Guidance on individual accountability
The DOJ memorandum focuses primarily on promoting individual accountability. In her speech, Monaco noted that the DOJ’s “number one priority is individual accountability” and “going after individuals who commit and profit from corporate crime.”
First, the DOJ memorandum focuses on the importance of a company’s complete and timely disclosures during investigations into individual misconduct. The memorandum instructs corporations to promptly disclose to the DOJ all relevant, non-privileged facts surrounding the misconduct. The memorandum also states that, going forward, DOJ prosecutors must specifically assess whether the corporation cooperated in a timely fashion. The guidance emphasizes that delayed disclosure will jeopardize a company’s eligibility to receive cooperation credit.
Second, the guidance notes that DOJ prosecutors will endeavor to complete investigations into individuals prior to or at the same time as the entry of a resolution against the corporation. If the DOJ resolves a corporate case prior to completing its investigation into the responsible individuals, the corporate resolution must be accompanied by a memorandum that discusses all potentially culpable individuals and provides an update as to the status of the individual investigation.
Third, the guidance advises prosecutors to consider pursuing charges against culpable individuals even if they are simultaneously being investigated abroad. The memorandum states that, before declining to commence a prosecution in the United States because an individual is being investigated for the misconduct abroad, prosecutors must make a determination as to whether there is a significant likelihood that the individual will be subject to effective prosecution in the other jurisdiction. Prosecutors are instructed to consider: (1) the strength of the other jurisdiction’s interest in the prosecution, (2) the other jurisdiction’s ability and willingness to prosecute effectively, and (3) the consequences that might follow if the individual is convicted in the other jurisdiction.
Guidance on corporate accountability
The DOJ guidance next focuses on various aspects of corporate accountability. The guidance provides clarity into the factors the government considers when pursuing resolutions with corporations.
First, the memorandum focuses on evaluating a corporation’s history of misconduct. In determining how to resolve an investigation, prosecutors generally will consider the corporation’s record of prior misconduct. The guidance instructs prosecutors to consider some past misconduct to be less probative. The guidance notes that prosecutors should assign the greatest significance to relevant federal criminal resolutions entered into within 10 years of the current offense. Further, prosecutors should consider whether prior resolutions involve corporate entities that have since been acquired and whether the management or executive leadership team at the current corporation is the same. The guidance notes that successive deferred or non-prosecution agreements will be disfavored. In her speech, Monaco stated that criminal resolutions cannot be “priced in as the cost of doing business.”
Second, the memorandum focuses on evaluating a corporation’s level of cooperation, noting that a corporation’s cooperation with an investigation can be a mitigating factor that can affect the form of the resolution and the applicable fine range. The memorandum also instructs companies seeking cooperation credit to timely preserve, collect, and disclose relevant documents located both in the United States and overseas. Prosecutors are instructed to provide cooperation credit to companies that are able to navigate foreign legal issues, such as data privacy laws and blocking statutes, to produce records located overseas. Conversely, companies that use such foreign laws to shield misconduct and subsequently fail to produce foreign evidence may not receive such credit.
The guidance also emphasizes the importance of voluntary self-disclosure. The memorandum directs all DOJ components that prosecute corporate crime to draft or review their policies on voluntary self-disclosure. The guidance also states that, absent aggravating factors, the DOJ will not seek a guilty plea where a corporation has voluntarily self-disclosed, fully cooperated, and timely and appropriately remediated the criminal conduct. Monaco noted that the DOJ intends to “reward companies whose historical investments in compliance enable voluntary self-disclosure and to incentivize other companies to make the same investments going forward.”
Third, the memorandum focuses on evaluating a corporation’s compliance program. The guidance directs prosecutors to consider the effectiveness of a corporation’s compliance program when determining the appropriate terms for a corporate resolution, including whether an independent compliance monitor is warranted. Prosecutors are directed to consider, among other factors, whether the corporation’s compliance program is well designed, adequately resourced, and effective in practice.
A key element of the new guidance: Prosecutors are specifically instructed to consider whether the corporation has implemented effective policies and procedures governing the use of personal devices and third-party messaging platforms in order to ensure that electronic data and business-related communications are preserved. Given the prevalence of these devices and messaging platforms, as well as the frequency with which personal devices are used for business communications, corporations should pay particular attention to their policies on this issue, and seek the guidance of counsel if necessary.
Independent compliance monitors
The memorandum next discusses the procedures surrounding the imposition of independent compliance monitors.
First, the guidance states that the need for the imposition of an independent compliance monitor will depend on the facts and circumstances of each case. The guidance includes a non-exhaustive list of factors in this area, including whether the corporation voluntarily self-disclosed the underlying misconduct, whether the corporation has an effective compliance program, the pervasiveness and context of the underlying criminal conduct, and more.
Second, the guidance instructs prosecutors to employ consistent and transparent procedures when selecting an independent monitor. The guidance states that monitor selection should be open to the public. The guidance also directs every DOJ component involved in corporate criminal resolutions that does not currently have a public monitor selection process to adopt an already existing process or develop and publish its own process.
Third, the guidance emphasizes the importance of the continuous review of monitors. Prosecutors are directed to ensure that they remain apprised of the ongoing work conducted by the monitor and should receive regular updates about the status of the monitorship and any issues that arise.
Corporate compensation
The DOJ has also placed emphasis on corporate compensation, indicating that it will consider whether a company’s compensation system rewards compliance and imposes financial sanctions on employees, executives, or directors whose direct or supervisory actions (or inaction) contribute to misconduct. The DOJ indicates that it will look to whether the company seeks to claw back compensation from employees who engaged in misconduct. The DOJ intends to release new guidelines on how to reward companies with respect to these issues by the end of the year.
Conclusion
These numerous, significant changes to the DOJ’s corporate enforcement policy indicate that the DOJ is cracking down on corporate misconduct. Monaco stated that, taken together, “the policies we’re announcing today make clear that we won’t accept business as usual.” The memorandum also shows that the DOJ is committed to ensuring that corporations are in compliance with all applicable laws and regulations. Monaco noted that, through these policies, the DOJ is “empowering companies to do the right thing—and empowering our prosecutors to hold accountable those that don’t.”
At the same time, the new policy raises questions for businesses. For example, how will the DOJ define “timely” disclosure of wrongdoing? In cross-border cases where a foreign regulator has commenced an enforcement action, how will the DOJ concretely determine whether a follow-on U.S. prosecution is warranted? On these and other potentially costly decisions for businesses, institutional knowledge, a keen understanding of past DOJ practice, and tenacious advocacy may be key.
Client Alert 2022-228
