New Policies Emphasize the Benefits of Voluntary Self-Disclosure and Clarify How a Corporation’s History of Misconduct Factors Into Disposition Decisions

On Sept. 15, 2022, Deputy Attorney General Lisa Monaco spoke at New York University Law School outlining the U.S. Department of Justice’s (DOJ) priorities and policies on corporate criminal enforcement.

Her speech built upon her October 2021 announcement of the DOJ’s broad priorities on corporate crimes, which emphasized the need for speedy and voluntary cooperation and detailed the benefits of voluntary disclosures. The speech was the culmination of a yearlong DOJ advisory group’s work reviewing corporate enforcement efforts and receiving feedback from academics, lawyers and compliance officers.

Voluntary Self-Disclosure

In the speech, Deputy AG Monaco emphasized the DOJ’s policy of rewarding corporations that voluntarily self-disclose misconduct to the government. She stated that going forward, every DOJ division that prosecutes corporate crime should now have a program that incentivizes voluntary self-disclosure, provides clear expectations of what self-disclosure actually entails and identifies the concrete benefits of self-disclosure.

Such concrete benefits include the DOJ not seeking a guilty plea or an indictment when a corporation has self-disclosed, cooperated and remediated the misconduct, and the DOJ not requiring an independent compliance monitor if a corporation has also implemented and tested an effective compliance program.

In addition to voluntary self-disclosure, Deputy AG Monaco discussed corporate compliance programs. In evaluating a corporation’s compliance program, prosecutors will consider whether the corporation’s compensation systems reward compliance or impose financial sanctions on employees whose actions contributed to criminal conduct and whether, after learning of misconduct, a corporation actually claws back compensation or imposes financial sanctions. She said the DOJ will issue further guidance on the additional benefits of clawbacks or other similar compliance arrangements.

Deputy AG Monaco warned that any corporation that intentionally delays producing relevant documents or information would receive reduced or potentially no cooperation credit. She admonished that a corporation’s first reaction when it discovers any hot or relevant documents should be to notify prosecutors.

Deputy AG Monaco also said that DOJ prosecutors will work to complete investigations and seek any warranted criminal charges against individuals prior to or at the same time as entering a resolution against the corporation.

History of Misconduct

Consistent with her October 2021 announcement that the DOJ would take a more holistic view of a corporation’s enforcement history, Deputy AG Monaco discussed the DOJ’s release of additional guidance as to how a corporation’s misconduct history will be evaluated when deciding on an appropriate resolution. She reiterated the DOJ’s commitment to consider a corporation’s full criminal, civil and regulatory record when coming to a resolution, but stated that older conduct will be given less weight. Criminal resolutions that occurred more than 10 years prior and civil or regulatory resolutions that occurred more than five years prior will be considered dated. Prior misconduct that occurred in the United States as well as misconduct involving the same personnel or management will, in turn, be given more weight.

Deputy AG Monaco also discussed how the DOJ will consider the nature and circumstances of the prior misconduct, including whether it shared the same root causes as the currently investigated misconduct.

She said that the DOJ will disfavor multiple, successive non-prosecution agreements (NPA’s) or deferred prosecution agreements (DPA’s) with the same corporation, making it more likely that repeat offenders will be criminally charged.

In light of this new guidance, corporations with a history of misconduct should be willing to address their history and prepared to distinguish it from the conduct being investigated.

However, Deputy AG Monaco stated that the DOJ will not penalize or treat corporations as repeat offenders where they acquire companies with a history of compliance problems so long as those problems are addressed promptly. Thus, corporations should conduct prompt due diligence on acquisitions and quickly address any potential compliance issues.

Monitors

Deputy AG Monaco also discussed how the DOJ will deal with independent compliance monitors. She stated that the DOJ would release new guidance for prosecutors about how to identify the need for a monitor, how to select a monitor and how to oversee the monitor’s work. She emphasized that all monitor selections will now be made pursuant to a process that is transparent and consistent. The DOJ will also now ensure that the scope of every monitor is appropriately tailored to the alleged misconduct.

While some of Deputy AG Monaco’s comments reiterated prior guidance, to the extent that the DOJ is able to provide greater transparency as to the benefits that will be awarded cooperation and the dispositions it will seek, that is a welcome development. In response and in order to obtain those benefits, corporations will need to continue to invest in compliance and develop policies that will assist them in making timely voluntary disclosures, where appropriate. Companies should also carefully follow upcoming DOJ guidance to see how each division is implementing these changes. Her comments also underscore the DOJ’s focus on aggressively prosecuting individuals and its intent to put such investigations on a fast track.

The full speech can be found here, and the accompanying DOJ memorandum detailing the policy revisions can be found here