On September 15, 2022, the U.S. Department of Justice (DOJ)'s Deputy Attorney General Lisa Monaco announced new guidance and policies regulating corporate criminal enforcement. The new policies emphasize that DOJ will not "accept business as usual," and is seeking to motivate companies—with a mix of incentives and deterrence—to self-report wrongdoing early and completely. In Monaco's words, DOJ wants to "empower" companies to "do the right thing" by rewarding companies that invest in compliance and that identify and voluntarily disclose misconduct in a timely manner.
DOJ's number one priority remains accountability, meaning holding individual wrongdoers accountable regardless of their position, status, or seniority. While this has been DOJ's primary goal for years, Monaco provided additional guidance for how DOJ plans to incentivize companies to report individual wrongdoers. On top of DOJ's prior October 2021 guidance, which required companies to disclose all individuals involved in potential wrongdoing, Monaco emphasized that cooperating companies must provide all relevant, non-privileged facts about individual misconduct in a timely manner to receive cooperation credit. Monaco warned that intentionally delaying the disclosure of documents or information for strategic reasons will result in the reduction or denial of cooperation credit. Monaco further stated that DOJ generally will pursue any charges against individuals before or at the same time as any corporate resolution, rather than after a corporate resolution.
Monaco further emphasized a mechanism to aid DOJ's investigation of individual wrongdoers: express language requiring prosecutors to consider whether the corporation has implemented effective policies and procedures governing the use of personal devices and third-party messaging platforms. Particularly when viewed in the context of substantial recent U.S. Securities and Exchange Commission settlements involving financial institutions that failed to preserve data from third-party messaging platforms, DOJ's inclusion of a section on the use of personal devices and third-party applications in its Corporate Criminal Enforcement Policies suggests that the government intends to investigate seriously whether companies have ensured that data from personal devices and messaging platforms is preserved for investigations.
Monaco also highlighted that DOJ will credit companies that "claw back" compensation from, or impose financial penalties on, employees and executives who have engaged in misconduct. Monaco explained that by emphasizing financial sanctions for individuals, DOJ is trying to shift the burden of corporate financial penalties away from shareholders and onto those who are more directly responsible. DOJ also intends to credit companies that implement compensation programs intended to incentivize compliance. Monaco announced that the public can expect further guidance on both of these points by the end of the year.
DOJ's new Corporate Criminal Enforcement Policies further add substantial guidance on monitors, including factors to be considered in evaluating whether a monitor is appropriate, the process prosecutors should follow in selecting monitors, and procedures governing how prosecutors must oversee a monitor's work. Monaco explained that all monitor selections will be made pursuant to a documented selection process and DOJ will ensure that the scope of every monitorship is tailored to the misconduct. This added emphasis on monitorships, on top of Monaco's rollback last year of Trump administration guidance that independent corporate monitors would be imposed as the exception, further signals a return to the more frequent imposition of monitors—and that monitors will be a regular part of any negotiation of a corporate resolution with DOJ.
Monaco also added some specifics to last year's announcement that prosecutors must consider the full range of a company's prior misconduct when determining an appropriate resolution. She explained that prosecutors must consider the nature and circumstances of the prior misconduct, how long ago the prior misconduct occurred, whether the conduct under investigation occurred under the same management team or executive leadership, and whether the company's current culture shows a commitment to compliance. Monaco further emphasized that it will be more difficult for prior offenders to receive a non-prosecution agreement (NPA) or a deferred prosecution agreement (DPA) because DOJ will disfavor agreeing to multiple, successive NPAs or DPAs with the same company, and DOJ leadership will scrutinize proposals to ensure a more consistent approach across DOJ. Importantly, however, DOJ will not treat a compliant company that acquires a recidivist company where the misconduct took place before the acquisition as a recidivist.
Monaco announced that every area within DOJ is now required to implement written policies that incentivize voluntary self-disclosure. Monaco suggested that these policies will be akin to existing policies in certain DOJ divisions, such as the Antitrust Division's Leniency Program, the Criminal Division's Foreign Corrupt Practices Act Corporate Enforcement Policy, and the National Security Division's program for export control and sanctions violations. Stating that "predictability is critical," Monaco emphasized that the policies must provide clear expectations of what self-disclosure entails and must identify credit that a company will receive if it meets those expectations.
Importantly, Monaco stated that, absent aggravating factors, DOJ will not seek a guilty plea when a company has voluntarily self-disclosed, cooperated, and remediated misconduct. This is a significant "carrot" to encourage voluntary disclosure, though it remains to be seen what DOJ means by "aggravating factors" that may reduce a company's cooperation credit.
At bottom, the guidance announced by Monaco advances long-standing goals of DOJ by increasing incentives for corporate cooperation and bolstering corporate compliance programs. DOJ's emphasis on timely, voluntary compliance suggests that DOJ will be less tolerant of lengthy and protracted internal investigations and presentations than it has been in the past and will impose consequences for intentional delay or gamesmanship. Time will tell whether DOJ will provide the promised predictability and incentives necessary to execute these policies and reverse the decline in corporate prosecutions. But, in the meantime, the guidance provides corporations and their counsel with a better framework to ensure appropriate resolutions.
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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