On Thursday, September 15, 2022, Deputy Attorney General Lisa A. Monaco outlined new steps the Department of Justice will take in its ongoing efforts to control corporate crime. The following day, Assistant Attorney General Kenneth Polite and Assistant Assistant Attorney General Lisa Miller discussed the new policy at the University of Texas Law School’s Government Enforcement Institute, a two-day conference held in Dallas, Texas.
The Deputy Attorney General of Monaco has highlighted five areas of intervention:
1. Prioritize individual responsibility
The Department will take several steps to pursue greater individual accountability for corporate misconduct.
- The government will require companies to fully disclose all non-inside information about potential employee involvement in misconduct;
- Prosecutors will be responsible for reducing or denying cooperation credit for corporate defendants if there is an undue or intentional delay in producing information or documents that demonstrate an individual’s potential guilt; and
- The Department will recommend that prosecutors bring criminal charges against an individual before or at the same time as any corporate resolution. This is intended to further encourage cooperation for the duration of an investigation. If it is not possible to prosecute an individual before or at the same time as a corporate resolution, prosecutors will need to create an investigative plan and timeline to pursue individual liability.
2. Revise how the DOJ will assess prior misconduct
The Department have always considered past misconduct when crafting an appropriate sanction for current misconduct, but Monaco have explained how this consideration will evolve.
- The Department will give the most weight to criminal resolutions in the United States and any prior wrongdoing involving the same employees;
- The government will give less weight to criminal resolutions that occurred more than ten years before the current misconduct and will give less weight to any civil or regulatory resolution that occurred more than five years before the current misconduct;
- Prosecutors will assess whether the instantaneous misconduct shares root causes with the prior misconduct. If so, it may demonstrate a weakness in the company’s compliance practices and carry more weight in crafting a sanction. The government will also consider whether the same management was involved in the two instances of misconduct; and
- The Department will oppose granting multiple or successive non-prosecution or deferred prosecution agreements to the same company.
3. Promote cooperation and voluntary self-disclosure
Monaco announced that the Department will require each component of the DOJ that prosecutes corporate crimes to implement a systematic approach to voluntary self-disclosure, building on existing programs in the Antitrust Division, the National Security and Foreign Corrupt Practices Law Unit. Each component will need to formalize a policy that defines the expectations of what is considered voluntary self-disclosure and the benefits of such disclosure. Absent aggravating factors, the DOJ will not seek a guilty plea from a company so long as it has voluntarily disclosed, cooperated with an investigation, and taken steps to remedy the misconduct; And the DOJ will not seek the imposition of a corporate monitor if the company has demonstrated that it has implemented an effective compliance program.
4. Considering Compensation Structures in Compliance Programs
The DOJ will continue, as it always has, to assess a company’s compliance program when crafting a resolution in an investigation. But Monaco stressed that in future prosecutors will also look at how a company’s compensation system affects compliance. For example, the DOJ will consider whether the company’s compensation system encourages adherence to the compliance program and imposes financial penalties on any employee whose actions have contributed to misconduct. In particular, the government will ensure that a company engages in the “recovery” of compensation from people who have been found to be at fault.
5. Guidelines on how the DOJ will use monitors
Monaco stressed that the DOJ will strive to select monitors through an established process that is transparent and works consistently in all cases. Additionally, the DOJ will ensure that it receives regular updates on the work of controllers to ensure that they are performing their duties properly and staying on budget.
Assistant AG Polite, who heads the department’s criminal division, and assistant assistant AG Miller, who oversees the criminal division’s fraud and appeals sections, discussed the policy at the UT Law CLE conference. Jackson Walker’s Erica Giese and Jennifer Freel attended the conference, with Giese serving on a panel and Freel serving on the planning committee. Polite and Miller highlighted three areas the Division will focus on in the coming months.
1. Ephemeral messaging
The Criminal Division will assess whether “best practice” guidelines should be issued to guide businesses on the use of personal devices and third-party messaging apps, including those offering ephemeral messages. Ephemeral or ephemeral messaging apps allow users to automatically delete messages after receiving them. There has been a significant increase in recent years in the use of systems that offer ephemeral messaging capabilities, such as Signal, Whatsapp, Slack (via the “Shred” app), and Facebook Messenger (vanish mode). Ephemeral messages pose a problem for traditional monitoring and retention practices because the disappearance of messages is often under the control of the individual user and not the corporate IT department.
Polite’s focus on guidance that governs the use of ephemeral messages is noteworthy because it demonstrates that the Department is not going to be left behind by industry in determining how compliance programs should evolve with emerging technologies.
2. Remuneration recovery procedures
Polit also highlighted Monaco’s discussion of the interplay between compensation structures and compliance programs. In particular, he announced that the Criminal Division will provide guidance to prosecutors on how to appropriately reward companies that operate pay clawback policies – contractual terms that allow a company to claw back compensation from executives. who played a role in the misconduct. These policies are intended to penalize wrongdoers who are responsible for corporate misconduct, rather than penalizing shareholders who would otherwise be liable for financial penalties or harm to the company.
Polite said his team will meet with both agency partners and executive compensation experts to gather more insight into how these aspects of compensation systems work. Based on this information, the Criminal Division will issue official guidance to prosecutors on how to reward companies that use pay clawback policies.
3. Voluntary self-disclosure despite history of misconduct
According to Ministry policy, a company with a history of misconduct may not be eligible for a declination. But at the same time, Monaco made clear in its remarks how important it will be for a company to voluntarily and timely disclose potential misconduct. In his remarks, Polite also tackled head-on the issue that often frustrates companies: if they need to be punished anyway because of a history of misconduct, why should they voluntarily disclose any current misconduct?
Polit explained that the department’s new policy makes it clear that there is always a benefit to be gained from voluntary self-disclosure. Under the new policies, a history of misconduct does not preclude a declination unless there are aggravating factors present. Polite announced that for the Criminal Division, aggravating factors that may prevent a declination include, but are not limited to: national security threats, widespread or gross misconduct, management involvement in the misconduct and the significant profits for the company from the fault.
The conclusion of this news from the DOJ:
- Companies should constantly monitor changing directives from government investigators and be prepared to reassess their compliance programs.
- A strong compliance program should not only reduce the risk of misconduct, but also quickly identify and resolve any misconduct that occurs.
- Companies should also assess their compensation structures to determine if there are additional steps they should take to further insulate the company from liability in a future government investigation.