This is a follow-up to our September 13, 2019 post discussing the DOJ guidance on corporate claims of inability to pay.

On Tuesday, October 8, 2019, the Department of Justice provided guidance on how its prosecutors should evaluate claims of corporate poverty.  This comes on the heels of Deputy Assistant Attorney General Matthew Miner’s comments last month suggesting that further guidance on corporate poverty claims was forthcoming.  The DOJ’s memo sets forth a framework for all DOJ prosecutors to consider when faced with a claim of corporate poverty, expanding on the statutory sentencing factors found in 18 U.S.C. § 3572(a) and (b) and the related guidance set forth at U.S.S.G. §§ 8C2.2 and 8C3.3.

Organizations asserting an inability to pay claim must provide the DOJ with the information set forth in its newly-issued “Inability-to-Pay Questionnaire” (which can be found here: https://www.justice.gov/opa/speech/file/1207576/download).  The Questionnaire focuses on the organization’s audited financial statements, cash flow and budget projections, and plans concerning contemplated acquisitions/divestitures of assets and corporate restructuring.

For complex corporate poverty claims, the DOJ highlighted additional factors that warrant special attention:

• Consideration of what gave rise to the organization’s current financial condition (e.g., dividends or distributions to the organization’s ownership, investments in assets, or the existence of related-party transactions).
• Consideration of the organization’s ability to raise capital.
• Consideration of any negative consequences in assessing the total penalty (e.g., inability to fund existing pension obligations, compliance with applicable law, potential layoffs or product shortages).
• Consideration of whether the organization will have the ability to pay the assessed penalty and make restitution to its victims.

DOJ prosecutors retain the flexibility to either reduce a proposed criminal fine or monetary penalty or implement an installment schedule over a reasonable period of time.  However, moving forward, DOJ prosecutors must obtain approval from their supervisors before agreeing to any reduction, and any proposed reductions exceeding 25% must gain approval from the Assistant Attorney General for the Criminal Division.