The US Department of Justice announced on May 9 a new policy to avoid the imposition of duplicative penalties by multiple authorities in corporate fraud investigations. But, the DOJ’s expectations with respect to compliance remain the same, and thus companies should continue to invest in effective compliance programs.
At a New York City Bar Association conference on May 9, Deputy Attorney General Rod Rosenstein announced a new US Department of Justice (DOJ) “No Piling-On” Policy (the Policy) designed to reduce the risk of punitive and duplicative penalties by multiple regulatory bodies. While Mr. Rosenstein’s announcement came within the context of a broader discussion on Foreign Corrupt Practices Act (FCPA) enforcement, it is apparent that the Policy will apply broadly to corporate fraud investigations, and is a recognition of the interconnectivity of the various enforcement agencies in the United States and the rest of the world.
The Policy is being incorporated into the US Attorneys’ Manual, like the FCPA Corporate Enforcement Manual, and consists of “four core features:”
- It reiterates DOJ’s current policy that no DOJ attorney shall invoke the threat of criminal prosecution for the purpose of extracting a larger settlement out of a company in a civil case.
- It directs DOJ divisions “to coordinate with one another, and achieve an overall equitable result.” This may include “crediting and apportionment of financial fines, forfeitures, and penalties, and other means of avoiding disproportionate punishment.”
- It encourages DOJ attorneys “to coordinate with other federal, state, local, or foreign authorities seeking to resolve a case with a company for the same misconduct.”
- It sets forth specific factors to consider in assessing “whether multiple penalties serve the interests of justice,” including “the egregiousness of the misconduct; statutory mandates regarding penalties; the risk of delay in finalizing a resolution; and the adequacy and timeliness of a company’s disclosures and cooperation with the Department.”
In other words, DOJ’s expectations remain the same: that companies will develop effective corporate compliance programs and investigate and remediate improper conduct. And, there remains a heavy emphasis on self-disclosure.
Moreover, though Mr. Rosenstein acknowledged that DOJ “should discourage disproportionate enforcement of corruption laws by multiple authorities,” he tempered those remarks by stating that “penalties that may seem duplicative really are essential to achieve justice and protect the public.” He cautioned that DOJ “will not hesitate to pursue complete remedies, and to assist our law enforcement partners in doing the same,” and further warned that “cooperating with a different agency or a foreign government is not a substitute for cooperating with the Department.” In particular, Mr. Rosenstein emphasized that DOJ will not “look kindly on” any attempt to come to DOJ after making “inadequate disclosures to secure lenient penalties with other agencies or foreign governments.” He also cited other “practical” factors that might hamper their ability to coordinate enforcement outcomes, including “the time of other agency actions, limits on information sharing across borders, and diplomatic relations between countries.”
The DOJ will develop and distribute guidelines internally for coordinating within DOJ and with other US and foreign enforcement agencies when seeking to impose penalties for the same conduct.
Mr. Rosenstein also announced the creation of the Working Group on Corporate Enforcement and Accountability (the Working Group) which will work to “promote consistency” within various DOJ divisions. The Working Group will include leaders from several DOJ divisions and will “make internal recommendations about white collar crime, corporate compliance, and related issues.”
In closing, Mr. Rosenstein expressed the goal of creating an alliance between corporate America and law enforcement, remarking that the “government should provide incentives for companies to engage in ethical corporate behavior and to assist in federal investigations.” However, he was silent on the already-punitive nature of disgorgement in FCPA matters, including the manner in which DOJ and the US Securities and Exchange Commission calculate disgorgement, their expansive temporal reach despite Kokesh v. SEC, and the duplicative effect through its role in calculating criminal penalties under the US Sentencing Guidelines. Further, while Mr. Rosenstein sought to instill more certainty in the context of cross-border investigations, his comments failed to address the significant burdens and disruption that even a single agency investigation can have on a corporation. In an environment in which DOJ’s FCPA investigations can span four or more years, and in which DOJ is partnering with its foreign counterparts to investigate in parallel fashion, it is not clear that the promise of efforts to avoid “piling-on” will move the needle in terms of corporate compliance or self-reporting.
Companies continue to be well-advised to invest meaningfully in effective compliance programs, not only to prevent and detect misconduct, but also to avoid government investigations and to mitigate their impact should they ensue.
The DOJ’s complete announcement can be found here.