DOJ unveils new policies to encourage responsible corporate citizenship and deter wrongdoing


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Practices: Government Law Enforcement/White Collar Criminal Defense, Litigation, Commercial and Commercial Litigation, Corporate and Securities Litigation, Antitrust, Anti-Corruption/International Risk, Securities and Futures Enforcement

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On September 15, 2022, before a hearing at NYU School of Law that included SEC Division of Enforcement Director Gurbir Grewal, U.S. Attorneys for the Southern District of New York and the District of New Jersey , and several line prosecutors, Deputy Attorney General Lisa O. Monaco announced major changes to the penal repression of companies. These changes are the result of an ongoing study by the DOJ’s Corporate Crime Advisory Group, a group of DOJ experts tasked with examining corporate law enforcement efforts, which Monaco has made public for the first time. last October. In his final remarks, Monaco stressed that the DOJ will implement a combination of incentives and disincentives to “make the business case for responsible corporate behavior” and shift the burden of financial sanctions from companies away from shareholders. The Ministry has also published a accompanying note describing the changes in more detail. Monaco’s remarks make it clear that the DOJ is taking concrete steps to accompany the more aggressive corporate crime prosecution stance it adopted last October.

1. Hold people accountable, faster

Monaco began by emphasizing that the DOJ continues to consider individual accountability – the prosecution of individuals who commit or profit from corporate crime – its top priority. To this end, Monaco has announced a new DOJ cooperation credit requirement. Specifically, a cooperating company must promptly alert the DOJ to “significant evidence.”

Companies that delay providing evidence of individual wrongdoing do so at their own risk: “Undue or intentional delay in producing information or documents, especially those that show individual culpability, will result in a reduction or denial cooperation credit,” she warned.

However, the burden of moving individual cases will not rest solely on businesses. Monaco explained that DOJ prosecutors “will endeavor to complete investigations and seek justified criminal charges against individuals before or at the same time as they enter into a resolution against a company.” In cases where the corporate case is solved first, prosecutors must now create an investigation plan with a plan and timeline for resolving the remaining individual cases.

2. Revised Approach to Historical Misconduct

Last year, Monaco announced that the DOJ now considers a company’s full criminal, civil and regulatory record to determine an appropriate resolution, a controversial move at the time. In her recent speech, she provided additional guidance on how the DOJ will contextualize this historic record.

The DOJ will review what type of misconduct occurred, as well as where the misconduct took place. Specifically, Monaco has identified the following factors as indicia of material prior misconduct: (a) criminal resolutions in the United States; (b) prior misconduct involving the same personnel, management or executive management as the current misconduct; and (c) a prior fault which “shared the same root causes as the current fault”. The DOJ will also look at how long the prior misconduct occurred. Criminal resolutions more than ten years old and civil or regulatory resolutions more than five years old will be given less weight by the Ministry.

Monaco also highlighted some mitigating factors that the DOJ will take into account in its assessment of past misconduct. First, she noted that a company’s actions in a highly regulated industry should be compared to others in that industry to gauge the seriousness of the misconduct. Second, she assured that acquiring companies with good compliance histories will not be penalized for historical compliance issues of acquired companies, if the issues are quickly resolved after the acquisition.

Finally, Monaco warned that DOJ management will closely review all non-prosecution agreement (NPA) and deferred prosecution agreement (DPA) proposals for companies that already have at least one NPA or DPA.

3. Encourage voluntary self-disclosure

Monaco also clarified that the DOJ remains committed to voluntary self-disclosure. Each component of the DOJ will now be required to have a formal, written policy incentivizing voluntary self-disclosure, including identification of the specific benefits a company will receive from self-disclosure.

Monaco discussed two new global policies that companies could benefit from if they disclose themselves. First, voluntary self-disclosure (in addition to cooperative and remedial measures) will prevent the Department from seeking a guilty plea. Second, if a company voluntarily self-disclosed and implemented and tested an effective compliance program at the time of the case resolution, the DOJ will not require an independent compliance monitor.

4. Additional Requirements for Compliance Monitors

Monaco also discussed surveillance missions. She announced that (a) the DOJ will issue new prosecution guidelines on how to identify the need for, select, and supervise compliance monitors; (b) monitor selections must now follow a documented selection process; and (c) prosecutors will confirm that the monitor is performing its role adequately and within budget. She noted that the DOJ is not a regulator, but “when we mandate a monitor, we recognize our obligations to stay involved and monitor the monitor,” she said.

5. Evaluate Financial Compensation Programs to Promote Compliance

Finally, Monaco has announced that DOJ prosecutors will now review a company’s compensation scheme in assess the strength of the company’s overall compliance program. Specifically, the DOJ will consider whether company policies use (a) “affirmative measures and criteria to reward behavior that promotes compliance” and/or (b) methods to penalize individuals who have contributed to misconduct. criminal, such as clawback provisions or escrow of indemnification. In addition, the DOJ will review the extent to which the company has enforced these misconduct policies. Monaco has indicated that the Criminal Division of the DOJ will issue additional guidance before 2023 on these policy changes.

Key points to remember

As Monaco itself pointed out at the top of its remarks yesterday, the last decade has seen a decline in criminal prosecutions against companies, which underscored the need for the Department to ‘do more and act faster’. . Monaco’s statement emphasized that the DOJ remains focused on encouraging businesses to prevent, detect and report wrongdoing by both “the carrot and the stick.” To earn carrots, companies must assess ways to encourage good behavior, including through compensation; to avoid sticks, they should consider ways to make their internal investigations more streamlined and nimble to meet DOJ expectations for timely disclosure. In summary, the DOJ’s new policies make it easier for prosecutors to aggressively pursue perceived wrongdoing while seeking tangible rewards for responsible corporate citizenship.

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