At last week’s American Bar Association’s 38th Annual National Institute on White Collar Crime, both Deputy Attorney General Lisa O. Monaco and Assistant Attorney General Kenneth A. Polite, Jr. provided additional insight into the DOJ’s continued focus on corporate criminal enforcement. Our previous blog post details the expansion of DOJ’s National Security Division and the increased emphasis on investigating and enforcing sanctions violations. Deputy Attorney General Monaco stressed the benefits of having a strong and established corporate compliance program: “Our goal is to empower companies to do the right thing, by investing in compliance, in culture and in good corporate citizenship—while at the same time empowering our prosecutors to hold accountable those who don’t follow the law.”
The speeches of Deputy Attorney General Monaco and Assistant Attorney General Polite continue a trend since October 2021 of increased review and modification of DOJ’s corporate enforcement policies. In October 2021, Deputy Attorney General Monaco first announced policy changes related to corporate enforcement actions in connection with: (1) individual accountability; (2) prior misconduct; and (3) corporate monitors. With respect to individual accountability, Deputy Attorney General Monaco stated companies “must identify all individuals involved in the misconduct, regardless of their position, status or seniority” to be eligible for any cooperation credit and must provide “all non-privileged information about individual wrongdoing.” As for prior misconduct, DOJ “will be directed to consider the full criminal, civil and regulatory record of any company when deciding what resolution is appropriate for a company that is the subject or target of a criminal investigation.” In other words, all prior misconduct, and not just similar misconduct, may be considered relevant in determining appropriate resolution of any criminal investigation. Deputy Attorney General Monaco also stated independent monitors may be imposed to correct compliance issues that led to the enforcement action and to reduce the risk of any further misconduct.
With these three objectives in mind, on September 15, 2022, DOJ issued a memorandum to announce its new corporate enforcement strategy. Then, on January 17, 2023, DOJ announced revisions to its Criminal Division’s Corporate Enforcement and Voluntary Self-Disclosure Policy. And on February 22, 2023, DOJ announced the U.S. Attorneys’ Offices Voluntary Self-Disclosure policy, setting a national standard to determine whether companies that voluntarily self-disclose criminal conduct are eligible for cooperation credit. A common and intended thread of these serial announcements is DOJ’s focus on companies’ preexisting compliance programs; if a company becomes involved in a criminal investigation, its compliance program will be thoroughly examined.
During her March 2, 2023 speech, Deputy Attorney General Monaco reiterated that DOJ was committed “to finding the right incentives to promote and support a culture of corporate compliance. We want companies to step up and own up when they discover misconduct and to use compensation systems to align their executives’ financial interests with the company’s interest in good corporate citizenship.” Assistant Attorney General Polite reiterated DOJ’s message regarding its stance on the importance of self-disclosure: “Companies that self-report their misconduct set the right tone for their employees and lead by example – showing them with actions that criminal conduct will not be tolerated and will be reported to the authorities. Those are the companies that ‘walk the walk’ when it comes to culture and tone at the top.” He announced revisions to DOJ’s Evaluation of Corporate Compliance Programs (“ECCP”) related to the use of personal electronic devices, messaging applications, and ephemeral messaging, as well as financial compensation and incentives. “Compensation structures that clearly and effectively impose financial penalties for misconduct can deter risky behavior and foster a culture of compliance. At the same time, positive incentives, such as promotions, rewards, and bonuses for improving and developing a compliance program or demonstrating ethical leadership, can drive compliance.” As a result, compensation will be part of DOJ’s evaluation of a company’s compliance program.
DOJ’s flurry of announcements is intended to establish a framework and standards to encourage timely voluntary self-disclosure by providing incentives for such disclosures and withholding benefits for companies that do not self-disclose, even if they cooperate fully with DOJ’s investigation once underway. Nonetheless, the decision whether to self-disclose potential misconduct is a thorny, fact-specific determination. How much these recent changes will impact companies’ decision making on self-disclosure will depend on how the changes are implemented by DOJ, including how significant and reliable the benefits of self-disclosure are in practice. Nonetheless, one inescapable takeaway from these announcements is that there is a renewed focus on the strength of and commitment to corporate compliance programs. All companies would be well served to examine whether their existing compliance programs are sufficiently robust to withstand DOJ scrutiny and, if not, to undertake necessary remediation now.
Future posts will address the new DOJ guidance regarding employees’ use of personal electronic devices and third-party messaging platforms, financial compensation incentives and clawbacks from employees who engage in wrongdoing, and more detailed analysis related to the ECCP.