Enforcement Uptick & Individual Accountability: Here’s What to Know from DOJ’s Updates to Enforcement Policies

The Department of Justice (“DOJ” or the “Department”)’s signals that it is doubling down on corporate criminal enforcement, including focusing on individual accountability, deserve close attention. 

The updates, announced by DOJ Deputy Attorney General Lisa Monaco, outlined in a Department-wide memorandum, and further expanded upon by Kenneth Polite, Assistant Attorney General for the Criminal Division, reinforce the message that companies must invest in compliance programs and incentives to support ethical behavior.  The updates also reinforce the Department’s expectations that companies should promptly investigate and respond to problematic behavior.

The revisions should not come as a complete surprise. Change has been on the horizon since Monaco released a similar, less detailed memorandum in October 2021 that introduced the Department’s more unified and aggressive stance on corporate criminal enforcement. Last week’s new announcements strike a more balanced tone, maintaining the Department’s tough-on-corporate crime posture but also providing companies with guidance on how to best prevent and mitigate exposure to compliance risks and enforcement action.

The impact of the new announcements remains to be seen but the Department’s message is clear: “times have changed.”^[1] Below, we preview how.

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High Level Takeaways

Collectively, the DOJ announcements address the following areas:

1. Individual accountability – a top enforcement priority; DOJ expects companies to promptly provide information on culpable individuals or risk losing cooperation credit;
2. Incentivizing ethical behavior – companies should develop incentives for employees to act ethically, and impose financial deterrents to criminal conduct such as compensation claw backs;
3. Voluntary self-disclosure – prosecutors should not seek a guilty plea where companies disclose and cooperate fully; DOJ units must clarify the specific incentives for reporting;
4. Compliance programs – should go beyond policies and procedures, and compliance leadership should be included at the executive level;
5. Historical misconduct – prosecutors should deprioritize dated misconduct, although involvement of senior leadership or repeat players in the wrongdoing will make even dated misconduct more relevant;
6. Independent monitors – more guidance is coming, including to ensure fairness in the selection and guidance of monitors and more DOJ oversight; and
7. More to come – additional guidance is expected from the DOJ including on rewarding companies for adopting financial incentives that promote or deter misconduct, such as compensation clawback policies; the next edition of DOJ’s Evaluation of Corporate Compliance Programs (last updated, June 2020) will also address the use of personal devices and third-party messaging platforms including ephemeral apps.

A more detailed discussion of these topics helps identify what is critical to plan for - now.

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1. Individual accountability remains the DOJ’s number 1 priority

• Individual accountability remains the Department’s “top” priority. Evaluating individual responsibility in corporate criminal cases is one of the DOJ’s key performance indicators (KPIs) in its 2022-2026 strategic plan and prosecutors will be motivated to ensure companies comply.^[2]
• Individual accountability and cooperation credit go hand-in-hand. The DOJ has emphasized that to receive full cooperation credit, companies must disclose “all relevant, non-privileged facts . . . about individual misconduct” on a “timely basis."^[3] The DOJ wants line prosecutors, companies, and outside counsel alike, to feel like they are “on the clock” to expedite investigations, especially into individuals.^[4]
• Going forward, prosecutors will “specifically assess” whether the timing and manner of a company’s disclosures inhibited the Department’s investigation and may reduce or eliminate cooperation credit where undue delays impact the Department’s ability to assess an individual’s culpability. ^[5] Likewise, delaying the disclosure of key documents and information for strategic reasons, especially with respect to culpable individuals, will result in the reduction or denial of cooperation credit.
• Companies should therefore prioritize and promptly disclose evidence that is most relevant to assessing individual culpability, such as communications involving those culpable individuals.

2. Incentivizing ethical behavior: claw backs and compensation structures that promote compliance and deter misconduct

• Ultimately, “it all comes back to corporate culture,” Monaco said. “No one should have a financial interest to look the other way or ignore red flags.”^[6] The DOJ intends to reward companies that use their compensation systems to incentivize compliance and deter misconduct through compensation clawback measures, partial escrowing of compensation, or similar arrangements.
• Prosecutors will consider whether a company’s compensation systems reward compliance and impose financial deterrents on individuals who contribute to criminal conduct.
• The Department’s emphasis on clawback measures may signal that the DOJ views such initiatives as a way of targeting individual accountability without bringing charges. We’ll learn more by year’s end as Monaco has directed the Criminal Division to develop further guidance on this topic, but the winds of change are blowing in a clear direction. Accordingly, companies should begin conversations about developing compliance-focused compensation and financial accountability measures.

3. Incentivizing Voluntary Self-Disclosure

• Voluntary self-disclosure is “the clearest path for a company to avoid a guilty plea or an indictment” and the significant fines, penalties, and costs that result, according to Monaco.^[7] Monaco wants the DOJ to adopt a more unified front against corporate crime, reiterating that “[p]redictability is critical.” Accordingly, for example, she has directed all areas within DOJ to review, adopt, and publicize written policies to incentivize voluntary self-disclosure according to common Department-wide principles that include two notable components:
• First, absent aggravating factors such as deep and pervasive misconduct or grave threats to national security, the DOJ will not seek a guilty plea where a company voluntarily self-discloses, fully cooperates, and remediates misconduct in a timely manner.
  • While Monaco did not detail what constitutes an aggravating factor in her remarks, Polite gave same insight into the Criminal Division’s approach, announcing that it will consider “significant profit to the company from the misconduct” as an aggravating factor, in addition to management’s involvement in the wrongdoing, as well as the pervasive or egregious nature of the misconduct.^[8]
  • Polite also previewed how the emphasis on self-disclosure may alter the Criminal Division’s Corporate Enforcement Policy (“CEP”), which details the Criminal Division’s existing treatment of voluntary disclosure. Notably, he explained, the new guidance “makes clear” that there is still a potential benefit to self-disclosure even for a recidivist company since, in the absence of aggravating factors, recidivism alone no longer renders a company ineligible for a declination.^[9]
• Second, the DOJ will not impose an independent compliance monitor on a company that self discloses, provided that the company has implemented and tested an effective compliance program at the time of resolution.

4. The Compliance Function Must Have a Seat at the Table

• The Department has stressed that the policy revisions are not solely about “individual accountability and corporate responsibility” but about “ownership and choice” too.^[10] In this respect, Monaco wants companies “empowered to do the right thing” and motivated to invest in compliance and culture.^[11] The new guidance gives compliance officers additional tools to “make a business case for responsible corporate behavior.”^[12]
• In his remarks, Polite highlighted that one key way the Criminal Division has sought to empower and motivate companies’ compliance function, is through Chief Compliance Officer (CCO) certifications, which have been required in all its corporate resolutions since March 2022. CCO certifications are signed by the CEO and CCO to certify that the company’s compliance program is reasonably designed and demonstrably effective. The certification is deemed a material statement and representation by the Company to the government, meaning that its signatories risk potential jail time and charges for lying to federal agents under 18 U.S.C. § 1001 if the compliance program is underdeveloped and ineffectual.
• Polite made clear that the certifications are designed to “guarantee a seat at the table” for Compliance and should contribute to a closer alignment of C-suite and compliance interests, which the DOJ expects to see as a feature in a company’s functioning compliance program.^[13] Corporate leaders who ignore the emphasis the Department continues to place on compliance, do so at their own risk, Polite warned.
• The Criminal Division has used CCO certifications in several resolutions, including in the FCPA DPA resolution reached on September 15 with Brazil-based GOL Airlines, in connection with a bribery scheme. GOL avoided a monitorship thanks, in part, to its redesigned anti-corruption compliance program and demonstrable commitments to enhancing compliance and internal controls. GOL’s CEO and CCO are both required to provide certifications at the end of the DPA, in order to ensure the company follows through on its commitments. This can’t happen unless the CEO and CCO are speaking with one voice on compliance issues.

5. Prosecutors’ Evaluation of a Company’s History of Misconduct is Subject to Limits

• In considering a resolution, prosecutors already evaluate a company’s full criminal, civil, and regulatory record. However, in news that will be welcome to companies in high-risk industries or who operate in high-risk jurisdictions, the DOJ’s recent announcements clarify that not all substantive misconduct is equal. U.S. criminal resolutions and prior misconduct involving repeat players and senior management will be the most significant forms of historic misconduct. Criminal resolutions older than 10 years, and civil or regulatory resolutions older than 5 years before the present misconduct, will receive less weight. Companies operating in highly regulated industries will also be compared against similarly situated companies.
• However, Monaco also announced that DOJ policy expressly disfavors successive non-prosecution agreements (NPAs) or deferred prosecution agreements (DPAs). A successive NPA or DPA for a company with a history of misconduct will now require approval from the Department’s senior leadership. Nevertheless, as discussed previously, the DOJ still encourages companies with a history of misconduct to self-disclose wrongdoing, since the timeliness of the disclosure will factor into decisions about cooperation credit and can also demonstrate to the Department that the compliance program operated effectively in detecting the misconduct.

6. DOJ will increase its oversight of independent compliance monitors

• The Department will select independent compliance monitors pursuant to a documented selection process. Monaco announced that the Department will release new guidance for prosecutors governing how to evaluate the need for a monitor, including how to select a monitor and oversee the monitor’s work to avoid scope creep and ballooning costs.
• All areas of the DOJ involved in corporate criminal resolutions that do not have existing, public policies on the selection of monitors, must develop and publish policies by year’s end.

7. The DOJ is Just Getting Started

• In contrast with Monaco’s October 2021 memorandum, which made headlines for its hardline tone as it introduced “necessary and fundamental revisions warranting immediate adoption,” ^[14] the recent announcements strike a more balanced tone and appear somewhat less exigent given the many promises about additional guidance to come in important areas including best corporate practices on the use of personal devices and third-party messaging applications, including ephemeral messaging, and the previously discussed claw back compensation provisions.

The new DOJ announcements provide a road map for navigating both the ongoing and anticipated changes to the corporate criminal enforcement landscape. If you have questions or would like more information on the matters discussed here, please reach out to any of the authors.