where a business organization has shown a demonstrated commitment to enhanced compliance measures through testing, represents a decreased likelihood of recidivism, and is already subject to oversight by industry regulators or overseas enforcement authorities. If applicable, these factors should be highlighted when trying to dissuade the Criminal Division from imposing a monitor.
For those resolutions requiring a monitorship, the Criminal Division will continue to scrutinize the monitor selection process for perceived or actual conflicts of interest as well as for diversity and inclusion. Companies should remain mindful of these factors when making written submissions to the Criminal Division regarding monitor candidates.
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