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Deputy Attorney General Lisa Monaco Announces Corporate Prosecution Policy Changes, Urges Corporate Defendants to Move Faster九月 22, 2022
On September 15, Deputy Attorney General Lisa Monaco announced significant changes to the US Department of Justice’s (“DOJ”) approach to corporate criminal enforcement. Monaco’s remarks expand on a 2021 speech in which she laid out an aggressive and clear-eyed approach to prosecuting corporate crime. The policies outlined in her remarks last week reflect a renewed emphasis on accountability for individuals and repeat corporate offenders, and make unambiguous that the DOJ will now demand prompt disclosure from corporations as a predicate for receiving cooperation credit in connection with any potential corporate resolution. Monaco also emphasized that the DOJ will consider executive compensation structures in evaluating the strength of a company’s compliance program, and will look favorably on structures that impose financial penalties for misconduct and affirmatively incentivize responsible behavior.
After planting a stake in the ground with last year’s speech, Monaco convened a group of DOJ experts to conduct a “top to bottom review” of corporate enforcement policies. The group sought input from outside experts, public interest groups, members of the business community, and the defense bar, and revised the DOJ policies to renew their emphasis on individual accountability, prompt and thorough cooperation, and robust internal compliance policies. Monaco explained that these revisions, described below, reflect a “carrot and stick” approach that will enable the DOJ to incentivize responsible corporate behavior and vigorously pursue accountability for wrongdoers, “regardless of their position, status or seniority.”
Emphasis on Individual Accountability
Monaco stressed that individual accountability is a top priority for the DOJ, and highlighted the DOJ’s recent trial successes against senior executives in the financial and pharmaceutical industries. From now on, she said, corporations must promptly provide “all relevant, non-privileged facts” regarding individual misconduct in order to receive cooperation credit. “Undue or intentional delay in producing information or documents—particularly those that show individual culpability—will result in the reduction or denial of cooperation credit,” Monaco noted. While she did not lay out specific standards for timely cooperation, Monaco suggested that a cooperating company’s first reaction upon discovering potentially significant documents or evidence should be to notify prosecutors rather than circling the wagons, and emphasized that delays that inhibit the government’s investigation will be grounds for reduction or denial of cooperation credit. Monaco clarified that this prompt reporting requirement is new and distinct from existing DOJ guidance requiring corporations to disclose all relevant, non-privileged information promptly, regarding individual misconduct as a predicate for cooperation credit. The DOJ’s emphasis on prompt disclosure underscores the importance of cooperation between inside and outside counsel at the earliest stages of the investigation process.
Monaco also noted that in some cases, the process of resolving investigations against corporations could delay individual prosecutions. To that end, Monaco announced that prosecutors will seek to resolve cases against individuals prior to or simultaneously with entering a resolution against a company. If it makes more sense to resolve the corporate case first, she suggested, prosecutors must now present a full investigative plan laying out the remaining work on individual cases.
Evaluating Companies with a History of Misconduct
Not all corporate offenders are created equal in Monaco’s view; 10 to 20 percent of large corporate criminal resolutions involve repeat offenses. In her 2021 remarks, Monaco committed the DOJ to examining a company’s regulatory, civil, and criminal record in determining an appropriate resolution. Monaco explained that, after making that announcement, the DOJ received feedback about the need to consider a company’s past misconduct in the context of its regulatory environment and subsequent reforms to its compliance culture. In response to this feedback, Monaco outlined new guidance on how the DOJ will evaluate past instances of misconduct.
First, in evaluating the appropriate resolution for companies with a history of misconduct, prosecutors must consider the timing of past misconduct. The DOJ will accord dated misconduct—conduct that took place more than 10 years ago in the criminal context and more than 5 years ago in the civil context—less weight than more recent conduct in assessing the full picture of a company’s history.
Next, the DOJ will consider whether the new conduct implicates the same personnel or behavior at issue in past matters. This focus reflects the DOJ’s interest in understanding whether the conduct is isolated or reflects deeper compliance issues.
Finally, in response to concerns that a focus on past misconduct will unfairly penalize corporations in highly regulated industries, Monaco explained that the DOJ will consider how the corporation’s conduct compares to that of peers in similarly regulated industries.
Monaco cautioned that these new guidelines are not intended to discourage acquisitions of companies with a history of noncompliance. So long as firms identify any compliance issues “promptly and properly address [them] post-acquisition,” the DOJ will not penalize acquiring companies with record of compliance for past misconduct at the acquired company.
As a corollary to the new guidelines, Monaco announced that the DOJ will now disfavor successive non-prosecution and delayed prosecution agreements with the same company. To that end, Monaco announced that DOJ leadership will now scrutinize all successive NPA and DPA proposals. “Companies cannot assume they are entitled to an NPA or a DPA, particularly when they are frequent flyers,” Monaco said.
Monaco also announced a new requirement that each component of DOJ maintain a formal, written policy that incentivizes voluntary self-disclosure. The goal of this requirement is to provide predictability by setting clear expectations for the requirement and benefits of self-disclosure. The details of this requirement have yet to be hashed out, and it is unclear how the new initiative will interact with or align with existing programs like the Antitrust Division’s leniency program and the Criminal Division’s Foreign Corrupt Practices Act’s Corporate Enforcement Policy.
Monaco also announced that the DOJ would release new guidance for prosecutors on seeking the appointment of an independent monitor, the procedures for selecting one, and guidelines on tailoring and overseeing the monitor’s work. To foster transparency and consistency, Monaco announced that the DOJ would now use a documented selection protocol to appoint monitors. Aiming to nip complaints about monitorships and overbreadth in the bud, Monaco announced that the DOJ will develop instructions for prosecutors on how to “monitor the monitor” and ensure that monitors remain on-task and on-budget.
Monaco announced that the DOJ will now consider a company’s compensation systems as a part of its assessment of the strength of its compliance program. She said that the DOJ will now reward companies whose compensation agreements encourage compliance and hold companies accountable when their compensation structures do not contain those incentives. Monaco suggested that the DOJ views measures like clawback provisions or escrowing of compensation as effective ways to deter misconduct. Monaco stressed that the DOJ is continuing to develop guidance on how to reward companies that take these measures.
Monaco’s speech sent a clear message that the DOJ will redouble its efforts to address corporate wrongdoing. And it’s asking for help to accomplish that goal: the DOJ will seek $250 million in appropriations from Congress next year to address the issue of corporate crime. More than anything else, Monaco emphasized that there is a business case for compliance and that prosecutors will expect companies to invest in prevention. Companies must therefore closely evaluate their existing programs, compensation structures, and compliance practices to ensure that if the DOJ comes calling, the current set of policies shows that they are aware of the DOJ priorities—and implementing them. Now, more than ever, companies need to recalibrate their policies in light of the DOJ’s new enforcement guidelines, revisit their compliance policies, and consider measures they can take to mitigate risk.
O’Melveny will be closely monitoring the DOJ’s approach to corporate crimes and other enforcement policies. Please contact the attorneys listed here, your O’Melveny counsel, or a member of O’Melveny’s Antitrust & Competition or White Collar Defense & Corporate Investigations teams for help in navigating this complex and evolving area of practice.
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