Editor’s Note: On September 15, 2022, the Program on Corporate Compliance and Enforcement (PCCE) at New York University School of Law hosted Deputy Attorney General Lisa O. Monaco while she delivered a speech detailing significant changes to the Department of Justice’s corporate prosecution policies. The speech and accompanying policy memo are available here. Over the coming days and weeks, PCCE will be publishing reactions to the new DOJ policies by practitioners, scholars, and compliance officers.
by John F. Savarese, Ralph M. Levene, David B. Anders, and Daniel H. Rosenblum
In an important policy speech late last week, Deputy Attorney General Lisa Monaco acknowledged “the data showing [an] overall decline in corporate criminal prosecutions over the last decade.” The interesting question prompted by that data, of course, is the one no one seems to know the answer to: Is this decline in corporate prosecutions the result of efforts by well-managed companies to respond to the oft-repeated admonition to set the right tone at the top and invest extensively in compliance programs, training and personnel such that the number of corporate prosecutions actually should be coming down? Or is it because there is some lack of adequate prosecutorial effort or some other obstacle standing in the way of achieving the right level of corporate prosecutions? In the absence of any hard empirical data on that crucial question, DAG Monaco opted for the latter explanation, thus repeating the common DOJ mantra that it “need[s] to do more and move faster.”
Putting aside the question whether the “we must do more” policy is genuinely necessary to achieving an optimal level of deterrence of corporate wrongdoing, there were several new and important points in DAG Monaco’s thoughtful speech to which any well-managed company should pay close attention. And, each of these points reflect, we think, welcome and sensible refinements to and clarifications of several corporate enforcement policy initiatives that DAG Monaco announced in October 2021. (Our reports on that speech can be found here and here.)
Corporate cooperation credit: While DOJ’s “top priority” remains pursuing individual wrongdoers, DAG Monaco noted that cooperating companies are a key source of evidence in order to hold culpable individuals responsible. To that end, moving forward, DOJ will be placing additional emphasis on the timeliness of corporate cooperation: “[W]e will require cooperating companies to come forward with important evidence more quickly.” Any perceived “undue or intentional delay” in producing key information or documents, particularly pertaining to individual culpability, “will result in the reduction or denial of cooperation credit.”
Voluntary self-disclosure: DOJ will now, for the first time ever, require “every Department component that prosecutes corporate crime [to] have a program that incentivizes voluntary self-disclosure.” This step is particularly welcome, as it will align all of DOJ’s prosecuting components on the important goal of incentivizing companies to voluntarily self-report wrongdoing that their internal compliance programs detect.
Recognizing that “[p]redictability is critical” to the efficacy of its self-disclosure policies, DOJ also announced that it “will not seek a guilty plea when a company has voluntarily self-disclosed, cooperated, and remediated misconduct.” In addition, DOJ “will not require an independent compliance monitor for such a corporation if, at the time of the resolution, it also has implemented and tested an effective compliance program.”
Corporate monitors: DOJ will be releasing new guidance for prosecutors to govern how they decide whether a corporate monitor is necessary as part of any corporate criminal resolution, how to select a monitor if one is genuinely necessary, and – very importantly – how prosecutors are to “monitor the monitor.” This last point is sensible and long overdue and should go a long way toward stopping the problem of monitorships that seem to go on forever, with little oversight by DOJ, and with little incentive for the monitor to bring their work to an end. We hope these new guidelines will give companies the tools they have lacked to date to raise concerns with the government about the scope, duration and cost of monitorships.
Corporate culture: Going forward, in evaluating the effectiveness of corporate compliance programs, DOJ will examine whether a company’s “compensation systems reward compliance and impose financial sanctions on [those] whose . . . conduct contributed to criminal conduct.” Companies should consider whether their compliance programs should be updated to address these issues.
History of misconduct: Finally, DAG Monaco responded to criticism that had been leveled at her October 2021 policy initiative announcing that, going forward, DOJ would “consider the full criminal, civil and regulatory record of any company when deciding on the appropriate resolution of a corporate criminal investigation.” In her speech last week, DAG Monaco wisely acknowledged that “not all instances of prior misconduct are created equal” and sensibly noted in that regard that “dated conduct will generally be accorded less weight” and observed that “if a corporation operates in a highly regulated industry, its history should be compared to others similarly situated to determine if the company is an outlier.” Also on this topic, the speech noted that DOJ does not want to discourage and indeed is willing to give positive weight to “acquisitions that result in reformed and improved compliance ” This places a critical premium on effective and timely pre-acquisition compliance diligence and post-acquisition compliance integration efforts.
We certainly share the aim at the heart of these new policy proscriptions – as DAG Monaco put it – to have a predictable, transparent and clear array of DOJ corporate criminal enforcement policies that will help companies to “feel empowered to do the right thing – to invest in compliance and culture, and to step up and own up when misconduct occurs.” In our experience, we see many companies appropriately making significant investments to enhance their compliance program and their culture, and it is good to see DOJ recognizing that, for its part, having greater transparency about its policies, expectations and decision-making are an important element of incentivising well-managed companies to continue making those investments.
John F. Savarese, Ralph M. Levene, and David B. Anders are Partners and Daniel H. Rosenblum is an Associate at Wachtell, Lipton, Rosen & Katz.
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