Category Archives: Corporate Criminal Liability and Enforcement

Where’s the Beef? Demonstrating “Timely & Appropriate” Remediation

by Jonny Frank, Michele Edwards, and Christopher Hoyle

Left to right: Jonny Frank, Michele Edwards and Christopher Hoyle. Photos courtesy of StoneTurn Group, LLP.

This article is part 4 in a series on remediation. Read part 1 on Root Cause Analysis here, part 2 on Read Across and Remediation here, and part 3 on Corrective Action Plans here.

Organizations seeking credit for “timely and appropriate” remediation under the DOJ’s Corporate Enforcement Policy (“CEP”) must show they conducted a comprehensive root cause analysis, addressed the root cause findings, and implemented an effective compliance program.[1] Additional guidance on DOJ expectations appears in Criminal Division memos on the evaluation of compliance programs,[2] and the selection of corporate compliance monitors.[3] The SEC has similar expectations.[4]

Building on our discussion of Root Cause Analysis (“RCA”), Similar Misconduct, and Timely and Effective Corrective Action Plans, this article suggests key steps to demonstrate the remediation and compliance program effectiveness to the board, prosecutors, regulators and other stakeholders.

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Balancing Victim Compensation and Efficiency in Non-Trial Resolutions: A Comparative Perspective from the International Academy of Financial Crime Litigators

by Stéphane Bonifassi, Lincoln Caylor, Grégoire Mangeat, Léon Moubayed, Jonathan Sack, Andrew Stafford K.C., Wolfgang Spoerr, and Thomas Weibel

Top left to right: Stéphane Bonifassi, Lincoln Caylor, Grégoire Mangeat, Léon Moubayed. Bottom left to right: Jonathan Sack, Andrew Stafford K.C., Wolfgang Spoerr, and Thomas Weibel. (Photos courtesy of authors)

Introduction

Negotiated settlements for financial crimes offer a practical approach to resolving cases without lengthy trials. However, they pose a complex dilemma: how to balance efficiency with the need for victims to have a meaningful role in the proceeding and achieve adequate victim compensation. Across various jurisdictions, the approaches to non-trial resolutions reflect differing priorities, with some countries leaning towards expediency and others emphasizing victim rights. This is why the International Academy of Financial Crime Litigators published a working paper on the topic. This piece explores the current state of how victims of financial crime are being compensated in non-trial resolutions across different legal jurisdictions. Furthermore, it identifies some of the challenges and trade-offs lawmakers face when trying to infuse an optimal amount of victim involvement into the settlement process, providing suggestions on how victims of financial crime can be better heard and compensated in settlement procedures.

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US Antitrust Regulators Threaten Ephemeral Messaging Users and Their Counsel with Obstruction Charges

by Jeremy Calsyn, Nowell Bamberger, Charles P. Balaan, and Joseph M. Kay

Left to right: Jeremy Calsyn, Nowell Bamberger, Charles P. Balaan, and Joseph M. Kay (photos courtesy of Cleary Gottlieb Steen & Hamilton LLP)

In recent months, federal regulators have made statements that companies and their counsel may be subject to criminal prosecution if they fail to preserve ephemeral messaging data when they receive a subpoena or other legal process. In January 2024, the Deputy Assistant Attorney General for Criminal Enforcement at the DOJ Antitrust Division warned “failure to produce” ephemeral messaging may result in obstruction charges.[1] Speaking at the ABA Antitrust Spring Meeting in April 2024, a lawyer for the Antitrust Division echoed that the DOJ “will not hesitate to bring obstruction charges” against company counsel and their clients if clients fail to properly retain so-called “ephemeral messages.”[2] This is consistent with other recent warnings from the DOJ.[3]

The agencies’ focus on features of ephemeral messaging, which they argue can be used to hamper investigations, ignores the fact that ephemeral messaging applications have a legitimate role in the workplace where data security and management is paramount. Despite the advantages of ephemeral messaging, clients should be aware of the legal and other risks presented by these applications and implement clear information retention policies that account for the organization’s duty to preserve information for litigation and government investigations.

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DOJ National Security Division Issues First-Ever Declination Under Enforcement Policy

by Satish M. Kini, David A. O’Neil, Jane Shvets, Rick Sofield, Douglas S. Zolkind, Carter Burwell, Connor R. Crowley, and Hillary Hubley

Top left to right: Satish M. Kini, David A. O’Neil, Jane Shvets, and Rick Sofield. Bottom left to right: Douglas S. Zolkind, Carter Burwell, Connor R. Crowley, and Hillary Hubley. (Photos courtesy of Debevoise & Plimpton LLP)

Key Takeaways

Even in criminal national security matters, early self-reporting, remediation and cooperation can enable companies to avoid prosecution and penalties.
Federal enforcement agencies are continuing to collaborate in investigating and prosecuting criminal cases at the intersection of national security and corporate crime.
Multinational corporations and academic institutions should be aware of the risk of outsiders fraudulently affiliating themselves with legitimate institutions to skirt export control laws.

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Strategic Communications Considerations When a Government Investigation Becomes Public Through Voluntary Self-Reporting or Other Means

by Cari Robinson

Photo courtesy of the author

The SEC, DOJ, and nationwide USAOs are increasingly encouraging organizations to self-report misconduct, fully cooperate with authorities, and meaningfully remediate. In return, companies may receive reduced penalties, up to and including a government agreement not to criminally prosecute and a declination to bring a civil enforcement action.

However, in addition to being costly and time-consuming, self-reporting presents reputational risks. There also is always a possibility that a sensitive matter will leak. In any event, having complementary legal and crisis communications strategies in place can help companies avoid costly missteps and mitigate reputational damage.

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BIS Primes the Corporate Enforcement Engine: A Fresh Look at What Recent BIS Actions & Statements Mean and a Proposed Framework for How U.S. Companies Can Best Prepare

by Brent Carlson and Michael Huneke

From left to right: Brent Carlson and Michael Huneke (Photos courtesy of authors)

The risk of corporate criminal enforcement actions for export controls evasion or diversion is significantly increasing. Recent actions and statements by the Department of Commerce’s Bureau of Industry & Security (“BIS”) suggest that, beyond saber-rattling, BIS is deliberately priming the corporate enforcement engine with the fuel for an enforcement wave that will follow the Foreign Corrupt Practices Act (“FCPA”) “playbook” that the U.S. Department of Justice (“DOJ”) has successfully deployed for the last two decades.

The fuel comes in the form of official, multiagency guidance documents and other actions that describe circumstances indicating a “high probability” of misconduct, which as we have previously written is a freestanding basis for enforcement actions under both the FCPA and the Export Administration Regulations (“EAR”).[1] Such agency actions by BIS notably include the issuance to U.S. companies of lists of counterparties under cover of what BIS officials describe as “red flag” letters. Since our prior analysis,[2] BIS has reemphasized the significance of such letters and underscored the importance of how U.S. companies respond.

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Keeping Deferred Corporate Charges Deferred: Some Dos and Don’ts

by John Savarese, Randall Jackson, and Michael Holt

Left to right: John Savarese, Randall Jackson, and Michael Holt (Photos courtesy of Wachtell, Lipton, Rosen & Katz)

At the heart of every white-collar deferred prosecution agreement (DPA) is the deferral of filed criminal charges and a promise by DOJ to dismiss those charges at the end of a fixed term if the company has lived up to its remedial and other commitments. Breaches of these agreements are rare. But DOJ’s recent letter advising the U.S. District Court for the Northern District of Texas that Boeing breached its obligations under a January 2021 DPA (entered into with DOJ to resolve criminal charges relating to Boeing’s mishandling of FAA reporting concerning its 737 MAX aircraft following fatal crashes of two of those planes) provides a telling reminder of the critical need for companies to design and carry out an effective and comprehensive plan to abide by all terms established under a DPA.

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EPA Announces New Enforcement Policy Requiring Civil-Criminal Coordination

by Steven P. Solow and Chloe Graham

From left to right: Steven P. Solow, and Chloe Graham (Photos courtesy of Baker Botts LLP)

The Assistant Administrator for EPA’s Office of Enforcement and Compliance Assurance (OECA) announced a new Strategic Civil-Criminal Enforcement Policy (Policy) that is perhaps the most significant change in environmental enforcement since the passage of the basic environmental laws decades ago. At bottom, the new Policy addresses the long-standing concern that the decision to enforce a matter civilly or criminally ultimately depended on whose “desk” it landed on.

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Head of DOJ Criminal Division Announces Voluntary Self-Disclosure Program for Individuals at PCCE’s 10th Anniversary Conference

On April 15, 2024, the NYU Law Program on Corporate Compliance and Enforcement (PCCE) held its 10th Anniversary Conference, featuring keynote speakers Nicole Argentieri, Principal Deputy Assistant Attorney General and Head of DOJ’s Criminal Division; Gurbir Grewal, Director of Enforcement, SEC; and Andrea Griswold, Deputy U.S. Attorney, SDNY, among other distinguished speakers. More information on the conference can be found here. At the conference, Principal Deputy Assistant Attorney General Argentieri first announced a new voluntary self-disclosure program for individuals. A blog post by her, which describes the program and provides links to more information, is republished below.

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Blockchain Analytics: A Reliable Use of Artificial Intelligence for Crime Detection and Legal Compliance

by Sujit Raman and Thomas Armstrong

From left to right: Sujit Raman and Thomas Armstrong. (Photos courtesy of authors).

Everyone these days is talking about artificial intelligence and how to use it responsibly. Among law enforcement and compliance professionals, discussions around the responsible use of AI are nothing new. Even so, recent advances in machine learning have turbocharged AI’s transformative potential in detecting, preventing, and—in a particular sense—even predicting illicit activity. These advances are especially notable in the field of blockchain analytics: the process of associating digital asset wallets to real-world entities.

In a recent, pathbreaking opinion and order, U.S. District Judge Randolph Moss rejected a criminal defendant’s challenge to the government’s evidentiary use of blockchain analytics to link him to illicit financial activity.[1] Many courts—including, just a few days ago, a U.S. district court in Massachusetts[2]—have relied on the validity of blockchain analytics when taking pre-trial actions like issuing seizure orders and authorizing arrest warrants; Judge Moss’s opinion is the first trial court examination of this powerful analytic capability. Taken together, this growing body of legal authority forcefully affirms the reliability—and therefore admissibility in court—of evidence derived from such analytics.

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