DGS Legal Alert: New DOJ Corporate Crime Policies Encourage Self-Disclosure & Strong Compliance Structures

October 3, 2022

On September 15, 2022, U.S. Deputy Attorney General (DAG) Lisa O. Monaco issued a memorandum and delivered prepared remarks announcing important policy updates in the Department of Justice’s (DOJ) efforts to fight corporate crime. The new policies build off of a preceding memorandum issued in October 2021 and signal a continued re-orientation towards holding culpable individuals responsible for corporate crime while encouraging companies to self-report, cooperate with investigators, and build strong compliance structures and culture. With the right mix of incentives and deterrence, DAG Monaco explained, shareholders will no longer be forced to bear the consequences of misconduct.

Key Takeaways:

  • Individual Accountability: DAG Monaco emphasized that going after individuals who commit and profit from corporate crime was DOJ’s “top priority.” To that end, time is of the essence. Observing that individual prosecutions are too often slowed by a company’s reluctance to cooperate with prosecutors or spend the time and money to remediate misconduct, DOJ’s new policies incentivize companies to produce “hot” documents or evidence sooner during a company’s investigation process. Such timely disclosures will be rewarded with greater cooperation credit, while undue or intentional delay will result in the reduction or denial of such credit. In addition, DOJ will require its prosecutors to complete investigations and seek any criminal charges against individuals prior to or at the same time as entering a resolution against a corporation. According to DAG Monaco, both prosecutors and corporate counsel should feel like they are “on the clock.”
  • History of Misconduct: Consistent with her October 2021 remarks, DAG Monaco explained that DOJ’s new policies required that prosecutors take a holistic look at a company’s misconduct history in determining an appropriate remedy or punishment. For repeat offenders—especially when involving the same personnel—DOJ will heavily scrutinize successive non-prosecution or deferred prosecution agreements and will not shy away from bringing charges or requiring guilty pleas. For others, the DOJ recognizes that not all misconduct is created equal and will accord less weight to criminal misconduct older than 10 years and civil or regulatory resolutions older than 5 years in determining appropriate punishment.
  • Voluntary Self-Disclosure: DOJ has long encouraged voluntary self-disclosure of corporate misconduct. Emphasizing the importance such disclosure plays in creating a healthy compliance culture and timely resolutions, DAG Monaco explained that every DOJ component engaged in corporate enforcement will implement a program to encourage and reward voluntary disclosures. As an incentive, DOJ will not seek a guilty plea from the company when a company has voluntarily self-disclosed, cooperated, and remediated its conduct, absent aggravating factors. Nor will DOJ require an independent compliance monitor if the company has an implemented an effective compliance program.
  • Independent Compliance Monitors: DAG Monaco explained that DOJ’s policies provide new guidance to prosecutors on how to identify the need for a monitor, how to select a monitor, and how to oversee the monitor’s work to increase the likelihood of success. In addition, the selection process for monitors will be transparent and consistent, and the selection of monitors will be tailored to the misconduct and corresponding compliance deficiencies. Prosecutors will ensure that all monitors stay on task and on budget.
  • Corporate Culture: DAG Monaco also made clear that DOJ will pay close attention to company compliance programs that effectively reduce financial incentives for corporate wrongdoing, such as by clawing-back or escrowing an individual wrongdoer’s compensation. DOJ will require companies to show how they are linking compensation to compliance. Prosecutors are now directed to not only consider what the company’s policies say, but whether the company is following those policies in practice. New guidance on how to reward companies that implement compensation-based compliance programs is expected by the end of the year.

Implications:

According to DAG Monaco, the math is simple: root out misconduct and save time, money, and your reputation; otherwise, be prepared to face harsh consequences. DOJ’s new corporate criminal policies signal a renewed and strengthened focus on punishing corporate wrongdoing. To prepare for these changes, companies should:

  • Invest in effective compliance programs that dedicate appropriate resources to early identification of misconduct, discovery and disclosure of documents or evidence of individual culpability, and remediation of misconduct. As the new DOJ policies make clear, leniency flows to those that voluntarily self-disclose
  • Strengthen their corporate compliance culture by reviewing and, if necessary, updating compensation policies and incorporating forthcoming guidance on how to implement compensation-based compliance programs.
  • Seek to hold individual wrongdoers accountable and, where appropriate, ensure early and robust cooperation with investigators.
  • Review the prior misconduct of the company and of any entities acquired through mergers or acquisitions to better gauge how such history may affect a prosecutor’s evaluation of any punishment for future misconduct.
  • Consult with experienced counsel early and often if facing allegations of corporate wrongdoing or an investigation or enforcement actions by the government.

    Please contact a DGS partner if we can assist you in any way.

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