DOJ Officials Announce New Priorities to Combat Corporate Crime with Additional Details Provided at Government Enforcement Conference in Dallas | Jackson Walker

On Thursday, September 15, 2022, Deputy Attorney General Lisa A. Monaco outlined the new steps the Justice Department will take in its ongoing corporate crime police efforts. The next day, Deputy Attorney General Kenneth Polite and Deputy Attorney General Lisa Miller discussed the new policy at the University of Texas School of Law’s Government Enforcement Institute, a two-day conference held in Dallas, Texas.

Deputy Attorney General Monaco highlighted five areas of concern:

1. Prioritize individual responsibility

The Department will take several steps to pursue increased individual liability for business misconduct.

  • The government will require companies to fully disclose all non-privileged information about the potential involvement of employees in misconduct;
  • Prosecutors will be instructed to reduce or deny the cooperative credit for corporate defendants if there is an undue or intentional delay in the production of information or documents demonstrating the potential guilt of an individual; And
  • The Department will recommend prosecutors to bring a criminal charge against an individual before or in conjunction with any corporate resolution. This is intended to further incentivize cooperation when suspending an investigation. If it is not possible to prosecute an individual before or in conjunction with a corporate resolution, prosecutors will need to create an investigation plan and timeline for prosecuting individual responsibility.

2. Review of how the Justice Department will assess past misconduct

The Department has always considered previous misconduct in defining adequate punishment for current misconduct, but Monaco has explained how that consideration will evolve.

  • The Department will give full weight to criminal resolutions in the United States and to any previous 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 civil or regulatory resolutions that occurred more than five years before the current misconduct;
  • Prosecutors will consider whether instant misconduct shares any root causes with previous misconduct. If so, this could demonstrate a weakness in the company’s compliance practices and gain more weight in crafting a punishment. The government will also consider whether the same leadership was involved in both cases of misconduct; And
  • The Department will disadvantage the conferral of multiple or subsequent 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 member of the DOJ prosecuting corporate crime to implement a systematic approach to voluntary self-disclosure, building on existing programs in the Antitrust Division, the Homeland Security Division and the law on bribery practices abroad. Each member will be required to formalize a policy that defines the expectations of what qualifies as a voluntary self-declaration and the benefits of making such disclosure. In the absence of aggravating factors, the DOJ will not seek a guilty plea from a company as long as it has voluntarily revealed itself, cooperated in an investigation and took 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. Consideration of Compensation Structures in Compliance Programs

The Justice Department will continue, as it always has, to evaluate a company’s compliance program while processing a resolution in an investigation. But Monaco pointed out that going forward, prosecutors will also consider how a company’s compensation system affects compliance. For example, 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 pay attention to whether a company engages in the “recovery” of compensation to people who have been found responsible for misconduct.

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 operates consistently in all cases. Additionally, the DOJ will make sure to receive regular updates on the monitors’ work to ensure they are properly carrying out their duties and are on budget.

Assistant AG Polite, who heads the department’s criminal division, and deputy assistant AG Miller, who oversees the fraud and appeal sections of the criminal division, 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 jury 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 consider whether “best practice” guidelines should be issued to guide companies on the use of personal devices and third-party messaging applications, including those that offer ephemeral messages. Ephemeral or disappeared messaging applications allow users to automatically delete messages after they are received. 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 (disappeared mode). Ephemeral messages are a problem for traditional monitoring and retention practices, as message disappearance is often under the control of the individual user and not a corporate IT department.

Polite’s focus on guidelines governing the use of ephemeral messaging is remarkable because it demonstrates that the Department will not overshadow the industry in determining how compliance programs should evolve with emerging technologies.

2. Compensation Refund Procedures

Gentile also highlighted the Munich discussion on the interaction between clearing structures and compliance programs. Specifically, it announced that the Criminal Division will provide guidance to prosecutors on how to adequately reward companies that apply compensation recovery policies, contractual terms that allow a company to recover compensation from executives who played a role in the misconduct. These policies are intended to penalize offenders who are responsible for corporate misconduct, instead of penalizing shareholders who would otherwise be subject to financial penalties or damages suffered by the company.

Polite announced that his team will meet with both agency partners and executive compensation experts to gather more information on how these aspects of compensation systems work. Based on this information, the Criminal Division will issue formal guidance to prosecutors on how to reward companies that use compensation recovery policies.

3. Voluntary self-disclosure despite a history of misconduct

Under Department policy, a company with a history of misconduct may not be eligible for a declination. But at the same time, Monaco made clear in his remarks how important it will be for a company to voluntarily and promptly disclose potential misconduct. In his remarks, Polite also addressed the question that often frustrates companies head-on: if they are to be punished anyway because of a previous history of misconduct, why should they voluntarily disclose any current misconduct?

Gentile explained that the Department’s new policy makes it clear that there is still a benefit to be gained from voluntary self-disclosure. Under the new policies, a history of misconduct does not preclude a declination unless aggravating factors are present. Polite announced that for the Criminal Division, aggravating factors that can prevent a declination include, but are not limited to: national security threats, pervasive or egregious misconduct, executive management involvement in misconduct, and significant profit to the company. from misconduct.

The conclusion of this DOJ news:

  • Organizations must continuously monitor the changing guidelines of government investigators and be ready to re-evaluate their compliance programs.
  • A robust compliance program should not only reduce the risk of misconduct, but also quickly identify and resolve any misconduct that occurs.
  • Companies should also evaluate their compensation structures to determine if there are any further steps they should take to further isolate the company from liability in a future government investigation.

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