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.
The Department of Justice’s (DOJ’s) September 15, 2022, Memorandum on Further Revisions to Corporate Criminal Enforcement Policies (DOJ Policy), announced by Deputy Attorney General (DAG) Lisa Monaco at an event hosted by the Program on Corporate Compliance and Enforcement at NYU Law, contains several new and significant announcements and revisions to DOJ policy. The defense bar and in-house lawyers involved in ongoing investigations are closely studying these revisions to DOJ prosecutorial standards for individual accountability, prior misconduct, evaluating a corporation’s self-reporting, timely disclosure of evidence, and increased scrutiny to monitorship decisions and oversight.
I am the Chief Compliance Officer at DailyPay, a mission-oriented fintech Earned Wage Access company whose core product offers a very low-cost way for workers to gain access to pay as they earn it. From my perspective, the sections covering corporate culture and DOJ’s evaluation of a corporation’s compliance program resonate in particular. DailyPay is displacing an industry long dominated by predatory lending vehicles like payday loans and exploitative check cashing outfits that historically have put profit before consumer protection and well-being. Having a strong, robust compliance program is one of many attributes that we believe set DailyPay apart, and accordingly, the latest pronouncement on prosecutorial standards for compliance programs has our attention.
Listening to DAG Lisa Monaco speak at NYU that evening, I recalled serving as an Assistant US Attorney in Southern District of New York, where I investigated and prosecuted various corporate crimes including money laundering, bank fraud, and forfeiture, and where I learned one of the most important lessons in my legal career: that taking the profit out of crime can have a big impact, sometimes as big as deprivation of liberty. People who engage in misconduct are motivated by so many different factors – and, in most cases of corporate crime, money plays at least some part. While compliance professionals well understand the connection among compliance policies and practices, incentives and compensation, we also know that financial penalties for compliance breaches need to be embraced and enforced by executive leadership and Boards to have any meaningful impact on the corporate culture and promote deterrence.
The latest DOJ Policy reflects this theme, as it mandates prosecutorial consideration of whether a company’s compensation program includes “penalties to be levied against current or former employees, executives, or directors whose direct or supervisory actions or omissions contributed to criminal conduct.” The DOJ Policy makes clear that when evaluating a corporation’s compliance program, prosecutors should evaluate “what companies say and what they do,” specifically focusing on whether there are financial consequences for wrongdoing, such as compensation claw back provisions. Significantly, the DOJ Policy directs prosecutors to analyze whether the policies addressing compensation and financial consequences have any teeth – are they actually enforced, and when they are, is the financial consequence to individuals merely a symbolic gesture designed to create the impression of personal financial accountability without actually having any real effect or impact on the persons involved? DOJ Policy more explicitly than ever before, now recognizes that it is critical for prosecutors to look under the hood and assess whether remediation consisting of harsh words, records in a personnel file, imposition of “punishment by training” and other similar steps – without imposition of financial consequences – is incentivizing better behavior, or just providing a good cover story. The new DOJ Policy drills into the prosecutor’s responsibility to also assess whether or not a particular compliance program incentivizes compliance-promoting behavior by financially rewarding compliance champions and leaders.
DAG Monaco said during her NYU announcement that she hopes these revisions will help compliance professionals make the case to senior management and the board for implementing strong compliance programs, including compensation plans that account for compliance incentives, and in fact many CCOs regularly use DOJ’s pronouncements on compliance for just this purpose. By calling out a corporation’s actions in imposing financial consequences to employees and executives based on measurable compliance metrics and standards, DOJ has handed CCOs and legal teams yet another boost when we advocate internally for HR compensation policies at our organizations to truly “put our money where our mouths are.”
The DOJ Policy firmly endorses a critical component of compliance programs and puts pressure on executive leadership and boards to closely examine what behavior is being encouraged and disfavored within the organization. While the focus of DOJ policy is naturally on criminal investigation – a situation all CCOs hope to never experience – more explicit DOJ Policy on compliance programs shine a light on ways that effective compliance can detect and prevent criminal misconduct. Policies and practices that establish clear, real, impactful financial consequences for compliance failures are not just helpful when things have gone so badly that the government gets involved – they expose gaps and send out early warning signs that help us make changes before things go awry. It is also especially helpful to hear that DOJ is looking to harmonize these policies across other civil and criminal enforcement agencies.
Jane A. Levine is the Chief Compliance Officer of DailyPay, Inc. and the former Chief Global Compliance Counsel and Head of Government and Regulatory Affairs at Sotheby’s.
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