During a speech on September 15, 2022, Deputy Attorney General Lisa Monaco announced significant policy changes to DOJ’s corporate enforcement strategy. Expanding on her October 28, 2021, speech and the memorandum that followed, Monaco reiterated that individual accountability is DOJ’s “top priority.” Monaco’s speech marked the first major policy shift in corporate criminal enforcement policy to come out of the DOJ during the Biden administration. It includes, in addition to policy changes that address corporate compensation structures, incentives to report employee misconduct, speed of cooperation and prosecution decisions, and use of ephemeral messaging, Monaco repeatedly emphasized that DOJ expected companies to do more to police themselves through investments in corporate compliance. DOJ’s renewed and heightened scrutiny of corporate compliance programs echoes recent pronouncements from enforcement authorities in the United States including the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC), as well as foreign enforcement authorities such as the Financial Conduct Authority (FCA) and the Serious Fraud Office (SFO).
To facilitate DOJ’s stated goal of increasing white collar prosecutions of individuals, DOJ is employing the following policies to incentivize corporations to disclose information about wrongful conduct “without undue or intentional delay,” including:
- the loss of cooperation credit for undue delay in disclosing such information;
- the use of the company’s full criminal, civil and regulatory history to analyze whether deferred or nonprosecution agreements and even plea agreements are appropriate resolutions;
- consideration of a company’s use of compensation to curate a corporate culture that does not tolerate criminal activity; and
- the more frequent imposition of corporate monitors.
We have summarized further these and other specific policy changes below.
A. Timely Disclosures and Prioritization of Individual Investigations
A company’s undue or intentional delay in disclosing information about wrongful conduct, particularly about individuals, will result in loss of cooperation credit. To be eligible for the cooperation credit, corporations must disclose “all relevant, non-privileged facts about individual misconduct.” In addition, corporations should prioritize the “most relevant” information for assessing individual culpability first.
DOJ prosecutors are directed to “seek warranted criminal charges against individuals prior to or at the same time as entering a resolution against a corporation.”
B. Foreign Prosecutions of Individuals Responsible for Corporate Crime
DOJ prosecutors are directed to “make a case-specific determination as to whether there is a significant likelihood that a[n individual targeted by a foreign jurisdiction] will be subject to effective prosecution in [the foreign] jurisdiction.” Further, “prosecutors should not be deterred from pursuing charges just because an individual liable for a corporate crime is located outside of the United States.”
C. Evaluating a Corporation’s History of Misconduct
DOJ will consider a company’s full criminal, regulatory and civil history, both domestically and internationally. DOJ prosecutors can weigh parts of a corporation’s history more significantly. Below is a breakdown:
- The “greatest significance” will be placed on:
- prior criminal resolutions in the United States, and
- conduct involving the same management and individuals or the same root cause from prior misconduct.
- Less weight will be given to:
- Criminal records more than 10 years old AND regulatory and civil records more than 5 years old. However, a dated history showing repeated misconduct “may be indicative of a corporation that operates without an appropriate compliance culture or institutional safeguards,” so the 5- and 10-year cutoffs are not strictly enforced.
- Prior misconduct by an acquired entity if the acquired entity “has been integrated into an effective, well-designed compliance program” and the acquiring corporation “addressed the root cause of the prior misconduct” and “full and timely remediation occurred within the acquired entity” before the current investigation.
- DOJ will also disfavor multiple, successive deferred- or non-prosecution agreements. Prosecutors must seek written approval of the appropriate U.S. attorney or assistant attorney general AND provide notice to Deputy Attorney General Monaco’s Office.
- Corporations will be compared to the compliance and conduct of their peer corporations.
D. Voluntary Self-Disclosure
To encourage corporate self-disclosure, all DOJ components that prosecute white collar crime must have a clear, documented policy that incentivizes voluntary self-disclosure based around the following core principles:
- DOJ will NOT seek a guilty plea when a company has “voluntarily self-disclosed, fully cooperated, and timely and appropriately remediated misconduct” absent aggravating factors.
- DOJ will NOT require a compliance monitor if the company “has implemented and tested an effective compliance program” at the time of resolution. DOJ’s new guidance on monitors is forthcoming.
E. Evaluation of Cooperation by Corporations
DOJ will consider a corporation’s timely preservation, collection, and disclosure of documents located in the U.S. and overseas. The cooperating corporation bears the burden of establishing the existence of any restriction on production, such as blocking statutes and other burdens.
F. Evaluation of a Corporation’s Compliance Program
DOJ will evaluate the strength of a company’s compliance program at two points in time: (1) the time of the offense, and (2) the time of the charging decision. In addition to the usual factors for evaluating compliance programs, DOJ will also consider a corporation’s:
- Compensation incentives and disincentives. For example, a disincentive would be escrowing and clawing back compensation for individual wrong-doers, and an incentive would be affirmative metrics to award compliance-promoting behavior.
- Use of non-disclosure or non-disparagement provisions in compensation and severance agreements and other financial arrangements that inhibit the public disclosure of criminal misconduct.
- Policies and procedures, training to employees, and enforcement regarding the use of personal devices and third-party messaging platforms to ensure that business-related electronic data and communications are preserved — and subsequently collected during an investigation.
Further guidance is forthcoming by the end of 2022.
G. Independent Compliance Monitorships
DOJ will no longer apply any general presumption against requiring an independent compliance monitor. But, DOJ will also not apply any presumption in favor of imposing one.
DOJ will consider the following factors when evaluating whether a monitor is appropriate:
- Voluntarily self-disclosure;
- By the time of resolution,
- implementation of an effective compliance program and sufficient internal controls to detect and prevent similar misconduct in the future;
- adequate testing of the compliance program and internal controls to demonstrate that they would likely detect and prevent similar misconduct in the future;
- the corporation’s risk profile has substantially changed, such that the risk of recurrence of the misconduct is minimal or nonexistent;
- Whether the underlying criminal conduct
- was long-lasting or pervasive across the business organization; or was approved, facilitated or ignored by senior management, executives or directors (including by means of a corporate culture that tolerated risky behavior or misconduct, or did not encourage open discussion and reporting of possible risks and concerns);
- involved the exploitation of an inadequate compliance program or system of internal controls;
- involved active participation of compliance personnel or the failure of compliance personnel to appropriately escalate or respond to red flags;
- was adequately investigated or took remedial measures — including the termination of business relationships or the responsible individuals;
- Any unique risks or compliance challenges — including the nature of a particular region, industry or customers; and
- Whether and to what extent the corporation is subject to oversight from industry regulators or a monitor imposed by another domestic or foreign enforcement authority or regulator.
This list is meant to be illustrative and not exhaustive. Prosecutors should also monitor their monitors and receive periodic updates to evaluate whether ongoing monitorship is appropriate. DOJ also directs each DOJ office to employ “consistent and transparent” monitor selection procedures that are available to the public. Each office that does not have such a policy must create one to be approved by the deputy attorney general.
H. Commitment to Transparency
Absent exceptional circumstances, corporate criminal resolution agreements will be published on the DOJ public website. The agreement should include the following: (1) an agreed-upon statement of facts outlining the criminal conduct; and (2) a statement of relevant considerations that explains the DOJ’s reasons for entering into the agreement.
New Fraud Section Chief Glenn Leon Started at DOJ on September 12, 2022
In June 2022, the Department named former DOJ Fraud Section supervisor Glenn Leon as the new Fraud Section chief. Leon served most recently as Hewlett-Packard’s former senior vice president and chief ethics and compliance officer. Leon’s dual experience as in-house counsel and prosecutor suggests he has a deep understanding of the realities of the business environment but can also aggressively prosecute cases. DOJ insiders and defense counsel describe Leon as “calm and level headed“ and “of even temperament.” Leon officially started in his new role on September 12, just days before Monaco’s policy speech. It is expected that Leon will give companies a fair shake but not necessarily the outcomes they want.
DOJ’s Antitrust Division in a Hiring Spree
Monaco’s promise to crack down on white collar enforcement also comes on the heels of a “hiring binge” at DOJ, which has the Department poaching senior-level litigators to bring firepower to the Department’s antitrust cases.
DOJ Rescinded 2018 Brand Memo; DOJ May Again Rely on Agency Guidance Documents
Invoking the post-Watergate DOJ and the 2015 Yates Memo, the September 2021 speech and memorandum are part of the DOJ’s broader strategy to return to its “traditional” approach of prosecuting white collar crime. On July 1, 2021, U.S. Attorney General Merrick Garland rescinded two Trump-era DOJ memoranda (2017 Sessions Memo Prohibition on Improper Guidance Documents, 2018 Brand Memo) that limited DOJ’s ability to use agency guidance to litigate cases. DOJ lawyers handling an enforcement action may again “rely on relevant guidance documents” when a guidance document “may be entitled to deference or otherwise carry persuasive weight with respect to the meaning of the applicable legal requirements.” As a result, industry should continue to hew its compliance programs to any applicable guidance.