DOJ Outlines Key Policy Changes in New Memorandum on Corporate Criminal Enforcement
In a speech on Thursday, September 15, Deputy Attorney General Lisa O. Monaco announced significant updates to Department of Justice (“DOJ”) policies regarding the prosecution of corporate crime.[i] In preparing these policies, Deputy Attorney General Monaco noted that the DOJ consulted dozens of experts in corporate enforcement, academia, and the private sector—emphasizing that these changes were the result of “diverse input” from all sides of the enforcement and compliance world.
In her speech, and in the accompanying memorandum titled Further Revisions to Corporate Criminal Enforcement Policies Following Discussions with the Corporate Crime Advisory Group,[ii] Deputy Attorney General Monaco outlined the three major areas of focus for DOJ prosecutors as they evaluate the appropriate outcome in a corporate resolution:
- Continued emphasis on individual accountability;
- Updated guidance for evaluating corporate recidivism; and
- New incentives to encourage voluntary corporate self-disclosure.
Key takeaways include:
- Individual Accountability. Consistent with the 2015 “Yates Memo”[iii] which outlined DOJ’s approach to individual accountability for corporate crime in the aftermath of the Great Recession, the DOJ’s new guidance reiterates the department’s prior emphasis on individual accountability: “[The DOJ’s] first priority in corporate criminal matters is to hold accountable the individuals who commit and profit from corporate crime.”[iv] In particular, the Monaco Memo outlines three topics of note in this area of renewed DOJ focus:
- Timely Corporate Disclosures Relating to Individual Actors. Deputy AG Monaco emphasized the need for timeliness in corporate investigations, noting that “speed is of the essence,” and that DOJ “will require cooperating companies to come forward with important evidence more quickly.”[v] In particular, disclosures that occur too long after the misconduct occurred reduce the likelihood that corporations will receive cooperation credit from the government.
- Prioritization of Individual Prosecutions. Prosecutors will be encouraged by these new policies to investigate and charge individuals involved in corporate wrongdoing before or concurrently with any resolution with the relevant corporation. If they do not, prosecutors will be required to prepare a memorandum justifying their decision not to charge the individuals principally involved.
- Foreign Prosecutions. Going forward, if an individual is subject to foreign jurisdiction for corporate criminal conduct, prosecutors must make a determination as to whether there is a “significant likelihood” that such individual will be subject to “effective prosecution” in the foreign jurisdiction before declining to prosecute in the United States.
- Corporate History of Misconduct. Corporations with a history of criminal misconduct will be evaluated with significantly greater scrutiny under these policies. Noting that ten to twenty percent of all large corporate criminal resolutions have involved “repeat offenders,” Deputy AG Monaco announced that the DOJ seeks to accord greater weight in resolving potential corporate charges to considerations of corporate recidivism. But “not all instances of prior misconduct are created equal.”[vi] In particular:
- Dated Conduct. Corporate criminal resolutions that occurred more than 10 years prior or civil regulatory resolutions that occurred more than 5 years prior to the conduct under investigation will be accorded less weight.
- Nature and Circumstances. The specific circumstances of prior misconduct will be closely evaluated. For example:
- Mergers and Acquisitions. Companies with a proven history of effective compliance that acquire an offending company will not be disfavored so long as problems are promptly addressed by the acquirer.
- Peer Comparison. If a company operates in a highly regulated industry, the DOJ will evaluate like companies to determine if the company’s conduct or compliance model meets industry standards.
- Prior DPAs or NPAs. Multiple non-prosecution or deferred prosecution agreements with the same corporation will be strongly disfavored. In order to secure successive DPAs or NPAs, DOJ prosecutors must obtain written approval from the supervising U.S. Attorney or Assistant Attorney General and notify the Office of the Deputy Attorney General, providing a clear incentive to line prosecutors to avoid this outcome.
- Voluntary Self-Disclosure and Corporate Compliance Programs. The New DOJ guidance outlines a number of ways that companies can mitigate their criminal exposure once wrongful conduct has been identified.
- Self-Disclosure of Wrongdoing and Cooperation Generally. No company that voluntarily self-discloses misconduct will face a guilty plea, absent aggravating factors, making self-disclosure the “clearest path for a company to avoid a guilty plea or indictment.”
- Compliance Program Evaluation. The DOJ plans to encourage self-disclosure through rewarding corporations which have demonstrated a commitment to compliance and a culture which fosters accountability for wrongdoing, and by making clear that compliance is a “good business decision,” as the only surefire way to avoid the reputational damage associated with corporate criminal prosecutions. Having an effective compliance program in place will also avoid the implementation of an independent compliance monitor as part of the resolution. In evaluating a compliance program, DOJ prosecutors will look to whether the program is (i) well designed, (ii) adequately resourced, (iii) “empowered” to function effectively, and (iv) working in practice.[vii]
- Compensation Structures and Corporate Technology. Corporate policies on compensation and technology will be considered by prosecutors as well. If a corporation has compensation systems which clearly impose penalties or “claw-back provisions” for individuals who engage in misconduct, and they have in fact implemented such consequences post-misconduct, that will be a beneficial factor in prosecutors’ evaluation of an effective and fair resolution. Additionally, corporations with robust policies on the use of personal or third-party devices and messaging platforms to conduct corporate business may favorably impact a prosecutor’s evaluation not just of the compliance program, but also of the corporation’s cooperation in the investigation generally.
- Compliance Monitorships. The Monaco Memo outlines 10 factors for prosecutors to evaluate in determining whether appointment of an independent compliance monitor may be effective in preventing future corporate wrongdoing. These factors include, in addition to the mitigation strategies described above (relating to compliance programs, cooperation, and self-disclosure), whether there exists a unique risk that the corporation will engage in future criminal conduct.
Updates re DOJ Corporate Crime Prosecution Resources:
- Deputy AG Monaco made a point of noting that the DOJ had sought $250 million from Congress for corporate crime initiatives, including improved technology and document discovery services to ensure that DOJ prosecutors had access to the resources needed to effectively manage complex corporate prosecutions which regularly involve documents numbering in the hundreds of thousands or millions. Ensuring that line prosecutors were able to effectively and efficiently manage these cases appears to be a top DOJ priority.
- Additionally, the DOJ has recently hired Matt Glavin—formerly of Anheuser-Busch InBev—to join the Criminal Division as a compliance and data analytics counsel, signaling an effort to embrace and encourage data-driven compliance methods that Glavin pioneered as private sector attorney.[viii]
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[i] See DOJ Press Release, Deputy Attorney General Lisa O. Monaco Delivers Remarks on Corporate Criminal Enforcement, (Sept. 15, 2022) available at https://www.justice.gov/opa/speech/deputy-attorney-general-lisa-o-monaco-delivers-remarks-corporate-criminal-enforcement.
[ii] See Memorandum from Deputy Attorney General Lisa O. Monaco, “Further Revisions to Corporate Criminal Enforcement Policies Following Discussions with the Corporate Crime Advisory Group,” Sept. 15, 2022.
[iii] See Memorandum from Deputy Attorney General Sally Quillian Yates, “Individual Accountability for Corporate Wrongdoing,” Sept. 9, 2015.
[iv] Memorandum from Deputy Attorney General Lisa O. Monaco, supra note 2, at 2.
[v] See DOJ Press Release, supra note 1.
[vi] See DOJ Press Release, supra note 1.
[vii] Memorandum from Deputy Attorney General Lisa O. Monaco, supra note 2, at 9.
[viii] See Dylan Tokar, Justice Department Recruits AB InBev Data Expert to White-Collar Crime Force, The Wall St. J., (Sept. 8, 2022) available at https://www.wsj.com/articles/justice-department-recruits-ab-inbev-data-expert-to-white-collar-crime-force-11662659234.