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DOJ’s Recent Guidance on Compliance Programs

In assessing potential sanctions against corporations, prosecutors must decide whether and how to exercise their discretion when evaluating penalties to impose upon a company whose employees engaged in wrongdoing despite the company’s controls designed to prevent illegal conduct.  There are in existence no fewer than 11 policies or statements issued by a variety of federal authorities providing guidance in analyzing corporate compliance programs in making this assessment.[1]  Most recently, on February 8, 2017, the Department of Justice’s (“DOJ”) Fraud Section issued additional guidance, “Evaluation of Corporate Compliance Programs” (the “Compliance Programs Memorandum”).  The Compliance Programs Memorandum provides a list of “important topics and sample questions that the Fraud Section has frequently found relevant in evaluating a corporate compliance program.”[2]  This alert reviews the Compliance Programs Memorandum and what, if any, change it makes in how prosecutors exercise their discretion.

The Compliance Programs Memorandum 

DOJ makes clear in the Compliance Programs Memorandum that there is no “one-size-fits-all” approach for establishing an effective corporate compliance program.  Rather, “each company’s risk profile and solutions to reduce its risks warrant particularized evaluation.”[3]  Nevertheless, there are “common questions” that DOJ will ask when it evaluates a company’s compliance program.[4]  The Compliance Programs Memorandum lists dozens of these “common questions,” divided under the following headings:

  1. Analysis and Remediation of Underlying Conduct

  2. Senior and Middle Management

  3. Autonomy and Resources

  4. Policies and Procedures

  5. Risk Assessment

  6. Training and Communications

  7. Confidential Reporting and Investigation

  8. Incentives and Disciplinary Measures

  9. Continuous Improvement, Periodic Testing, and Review

  10. Third-Party Management

  11. Mergers and Acquisitions

The Compliance Programs Memorandum notes that these topics and their corresponding questions constitute neither a checklist nor a formula, and that in any particular case, specific topics may be more or less relevant.

Scope and Application of the Guidance 

The Compliance Programs Memorandum applies to domestic companies and foreign companies with any business interests in the United States and provides a one-stop shop for summarizing the key issues in crafting a compliance program that DOJ will find to be acceptable.  Companies would be well-advised to review their compliance polices and procedures to ensure that they can withstand scrutiny under the Compliance Programs Memorandum. 

This is Not New 

The substance of the guidance provided in the Compliance Programs Memorandum is not new.  For years, prosecutors responsible for investigating companies have considered the topics and questions listed in the Compliance Programs Memorandum in deciding whether to bring charges against a company and/or its employees.  Indeed, many of these topics and questions appear in publicly available resources such as the USAM, USSG, FCPA Guide, and the Organization for Economic Cooperation and Development’s Anti-Corruption Ethics and Compliance Handbook for Business and Good Practice Guidance on Internal Controls, Ethics, and Compliance memorandum.  Several federal agencies use almost identical factors in their enforcement policies.[5] 

Three Benefits from the Compliance Programs Memorandum 

First, the Compliance Programs Memorandum represents DOJ Fraud Section’s effort to consolidate in a single location the issues it considers relevant in evaluating a corporate compliance program.  Prior to the publication of the Compliance Programs Memorandum, companies and their compliance counsel had to cobble together guidance from a variety of sources.  DOJ has now provided compliance counsel with a single source from which to begin their development of new compliance programs or analysis of preexisting ones.

Second, the Compliance Programs Memorandum provides a benchmark against which a company’s compliance efforts can be measured.  Attending to the considerations expressed in this Memorandum can and should impact a prosecution decision. 

Third, the Compliance Programs Memorandum represents the first formal guidance issued by DOJ’s Fraud Section since the presidential administration change and the confirmation of the new Attorney General and thus may provide some insight into the new administration’s enforcement priorities — in this case, perhaps focusing initially on compliance efforts (often used to avert prosecution) and not prosecutorial initiatives.


[1] See e.g., United States Attorneys’ Manual (“USAM”), https://www.justice.gov/usam/united-states-attorneys-manual; the United States Sentencing Guidelines (“USSG”),  http://www.ussc.gov/guidelines; DOJ & Securities & Exchange Commission (“SEC”) Resource Guide to the U.S. Foreign Corrupt Practices Act (“FCPA Guide”), https://www.justice.gov/sites/ default/files/criminal-fraud/legacy/2015/01/16/guide.pdf; SEC Enforcement Manual, https://www.sec.gov/divisions/enforce/enforcementmanual.pdf; Commodity Futures Trading Commission’s Cooperation Factors in Enforcement Division Sanction Recommendations, http://www.cftc.gov/idc/groups/public/ @cpdisciplinaryhistory/documents/file/enfcooperation-advisory.pdf; Federal Trade Commission’s Competition Policy Guidance, https://www.ftc.gov/tips-advice/competition-guidance; Health & Human Services Compliance Education Materials, https://oig.hhs.gov/compliance/101/; DOJ Environment and Natural Resources Division’s Factors in Decisions on Criminal Prosecutions, https://www.justice.gov/enrd/selected-publications/factors-decisions-cri... Protection Agency’s Audit Policy, https://www.epa.gov/compliance/epas-audit-policy#_bookmark3; Department of Labor - Occupational Safety and Health Administration’s Compliance Directives, https://www.osha.gov/pls/ oshaweb/owasrch.search_form?p_doc_type=DIRECTIVES&p_toc_level=2&p_keyvalue=CPL&p_status=CURRENT.

[2] DOJ, Criminal Division, Fraud Section, Evaluation of Corporate Compliance Programs (Feb. 8, 2017).

[3] Id.

[4] Id.

[5] See Note 1, supra.

Copyright 2017 K & L Gates

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About this Author

Christopher L. Nasson, Government Enforcement Attorney, White Collar Enforcement Lawyer, KL Gates, Law Firm
Partner

Mr. Nasson is a partner in the firm’s Boston office. His practice is focused on government enforcement, white collar criminal defense, securities enforcement, internal investigations, corruption-related matters, and complex civil litigation. 

Prior to joining the firm, Mr. Nasson served as an Assistant U.S. Attorney in the Business & Securities Fraud Section of the U.S. Attorney’s Office for the Eastern District of New York. Prior to that, he served as an Assistant U.S. Attorney in the White Collar Crime Section of the U.S. Attorney’s Office...

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Michael D. Ricciuti, Government Enforcement Attorney, Securities Enforcement Lawyer, KL Gates, Law Firm
Partner

Mr. Ricciuti concentrates his practice in government enforcement, white collar criminal defense, securities enforcement, internal investigations, and complex civil litigation. He has represented clients – as defendants, witnesses, or victims – in federal and state criminal and securities enforcement matters and has handled a variety of state and federal civil and administrative investigations and proceedings across the country. Mr. Ricciuti has conducted internal investigations and due diligence reviews on behalf of clients, handled complex domestic and international civil commercial disputes in the United States and abroad, and handled a variety of matters related to homeland security involving foreign assets and export controls. Mr. Ricciuti also routinely handles challenging civil matters on behalf of clients. He has tried dozens of criminal and civil cases to a verdict as well as civil arbitrations. He has also been involved in dozens of matters that proceeded to appeal in the Supreme Judicial Court, Appeals Court and First Circuit, as well as numerous administrative hearings and mediations. 

Mr. Ricciuti is a member of the Adjunct Faculty at Suffolk University Law School, where he has taught Constitutional Law and Criminal Procedure, a three-credit upper-level criminal course on Constitutional law and criminal process, for ten years. 

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Barry Hartman, Litigation Attorney, Environmental Attorney, KL Gates Law Firm
Partner

Mr. Hartman represents companies and individuals in criminal and civil investigations, trials, and appeals primarily involving complex federal regulatory programs, with an emphasis on environmental matters, and advises clients on compliance with those programs. He also conducts internal investigations, counsels clients regarding corporate compliance programs, and represents clients in Congressional investigations regarding lobbying, ethics, and related issues. He has represented clients in industries including maritime, energy, pharmaceuticals, healthcare, recycling, chemicals,...

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Clifford C. Histed, Financial Markets Lawyer, Health Care Attorney, KL Gates, Law Firm
Partner

Cliff Histed focuses on representing companies and individuals operating in highly-regulated industries, particularly in the areas of financial markets, trading, and health care, during both criminal and regulatory proceedings, and in representing clients in litigation and at trial.

Mr. Histed is a former supervisory federal prosecutor and supervisory enforcement lawyer with the Commodity Futures Trading Commission.  He has more than 23 years’ experience investigating and prosecuting official misconduct, business frauds, and criminal offenses in...

312-807-4448