DOJ Expands Framework for Cracking Down on Corporate Crime | Holland & Knight LLP


In a speech to prosecutors, policymakers and academics on Sept. 15, 2022, U.S. Deputy Attorney General Lisa O. Monaco announced that the U.S. Department of Justice (DOJ) would no longer “accept business as usual” when it comes to prosecution of corporate crime. Speaking at the New York University (NYU) Program on Corporate Compliance and Enforcement, Monaco announced a number of policy changes that focus on holding individuals accountable and resolving cases quickly. By deploying a “combination of carrots and sticks — with a mix of incentives and deterrence,” DOJ is seeking to give “general counsels and chief compliance officers the tools they need to make a business case for responsible corporate behavior,” Monaco said.

Policy Announcements

Focus on Individual Accountability and Swift Investigations

Monaco emphasized that the top priority for corporate criminal enforcement remains going after individual wrongdoers who commit and profit from corporate crime, whether they are “on the trading floor or in the C-suite.” Monaco acknowledged the overall decline in corporate criminal prosecutions in the last decade and noted that DOJ “need[s] to do more and move faster.” To assist and empower prosecutors in completing corporate investigations more efficiently, DOJ is requiring companies to come forward quickly with important evidence or risk the loss of cooperation credit. Monaco explained that a company’s decision to delay disclosure while it considers how to mitigate the damage or investigate internally undermines accountability. “Going forward, undue or intentional delay in producing information or documents — particularly those that show individual culpability — will result in the reduction or denial of cooperation credit,” Monaco said.

In addition, Monaco announced that prosecutors will work to complete investigations and seek warranted criminal charges against individuals “prior to or at the same time as entering a resolution against a corporation.” In other instances, prosecutors will be required to prepare a full investigative plan outlining the remaining work to be completed on individual cases and a timeline for completing that work. Monaco noted that she wanted prosecutors and corporate counsel to understand that they are “on the clock” in completing investigations, particularly as to “culpable individuals.”

Corporate Responsibility

On the corporate responsibility front, Monaco focused on four areas that DOJ will consider in resolving cases against business entities: 1) history of misconduct, 2) voluntary self-disclosures, 3) independent compliance monitors and 4) corporate culture.

History of Misconduct. Recognizing that “not all instances of prior misconduct are created equal,” Monaco announced that, going forward, DOJ will focus on, among other things: 1) prior wrongdoing involving the same personnel or management as the current misconduct, 2) the recency of the misconduct,1 and 3) the nature and circumstances of the prior misconduct. DOJ will be specifically focused, Monaco said, on whether prior misconduct “shared the same root causes as the present misconduct” (and the same actors) and whether the facts indicate a “broader weakness[]” in the company’s “compliance culture or practices.”

Monaco also made clear that multiple, successive non-prosecution or deferred prosecution agreements with the same company would be “disfavored” and that offers of a successive non-prosecution agreement (NPA) or deferred prosecution agreement (DPA) will be scrutinized before approval.

Voluntary Self-Disclosure. Monaco noted that the “clearest path for a company to avoid a guilty plea or an indictment is voluntary self-disclosure.” DOJ’s goal, she said, was simple — to reward companies that enable voluntary self-disclosure and incentivize companies to make the same investment. Monaco announced that “for the first time ever, every [DOJ] component that prosecutes corporate crime will have a program that incentivizes voluntary self-disclosure.” Any DOJ component that currently lacks a formal, documented incentive program will be required to draft one.

Monaco also provided common principles that will apply across voluntary self-disclosure policies: 1) “absent aggravating factors, [DOJ] will not seek a guilty plea when a company has voluntarily self-disclosed, cooperated, and remediated misconduct,” and 2) “[DOJ] will not require an independent compliance monitor for such a corporation if, at the time of resolution, it also has implemented and tested an effective compliance program.”

Independent Compliance Monitors. Addressing concerns about DOJ’s policies and position on corporate monitors, Monaco announced changes meant to increase transparency regarding when DOJ will require third-party corporate monitors and how such monitors will be chosen. Under new DOJ guidance, prosecutors will “not apply any general presumption” against requiring monitors, nor in favor of one; rather, “the need for a monitor and the scope of any monitorship must depend on the facts and circumstances of the particular case.” Under the new guidance, prosecutors will be required to consider a non-exhaustive list of 10 factors2 in determining whether a monitor is appropriate.

As to the selection of corporate monitors, Monaco announced in a separate memorandum that prosecutors should employ “consistent and transparent procedures” and that “[m]onitor selection should be performed [under] a documented selection process that is readily available to the public.” Every DOJ component involved in corporate criminal resolutions that does not already have a public monitor selection process must, by Dec. 31, 2022, “adopt an existing Department process, or develop and publish its own selection process[.]” Finally, under the new guidance, DOJ will require that the Office of the Deputy Attorney General approve “monitor selection for all cases in which a monitor is recommended, unless the monitor is court appointed.” Whenever a monitor is appointed, DOJ will require prosecutors to ensure that the monitor’s responsibilities and scope of authority are well-defined and recorded in writing, and remain apprised of the ongoing work conducted by the monitor.

Corporate Culture. Finally, Monaco highlighted the importance of investments in compliance and corporate culture. Monaco noted that, going forward, prosecutors assessing a company’s compliance programs would “consider whether [a company’s] compensation systems reward compliance and impose financial sanctions on employees, executives, or directors whose direct or supervisory actions or omissions contributed to criminal conduct,” as well as “evaluate what companies say and that they do, including whether, after learning of misconduct, a company actually claws back compensation or otherwise imposes financial penalties.” Notably, Monaco asked DOJ’s Criminal Division to develop guidance by the end of this year “on how to reward corporations that employ clawback or similar arrangements.”

Takeaways

Monaco’s policy pronouncements reinforce the message that she and other senior Justice Department officials have been sending for more than a year now: that DOJ is intent on reining in corporate malfeasance and holding individuals accountable. However, Monaco has also highlighted the importance of efficiency in conducting corporate investigations and the need for speedy cooperation by corporations. As DOJ continues to roll out additional guidance and implementing memoranda to line prosecutors, business organizations and their counsel, as well as executives, should focus closely on how the government will assess a company’s history, culture and prompt responses to individual wrongdoing. DOJ will be looking to see whether the company itself is using the right combination of “carrots and sticks” to encourage lawful and compliant conduct. 

Monaco’s full memorandum, “Further Revisions to Corporate Criminal Enforcement Policies Following Discussions with Corporate Crime Advisory Group,” can be found on the DOJ website.

Notes

1 Monaco noted that “[c]riminal resolutions that occurred more than 10 years before the conduct currently under investigation, and civil or regulatory resolutions that took place more than five years before the current conduct” will generally be accorded less weight.

2 These factors include:

  1. Whether the corporation voluntarily self-disclosed the underlying misconduct in a manner that satisfies the particular DOJ component’s self-disclosure policy;
  2. Whether, at the time of the resolution and after a thorough risk assessment, the corporation has implemented an effective compliance program and sufficient internal controls to detect and prevent similar misconduct in the future (including, notably, how a company addresses the use of personal devices and messaging platforms);
  3. Whether, at the time of the resolution, the corporation has adequately tested its compliance program and internal controls to demonstrate that they would likely detect and prevent similar misconduct in the future;
  4. 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);
  5. Whether the underlying criminal conduct involved the exploitation of an inadequate compliance program or system of internal controls;
  6. Whether the underlying criminal conduct involved active participation of compliance personnel or the failure of compliance personnel to appropriately escalate or respond to red flags;
  7. Whether the corporation took adequate investigative or remedial measures to address the underlying criminal conduct, including, where appropriate, the termination of business relationships and practices that contributed to the criminal conduct, and discipline or termination of personnel involved, including with respect to those with supervisory, management, or oversight responsibilities for the misconduct;
  8. Whether, at the time of the resolution, the corporation’s risk profile has substantially changed, such that the risk of recurrence of the misconduct is minimal or nonexistent;
  9. Whether the corporation faces any unique risks or compliance challenges, including with respect to the particular region or business sector in which the corporation operates or the nature of the corporation’s customers; and
  10. 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.