On September 15, 2022, Deputy Attorney General Lisa O. Monaco delivered remarks on the Department of Justice’s corporate prosecution priorities at New York University, at the invitation of the University’s Project on Corporate Compliance and Enforcement. While many of her comments were simply a reiteration of existing priorities, some were potentially meaningful changes. Indeed, by clarifying certain points and strengthening others, Monaco emphasized the “carrot and stick” approach to signal loud and clear that the DOJ remains as focused as ever on pursuing corporate crime. She unambiguously encouraged corporations both to self-report potential criminal activity and cooperate in the investigation of culpable individuals, indicating that failure to do so could lead to severe consequences. At the same time, as has long been the case, the policies leave somewhat subjective the true nature of any “carrot” and any “stick” that would apply in any given case, making the decision of how corporations should deal with potential criminal conduct one of the most challenging decisions corporations can face.
Monaco went through five separate topics.
A. Individual Accountability:
Monaco made clear that pursuing individual accountability for those who commit and profit from crime remains the DOJ’s top priority for corporate criminal enforcement. And she stressed that, in the view of the current DOJ, to do that effectively there needs to be greater cooperation from corporations and more quick action. She expressed a concern that the DOJ has observed too many instances of companies and executives delaying the disclosure of certain documents, while they work to mitigate the damage and investigation of their own conduct. And she made clear that, going forward, 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. Indeed, she stated that “if a cooperating company discovers hot documents or evidence, its first reaction should be to notify the prosecutors,” and made clear that “[t]his requirement is in addition to prior guidance that corporations must provide all relevant, non-privileged facts about individual misconduct to receive any cooperation credit.” This emphasis on speed was coupled with a promise that DOJ prosecutors will work to complete investigations and seek warranted criminal charges against individuals before or at the same time as entering a resolution against a corporation, and that in cases where it makes sense to resolve a corporate case first, the DOJ will require a full investigative plan outlining the remaining work to do on the individual cases and a timeline for completing that work.
B. History of Misconduct:
Monaco provided additional clarity as to how DOJ will consider the criminal, civil and regulatory record of a company when determining the appropriate resolution. While she stated that the DOJ will continue to consider the “full” criminal, civil, and regulatory history, she made clear that “dated conduct,” meaning criminal resolutions that occurred more than 10 years before the conduct under investigation, and civil or regulatory resolutions that took place more than five years before the current conduct, will be “accorded less weight.” She also acknowledged that the DOJ will also consider the nature and circumstances of the prior misconduct, including whether it shared the same root causes as the present misconduct, recognizing that not all instances of prior misconduct should be treated equally. She made clear that the DOJ will not treat as recidivists’ companies that have a proven track record of compliance simply because they have acquired companies with a record of compliance challenges. And lastly, she stated that the DOJ will disfavor entry into multiple and successive Non-Prosecution and Deferred Prosecution Agreements. As she put it, “if any corporation still thinks criminal resolutions can be priced in as the cost of doing business, we have a message—times have changed.”
C. Voluntary Self-Disclosure:
Monaco simultaneously held out voluntary self-disclosure as the means to receive the proverbial “carrot.” Recognizing that there has been limited predictability to the value of self-reporting outside of the Antitrust Division and in FCPA cases, Monaco announced that, going forward, every DOJ component that prosecutes corporate crimes will be required to have a program that incentivizes voluntary self-disclosure. If a component currently lacks a formal, documented policy, it is being required to draft one that provides clear expectations of what self-disclosure entails and identifies the concrete benefits that a self-disclosing a company can expect.
In advance of such component-by-component policies, she announced certain common principles: Absent aggravating factors, the Department will not seek a guilty plea when a company has voluntarily self-disclosed, cooperated, and remediated misconduct; and the Department will not require an independent compliance monitor for such a corporation if, at the time of resolution, it also has implemented and tested an effective compliance program.
D. Independent Compliance Monitors:
Monaco announced that the DOJ will release new guidance for prosecutors on how to identify the need for an independent compliance monitor, including how to select one and oversee the monitor’s work. All monitor selections would be made pursuant to a documented selection process, and prosecutors will be encouraged to ensure that the scope of every monitorship is tailored to the misconduct and the related compliance deficiencies of the company. Here, Monaco emphasized that the DOJ is not a regulator, nor does it inspire to be. Thus, she stated that the DOJ will seek to be strategic and impactful in its imposition of any monitor.
E. Corporate Culture:
Monaco observed that corporations are increasingly incorporating corporate values into their compensation systems as a way to promote compliance—financially rewarding compliant behavior and clawing back compensation for non-compliance. Monaco spoke of such changes as positive developments, and which DOJ clearly wants to encourage. Accordingly, Monaco noted that when evaluating a company’s compliance program in the future, prosecutors will be encouraged to assess whether the company’s compensation systems reward compliance and impose financial sanctions on employees, executives, or other directors whose actions or omissions contributed to criminal conduct. The DOJ’s Criminal Division will develop guidance by year-end on how prosecutors should evaluate such arrangements.
On balance, these developments all heighten both the potential incentives for corporations cooperating with the DOJ and the potential consequences for failing to do so effectively. And perhaps most significantly, they signal that there will be little tolerance for corporations that are slow to act. The identification of potential corporate criminal behavior has long presented incredibly complicated questions for corporate counsel and this ratcheting up of the pressure will serve to up the stakes. In the event of internal whistleblowers, or other indicia of potential criminal activity, it is thus more imperative than ever for corporations to take such matters seriously, consult with counsel, and act decisively.