There’s A New Compliance Sheriff In Town, And She’s Cracking Down On Corporate Misconduct

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The U.S. Department of Justice ("DOJ") is making it harder on companies that commit corporate crimes. A lot harder.

That’s the message that Deputy Attorney General Lisa Monaco recently gave attendees at the American Bar Association's White Collar Crime Conference in Miami. In her speech, DAG Monaco laid out the major changes to how the DOJ will approach corporate crimes and the individuals who commit them.

Three key takeaways from DAG Monaco’s speech:

1. Prior conduct – and misconduct – matters.

DAG Monaco announced that companies facing scrutiny for misconduct will go under the microscope. “For clients facing investigations, as of today, the department will review their whole criminal, civil and regulatory record — not just a sliver of that record.”

For entities under investigation, prosecutors are no longer limited to reviewing historical misconduct similar to the activity under investigation. If a company is facing an FCPA investigation, for example, the DOJ will take into account any prior enforcement action against that company – be it the result of tax, environmental, money laundering, or any other type of misconduct – when determining an appropriate resolution for the company. Likewise, if the company was prosecuted for crimes by another state or country, this too will be taken into account.

This move could have particularly significant implications for entities in highly regulated industries such as defense, emerging technologies, banking, insurance, and healthcare, but businesses in all sectors would be well advised to review their compliance policies and procedures. As DAG Monaco put it, “[c]ompanies need to actively review their compliance programs to ensure they adequately monitor for and remediate misconduct — or else it’s going to cost them down the line.”

2. Cooperation credit has been reinstated for companies that come completely clean.

According to DAG Monaco, the DOJ is restoring its policy to give cooperation credit to companies who provide information on all individuals involved in the misconduct.

This policy, first put in place under President Obama, requires companies under investigation that wish to cooperate to let the DOJ make the decisions on who at their companies is involved in or responsible for the wrongdoing: “The department’s investigative team is often better situated than company counsel to determine the relevance and culpability of individuals involved in misconduct, even for individuals who may be deemed by a corporation to be less than substantially involved in misconduct.” In addition, the cooperating companies will be required to turn over to the DOJ “all non-privileged information about those individuals’ involvement” to aid prosecutors in the assessment of responsibility.

In response to an anticipated reaction from the business community, DAG Monaco pushed back against the idea that giving the DOJ additional names would lead to the unfair prosecution of minimal participants: “Asking for this information does not alter the principles that govern fair and just charging decisions. Like every case, prosecutors will make decisions about individuals implicated in corporate criminal matters based on the facts, the law and the Principles of Federal Prosecution."

This focus on complete disclosure is part of a broader DOJ effort targeting the individuals who commit and authorize corporate misconduct. It sends a clear signal that prosecutors expect to receive the full list of individuals involved in wrongdoing before they’ll hand out cooperation credit.

3. Stopping Future Misconduct Takes Center Stage

The third element of the DOJ's fight against corporate wrongdoing focuses on preventing recidivist misconduct at companies that enter into settlement agreements with the Department. They’re doing that in two ways, said DAG Monaco. First, by rescinding the prior DOJ guidance that disfavored the use of corporate monitors to help companies change their corporate culture and self-police their activities. To make this work, the Department will study the way corporate monitors are chosen to eliminate the perception of favoritism – and the act – in the monitor-selection process.

Second, the DOJ is looking at how the Department uses non-prosecution agreements (“NPAs”) and deferred-prosecution agreements (“DPAs”) to persuade wrongdoers to find and eliminate corporate wrongdoing, especially for companies that have already benefitted NPAs and DPAs: “we have no tolerance for companies that take advantage of pre-trial diversion by going on to continue to commit crimes, particularly if they then compound their wrongdoing by knowingly hiding it from the government.”

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In the end, DAG Monaco’s message to the business community was clear: there’s a new sheriff in town, and they’re cracking down on corporate misconduct: “Looking to the future, this is a start — and not the end — of this administration’s actions to better combat corporate crime.”

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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