Takeaway: Changes in DOJ corporate compliance programs focus on prompt reporting and self-disclosure, and individual accountability. Companies can protect their interests by creating a diligent, comprehensive risk-based compliance program.
Following a major revision in corporate enforcement strategy that took place last fall, Deputy Attorney General Lisa Monaco announced the Department of Justice’s (DOJ) new corporate enforcement strategy on September 15, 2022. Prosecutors were urged to speed up investigations into corporate wrongdoing, companies were warned not to delay disclosures, and self-reporting programs were expanded.
Prompt Reporting and Voluntary Self-Disclosure
Under the new strategy, the DOJ aims to incentivize companies to promptly self-report corporate malfeasance. Monaco urged prosecutors to speed up investigations of individuals, noting that corporate prosecutions have declined over the past few decades. To deter companies from delaying these investigations, Monaco stated that any cooperating company that does not promptly turn over documents and information to the government in an investigation may lose some or all credit for cooperating.
Monaco reiterated previous DOJ guidance, strongly urging companies to voluntarily self-disclose instances of wrongdoing. As an incentive to self-disclose, Monaco stated that absent substantial aggravating factors, the DOJ will not seek guilty pleas in situations where the wrongdoing is voluntarily self-disclosed and remediated.
Monaco’s new strategy focuses heavily on individual accountability and suggests a more aggressive approach to individual prosecutions. Cooperating companies are required to come forward more quickly with evidence of individual malfeasance. Monaco stated that when a company discovers evidence suggesting individual criminal liability, it should immediately turn that evidence over to the DOJ. Failing to promptly turn over evidence against individuals will endanger a company’s cooperation credit. Monaco also informed that the DOJ would not enter into deferred prosecution agreements with companies until the DOJ has begun individual prosecutions or has created an investigative plan to do so.
As an incentive, companies that claw back compensation from employees engaged in wrongdoing are looked upon more favorably. Monaco emphasized the importance of companies holding individuals accountable for their own actions, stating “compensation systems that clearly and effectively impose financial penalties for misconduct can deter risky behavior and foster a culture of compliance.”
Monaco addressed the DOJ’s position on recidivist corporate offenders, informing that even prior unrelated misconduct would factor into the resolution of corporate criminal cases. To alleviate concerns arising from this factor, Monaco clarified that criminal resolutions taking place more than 10 years prior to a company’s current misconduct, and civil or regulatory settlements more than five years prior, would be given less consideration.
However, Monaco detailed that the DOJ did not wish to deter acquisitions of companies with a history of compliance issues. If an acquisition results in an enhanced compliance program, the DOJ will give additional goodwill to acquiring companies that voluntarily self-disclose criminal conduct and significantly improve corporate compliance.
Read Deputy Monaco’s statement at: https://www.justice.gov/opa/speech/deputy-attorney-general-lisa-o-monaco-delivers-remarks-corporate-criminal-enforcement
The DOJ emphasized that these changes were meant to encourage companies to develop a robust compliance system. Companies that devote the time and resources to strengthening compliance will be able to prevent and detect individual malfeasance and are less likely to face heavy penalties in the event of a violation.
Considering these new policies, it is imperative that corporations build a comprehensive, risk-based compliance program and conduct thorough due diligence in acquisitions.