Department of Justice Encourages Corporations to Disclose Criminal Conduct and Develop Strong Compliance Programs… Or Else
The U.S. Department of Justice (DOJ) has announced sweeping changes to how it will evaluate accountability for corporate criminal conduct. In a memo released September 15, 2022, the DOJ reasserted that its first priority in corporate criminal matters will be to go after individuals who commit and profit from corporate crime. But to do so, the department intends to rely on these individual’s employers. The DOJ is encouraging companies to timely investigate employee wrongdoing and disclose “all relevant, non-privileged facts and evidence about individual misconduct such that prosecutors have the opportunity to effectively investigate and seek criminal charges against culpable individuals.” This encouragement has teeth: failure to timely inform the department of individual misconduct will result in the company losing credit for its cooperation.
Under the DOJ’s new approach, voluntary disclosure will also help companies resolve criminal matters in which they are directly involved. The department directed its offices to establish policies that encourage corporations to disclose their own misconduct. Benefits from voluntary disclosure could include avoiding a guilty plea or an independent monitorship.
The DOJ also instructed its prosecutors to consider certain factors when resolving corporate criminal factors. Many of these new considerations evaluate the strength of the company’s compliance policies. For example, prosecutors must now consider whether the company provides “full cooperation”— which includes the timely collection, preservation and disclosure of relevant documents located in the United States and elsewhere — and whether the company’s compliance program is “well designed, adequately resourced, empowered to function effectively and working in practice.” Prosecutors will also consider whether the company’s compensation structure promotes compliance (by, for example, clawing back the compensation of employees who commit crime or using compliance metrics when considering raises), whether the company has used non-disclosure or non-disparagement provisions to inhibit the disclosure of criminal misconduct and whether the company has taken steps to preserve all business-related electronic data on its employees’ personal devices.
Finally, the DOJ announced its intent to place greater emphasis on a company’s record of past misconduct when determining the proper resolution of criminal matters. The department also stated that “multiple non-prosecution or deferred prosecution agreements are generally disfavored, especially where the matters at issue involve similar types of misconduct; the same personnel, officers or executives; or the same entities.”
In all, the DOJ’s announcements make clear that it intends to ramp up its investigation and prosecution of corporate crime. The department’s new guidelines on voluntary disclosure should be of particular interest to general counsels and compliance officers. These guidelines encourage companies to get ahead of their employee’s criminal misconduct by timely disclosing it to federal law enforcement. In exchange, companies can receive cooperation credit that might prevent corporate consequences. If the company itself is engaged in wrongdoing, disclosure can lighten or avoid criminal penalties.
Companies who have experienced criminal, civil or regulatory issues in the past should also take note of the DOJ’s new emphasis on recidivism. Of particular interest, companies who have previously received non-prosecution or deferred-prosecution agreements cannot expect that treatment again. Voluntary disclosure could therefore be particularly beneficial for repeat offenders.
The DOJ’s announcements also demonstrate the importance of having a strong compliance program. In addition to preventing criminal conduct in the first place, these programs can also weigh in the company’s favor if some misconduct does occur.
Neil E. Youngdahl also contributed to this article.