DOJ WILL STRENGTHEN RESPONSE TO CORPORATE CRIME: MAJOR POLICY CHANGES SIGNAL RETURN TO TOUGHER ENFORCEMENT AND INDIVIDUAL ACCOUNTABILITY
On October 28, 2021, at the American Bar Association’s National Institute on White Collar Crime, Deputy Attorney General Lisa O. Monaco announced revisions to the Department of Justice’s policies, all designed to strengthen DOJ’s response to corporate crime. Deputy AG Monaco outlined major policy changes focused on individual accountability, when cooperation credit will be given to corporations, how corporations’ prior history of misconduct will be evaluated, and when corporate monitors will be imposed. Deputy AG Monaco said these changes were just the beginning of DOJ’s efforts to further incentivize corporations to embrace a culture of compliance, and she also announced the creation of a new DOJ Advisory Group that will focus on additional potential policy shifts. Both were also discussed in DOJ’s Memorandum published the same day, titled “Corporate Crime Advisory Group and Initial Revisions to Corporate Criminal Enforcement Policies.”
As noted, Deputy AG Monaco’s remarks focused on four key issues:
- Individual Accountability. Deputy AG Monaco stated that “accountability starts with the individuals responsible for criminal conduct” and reiterated that the DOJ’s first priority in corporate criminal matters is to prosecute the individuals who commit and profit from corporate malfeasance. She indicated that prosecutors are urged to “be bold” in holding accountable those who commit criminal conduct, noting the existing Federal Principles of Prosecution require only that a prosecutor believe a person has violated the law and that the admissible evidence is probably sufficient to obtain a conviction. This statement was particularly pointed in connection with prosecution of senior executives, which Deputy AG Monaco acknowledged were difficult cases that the government would sometimes lose.
- Corporate Cooperation. Deputy AG Monaco also announced that the DOJ was restoring prior Obama-era guidance that to qualify for any cooperation credit, corporations are obligated to provide DOJ with information about all individuals involved in or responsible for the misconduct at issue, regardless of position, status, or seniority. This policy refers back to the “Yates Memo,” which was later rolled back somewhat by then-Deputy Rod Rosenstein in 2018, who narrowed the scope of mandatory identification to those individuals who were “substantially involved” in misconduct. Deputy AG Monaco’s guidance requires cooperating companies to provide information about “all individuals involved in the misconduct, regardless of their position, status or seniority,” including even those deemed by the corporation to be “less than substantially involved” in the misconduct, noting that the line between “substantial involvement” and “insubstantial involvement” is often subjective, and knowledge of all individuals’ involvement and the opportunity to gather information from them is important to the DOJ even if it determines their conduct does not warrant prosecution.
- Prior Corporate Misconduct. Under DOJ’s new guidance, all of a company’s prior misconduct must be evaluated in the context of resolution, whether or not that misconduct is related or even similar to the conduct at issue in a particular investigation. Whereas in past Foreign Corrupt Practices Act (“FCPA”) prosecutions, prosecutors might only consider a corporation’s prior FCPA violations when evaluating whether a corporation is a recidivist, they are now instructed to look broader. Deputy AG Monaco explained that prosecutors are instructed to consider “the full criminal, civil and regulatory record” of a company when resolving a criminal investigation and should not limit their consideration to similar misconduct; indeed, prosecutors now must start from the position that all prior conduct is potentially relevant. This would include enforcement actions outside the DOJ, such as a prosecution in another country and prior regulatory proceedings.
- Corporate Monitors. Deputy AG Monaco signaled a return to the era of frequent imposition of corporate monitors by stating that prior guidance is rescinded to the extent it suggested that monitorships were disfavored. While there were few concrete changes in this area, Deputy AG Monaco emphasized that the DOJ is free to require an independent monitor when appropriate to satisfy prosecutors that a company is living up to its compliance and disclosure obligations under its Non-Prosecution Agreement (“NPA”) and Deferred Prosecution Agreement (“DPA”). She noted that the DOJ is evaluating the monitor selection process and will consider whether to standardize that process across the department, with the aim of avoiding the possible perception of favoritism. As before, though, she indicated that two broad considerations should guide prosecutors when assessing the need for and propriety of a monitor: (1) the potential benefits for a corporation and the public, and (2) the cost of a monitor and its impact on the operation of a corporation. While acknowledging that monitors may not be welcomed by companies, the DOJ intended to make companies with “weak” compliance programs to pay a “hefty price.”
Deputy AG Monaco also announced the formation of the Corporate Crime Advisory Group, which will include representatives from every part of the department involved in corporate criminal enforcement. The group will focus on issues like corporate monitors, repeat offenders, and NPA and DPA non-compliance, as well as offer recommendations on prioritizing individual accountability and enforcement. And Deputy AG Monaco previewed certain potential shifts that may come out of that group.
- Corporate Repeat Offenders. Deputy AG Monaco emphasized that DOJ will focus on companies who are the subject of multiple DOJ investigations, and noted that an immediate area for consideration is whether Non-Prosecution Agreements and Deferred Prosecution Agreements are appropriate for certain recidivist companies.
- NPAs and DPAs. Deputy AG Monaco stated that DOJ “has no tolerance for companies that take advantage of pre-trial diversion by going on to continue to commit crimes,” particularly where they hide those crimes from the government. She cautioned that there would be “serious consequences” for any company that breaches the terms of its DPA or NPA.
In her speech, Deputy AG Monaco also set forth five key takeaways that she clearly sought to drive home for all listeners:
- Companies must proactively assess their internal compliance programs to ensure adequate monitoring and remediation of misconduct or risk the costs of such failures in the future.
- Companies under investigation can expect DOJ’s comprehensive review of their full criminal, civil, and regulatory records.
- Companies cooperating with the government must identify all individuals involved in corporate misconduct and produce all non-privileged information of such involvement in order to obtain cooperation credit.
- There is no default presumption against corporate monitors.
- The administration will take further steps to better combat corporate crime.
Deputy AG Monaco’s remarks, and the overall shift in enforcement priorities, are in line with other recent statements by top U.S. government attorneys, both at the ABA conference and before. Although the precise impact of some of these policy shifts will only be seen over time, it is plain that corporations (and financial institutions in particular) should expect a more aggressive approach from DOJ and other enforcement agencies as the Biden administration moves forward. Companies under investigation must be prepared to disclose information related to an increasingly wider circle of employees who may have been involved in misconduct if they want to be seen as cooperative, and they will also face increased pressure to demonstrate that “root causes” of wrongful conduct have been addressed and that their compliance programs and controls are effectively implemented and resourced at the time of resolution.
This shift in approach is not only important for companies under investigation, however. Companies that are not currently under DOJ scrutiny should also actively review and invest in their compliance programs and increase their focus on corporate cultures of accountability and compliance such that, in the event that an investigation ever ensues, they are well positioned. Indeed, DOJ’s focus on “incentivizing responsible corporate citizenship, a culture of compliance and a sense of accountability” makes it all the more important to focus on such issues long before a company becomes the focus of department investigations.