Tuesday, November 02, 2021

DOJ issues guidance on individual accountability, prior corporate misconduct, and corporate monitors

By Lene Powell, J.D.

Holding individuals accountable for white collar crime is the “first priority” for the DOJ, said Deputy Attorney General Lisa O. Monaco. To that end, the DOJ has restored guidance making clear that companies must provide information about individuals involved in misconduct in order to receive cooperation credit. The DOJ also issued new guidance to prosecutors about what historical misconduct needs to be evaluated when considering corporate resolutions and rescinded guidance that corporate monitorships should be disfavored or the exception.

Monaco also announced the formation of the Corporate Crime Advisory Group, which will develop recommendations and propose revisions to the department’s policies on corporate criminal enforcement.

Monaco delivered the remarks in a keynote address at the ABA's 36th National Institute on White Collar Crime.

DOJ guidance facilitates compliance. Drawing on her experience as both a prosecutor and former corporate board member, Monaco said that clear DOJ guidance strengthens the case for strong compliance programs. Designing compliance programs can involve “difficult conversations” and tradeoffs. Guidance makes clear why taking steps to root out misconduct and avoid the “edge case” can be the most valuable guidance a general counsel or trusted legal advisor can provide, said Monaco.

Compliance programs help companies by avoiding regulatory actions in the first place and receiving credit from the government, said Monaco. Indeed, companies serve their shareholders and fulfill their fiduciary duties when they proactively put in place compliance functions and spend resources anticipating problems. The DOJ will “ensure the absence of such programs inevitably proves a costly omission for companies who end up the focus of department investigations,” said Monaco.

Monaco laid out three guidance changes the DOJ was undertaking, relating to individual accountability, prior corporate misconduct, and corporate monitors.

Individual accountability. Front and center for the DOJ is the importance of individual accountability.

“Attorney General Garland has made clear it is unambiguously this department’s first priority in corporate criminal matters to prosecute the individuals who commit and profit from corporate malfeasance,” said Monaco.

To bolster individual accountability, Monaco has directed the DOJ to restore prior guidance that makes clear that to be eligible for any cooperation credit, companies must provide the department with all non-privileged information about individuals involved in or responsible for the misconduct at issue. The disclosure must be thorough: a company must identify all individuals involved in the misconduct, regardless of their position, status or seniority. Companies may no longer limit disclosures to those they assess to be “substantially involved” in the misconduct.

Monaco addressed the concern that the government will unfairly prosecute minimal participants, noting that in every case, prosecutors will make decisions about individuals implicated in corporate criminal matters based on the facts, the law and the Principles of Federal Prosecution.

Monaco acknowledged that the government may lose some cases pursuing individuals, since they are among some of the most difficult the government brings. But as long as the DOJ acts consistent with the Principles of Federal Prosecution, prosecutors should “be bold” and not be deterred by the fear of losing, said Monaco. She added that the DOJ is taking steps to surge resources to prosecutors, including embedding a new squad of FBI agents in the Department’s Criminal Fraud Section.

Prior corporate misconduct. Although holding individuals accountable is top priority, companies are not off the hook by any means. The DOJ will also examine a company’s history of compliance and misconduct.

To that end, Monaco issued new guidance to prosecutors regarding what historical misconduct needs to be evaluated when considering corporate resolutions, including an amendment to the DOJ’s “Principles of Federal Prosecution of Business Organizations.” Under the new guidance, prosecutors are directed to consider the full criminal, civil and regulatory record of any company—not just prior similar violations—when deciding what resolution is appropriate for a company that is the subject or target of a criminal investigation.

For example, a prosecutor in the FCPA unit will take a department-wide view of misconduct, looking at whether a company run afoul of the Tax Division, the Environment and Natural Resources Division, the money laundering sections, the U.S. Attorney’s Offices, and so on. The prosecutor will also weigh what has happened outside the department, including whether the company was prosecuted by another country or state, or whether the company has a history of running afoul of regulators.

“Taking the broader view of companies’ historical misconduct will harmonize the way we treat corporate and individual criminal histories, as well as ensure that we do not unnecessarily look past important history in evaluating the proper form of resolution,” said Monaco.

Corporate monitors. The third piece of guidance relates to the use of corporate monitors. Monaco explained that in recent years, some have suggested that monitors should be the exception and not the rule. But resolutions involve trust on the part of the government, and independent monitors have long been a tool to encourage and verify compliance.

As a result, to the extent that prior Justice Department guidance suggested that monitorships are disfavored or are the exception, Monaco has rescinded that guidance. The DOJ’s position is that it is free to require the imposition of independent monitors whenever it is appropriate to do so in order to satisfy prosecutors that a company is living up to its compliance and disclosure obligations under the DPA or NPA, said Monaco.

NPAs and DPAs. Monaco also gave a preview of other areas of focus. On the issue of repeat offenders, Monaco said that a recent review of data showed that between 10 and 20 percent of all significant corporate criminal resolutions involve companies who have previously entered into a resolution with the department. Accordingly, the DOJ is considering whether and how to differently account for companies that become the focus of repeated DOJ investigations.

One area for consideration is the use of NPAs and DPAs, said Monaco. Do companies take them seriously enough? Are there other approaches that might have a greater impact? NPAs and DPAs are not a “free pass” and there will be serious consequences for violating their terms, said Monaco.

Monaco noted that two different multinational corporations separately announced that each had received a breach notification from the Justice Department.

“This is obviously not a step we take lightly, but we will do so where necessary and appropriate,” said Monaco.

Formation of Corporate Crime Advisory Group. Finally, to guide the department, Monaco announced the formation of the Corporate Crime Advisory Group. The group will be made up of representatives from every part of the department involved in corporate criminal enforcement. It will review the above issues as well as other issues, like benchmarking, and will make recommendations and propose revisions to policies on corporate criminal enforcement.