On January 17, 2023, Assistant Attorney General (“AAG”) Kenneth A. Polite announced significant updates to the Department of Justice (“DOJ”) Criminal Division’s corporate criminal enforcement policies (“CEP”), which are designed to further incentivize voluntary self-disclosure and cooperation. These updates follow from Deputy Attorney General (“DAG”) Lisa A. Monaco’s recent directive that each relevant DOJ component review its voluntary self-disclosure policies. The CEP revisions expand upon the DOJ Criminal Division’s existing voluntary self-disclosure policy, and answer DAG Monaco’s call “to clarify the benefits of promptly coming forward to self-report, so that chief compliance officers, general counsels, and others can make the case in the boardroom that voluntary self-disclosure is a good business decision.” These revisions — the first since 2017 — apply to all corporate criminal enforcement by the Criminal Division, not just FCPA matters, and aim to provide clarity regarding measurable incentives (e.g., form of disposition, percent discount) for companies to voluntarily self-disclose, meaningfully cooperate, and remediate, while highlighting that there will be more severe outcomes for companies that elect not to do so.
I. Aggravating Factors and Voluntary Disclosure
Under the updated policy, prosecutors now have the discretion to determine that a declination is appropriate, despite the existence of aggravating circumstances, if a self-disclosing company can demonstrate each of the following three factors: First, the voluntary self-disclosure was made immediately upon the company becoming aware of the misconduct allegation. Second, at the time of the misconduct and the disclosure, the company had an effective compliance program and system of internal accounting controls that enabled the identification of the misconduct and led to the company’s prompt self-disclosure. Third, the company provided extraordinary cooperation with the Department’s investigation and undertook extraordinary remediation.
The new policy recognizes that some companies may not be able to overcome their distinct aggravating factors, despite voluntarily self-disclosing, endeavoring to provide extraordinary cooperation, and timely and appropriately remediating. The revised CEP contains incentives for cases where a criminal resolution may still be warranted. In such circumstances, the Criminal Division will recommend that a sentencing court accord a 50-75% reduction off of the low end of the U.S. Sentencing Guidelines fine range, except in the case of a recidivist. For repeat offenders, the reduction generally would not be from the fine range’s low-end. On those facts, unless there are multiple or particularly egregious aggravating circumstances, the Criminal Division will not generally require a corporate guilty plea, even for criminal recidivists, nor will it impose a monitor.
II. Full Cooperation and Timely, Appropriate Remediation Without Voluntarily Self-Disclosure
The updated policy now applies to all Criminal Division corporate resolutions, not only cases in which a company voluntarily self-discloses. Under the revised CEP, if a company fails to self-disclose misconduct, but still fully cooperates and timely and appropriately remediates, the Criminal Division will recommend up to a 50% reduction off of the low end of the Guidelines fine range, which is twice the prior maximum rate. Again, for a recidivist, the reduction likely will not be off of the low end of the range, but prosecutors will have discretion to seek a particular result within the range based on the distinct facts and circumstances.
III. A Violator’s Burden to be “Extraordinary”
AAG Polite emphasized that regardless of the circumstances under which corporate leaders identify misconduct, “each and every company starts at zero cooperation credit and must earn credit based on the parameters and factors outlined in the CEP.” By permitting for a greater possible range of sentencing reductions from the Guidelines, the updated CEP allows prosecutors to draw sharper distinctions regarding companies’ degree of cooperation and remediation. In that regard, AAG Polite explained how prosecutors will distinguish between “extraordinary” and “full” cooperation.
Prosecutors’ evaluation of “extraordinary cooperation” will be informed by the concepts of immediacy, consistency, degree, and impact that apply to cooperation by individuals and corporations alike. Thus, prosecutors’ value immediate cooperation, consistent truthfulness, help in obtaining evidence prosecutors otherwise could not get (e.g., securing and imaging electronic devices, recording conversations, or providing access to foreign-located records and witnesses), and cooperation that produces results (e.g., facilitating trial testimony or providing information that leads to additional convictions) when assessing the quality of a cooperator’s assistance.
The DOJ is committed, perhaps more than ever, to rewarding companies that promptly self-disclose misconduct. AAG Polite tacitly acknowledged the inevitable role of prosecutors’ subjective judgments when describing extraordinary cooperation as a “know it when we see it” situation. Nevertheless, the CEP revisions reflect a determined effort to develop quantifiable metrics to help incentivize corporate cooperation.
Of course, this policy update does not alter companies’ need to have an appropriately tailored compliance program that, among other things, reduces the risk of DOJ investigations in the first place--though it further incentivizes such programs by styling them as a prerequisite for declination in the face of aggravating circumstances. But even world-class compliance programs cannot prevent all misconduct. When potential criminal activity surfaces—whether in the course of ordinary compliance efforts or as part of the M&A process, including post-acquisition audits and integration—corporate leadership, including in-house counsel and compliance professionals, will need to consider the CEP’s changes. DOJ clearly hopes and expects the latest CEP revisions will simplify and accelerate these corporate leaders’ time-sensitive decision to self-report.