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DOJ Releases Updated Guidance on Evaluating Corporate Compliance Programs

The Department of Justice (DOJ) Criminal Division recently issued updated guidance for white-collar prosecutors regarding the “Evaluation of Corporate Compliance Programs” (the “Guidance”). The Guidance is intended to harmonize with existing guidance, as well as provide additional context for DOJ’s multifactor analysis of a company’s compliance program when resolving a criminal case.1 Companies should therefore (i) carefully analyze the Guidance, including to understand what DOJ considers to be a well-designed compliance program, and (ii) reassess its existing compliance program accordingly.

DOJ’s Increasing Emphasis on Corporate Compliance Programs

A corporation’s compliance program has become an increasingly important factor that prosecutors evaluate at the conclusion of a criminal investigation. DOJ’s Guidance is intended to help prosecutors make informed decisions as to whether, and to what extent, the corporation’s compliance program was effective at the time of the offense and/or at the time of a charging decision or resolution. Such determinations bear on the appropriate (i) form of any resolution or prosecution, (ii) monetary penalty, if any, and (iii) compliance obligations contained in any corporate criminal resolution (e.g., monitorship or reporting obligations). 

Apart from its direct application in criminal cases, this new Guidance also provides a valuable roadmap for companies who are interested in conducting a self-assessment of the “effectiveness” of their own compliance programs. Given the format and organization of the Guidance, as well as the number of detailed questions that it poses, companies wanting to take a more proactive approach would be well-advised to study it, as well as to summarize it to their Boards of Directors who are responsible for overseeing the corporate compliance function.

DOJ’s Three Fundamental Corporate Compliance Program Questions

Although the Guidance does not provide a rigid formula to assess the effectiveness of corporate compliance programs, it does set forth three “fundamental questions” that prosecutors should ask when evaluating compliance programs, each briefly discussed below.

  • Is the compliance program well-designed? According to DOJ, a well-designed compliance program starts with whether and “how the company has identified, assessed, and defined its risk profile, and the degree to which the program devotes appropriate scrutiny and resources to the spectrum of risks.” The policies and procedures that implement the program must provide content and effect company norms in a manner that reduces identified risks, makes clear that misconduct is not tolerated, and appropriately distributes responsibility. In addition, a well-designed program includes appropriately tailored training and communications in order for all employees to understand the program. Other components include management of third-party relationships, internal reporting, whistleblower and investigation processes, and comprehensive due diligence of any acquisition targets.
  • Is the compliance program being implemented effectively? A prosecutor will not be swayed by a well-designed compliance program that is not implemented effectively. The effectiveness of the program requires commitment, sincerity, leadership and oversight from senior and middle management. Adequate funding and sufficient autonomy are also indicators of an effective program. Mechanisms such as internal auditing and disciplinary measures to aid in implementation are highly valued. 
  • Does the compliance program actually work in practice? In accordance with the Principles of Federal Prosecution of Business Organizations, prosecutors must actually determine both whether a compliance program was working at the time of the offense as well as whether the program is working at the time of resolution. This task can often prove difficult, especially where misconduct is not immediately detected or reported. To do this, prosecutors consider whether and how the misconduct was detected and what resources were in place to investigate suspected misconduct, as well as the nature and thoroughness of the company’s remedial efforts. In addition, compliance programs should be reviewed over time to ensure they evolve with changes to a corporation’s business, operating environment, customers, regulations, and industry standards.

Conclusion: DOJ Further Reveals Its Playbook for Assessing Compliance

Although evaluating corporate compliance programs is not new to federal criminal investigations, the Guidance provides a clear playbook for prosecutors. As previously noted, corporate leaders should evaluate and implement this playbook to evaluate the effectiveness of their own compliance programs, and act upon these findings. While a robust program is never a guarantee against a criminal prosecution, the more a company can “show” (not just “claim”) a genuine commitment to compliance and self-governance, the less likely that a criminal response would be warranted. In short, this new Guidance helps to take some of the guess-work out of how to favorably influence the broad discretion of the prosecutor. In addition, and perhaps more practically, the guidance also helps to clarify—in more measurable and objective terms—what compliance “effectiveness” means.


1 This new Guidance builds on other resources upon which federal prosecutors rely to make these informed decisions, including the “Principles of Federal Prosecution of Business Organizations” in the Justice Manual, and the October 2018 Benczkowski Memo, which provides guidance regarding the selection of corporate monitors.

© 2019 Beveridge & Diamond PC

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About this Author

Peter C. Anderson White Collar and Environmental Crimes law attorney
Principal

Mr. Anderson uses his experience as a former federal prosecutor to defend corporations and individuals against government investigations and prosecutions, primarily involving environmental and regulatory crimes. In addition to defense services, he provides corporate compliance counseling. He helps lead the Firm's White Collar and Environmental Crimes Practice Group.

202-789-6014
Joshua Van Eaton Energy Attorney
Principal

Josh helps clients resolve high-stakes compliance, enforcement, and litigation matters.

He brings the perspective gained from a distinguished U.S. government service career to provide clients with strategic counsel on air, water, and waste issues with a focus on mobile source emissions. He also litigates those matters and advises on proactive environmental compliance strategies.

Prior to joining Beveridge & Diamond, Josh served as Senior Trial Attorney in the Environmental Enforcement Section of the Environment and Natural Resources Division (ENRD) of the U.S. Department of Justice (DOJ). During his DOJ career, he received the Samual J. Heyman Service to America Medal and was named Federal Employee of the Year in 2017 in recognition of his work as Lead Counsel in the United States v. Volkswagen AG, et al. (“Clean Diesel”) civil Clean Air Act (CAA) enforcement litigation. He also has received the Assistant Attorney General’s Award for Excellence, the EPA Administrator’s Award for Excellence, and numerous other DOJ commendations and awards. Clients benefit from the experience he gained advising senior officials across agencies and at corporations.

Josh’s public service includes a distinguished and ongoing military career. Josh currently serves in the Army Reserve as Associate General Counsel in the Office of General Counsel of the Defense Logistics Agency, where he also serves as Co-Chair of the Installation and Environmental Law Practice Group.

During his time on active duty, Josh served first as a criminal prosecutor and legal advisor in one of the army’s largest criminal jurisdictions then subsequently as a litigation attorney in the Environmental Law Division of the U.S. Army Judge Advocate General’s Corps. He is also a former Senior Administrative Law Attorney in the Administrative Law Division of the Department of the Army and a former Associate Professor of Administrative and Civil Law at the Army Judge Advocate General’s School in Charlottesville, Virginia. His military awards include the Army Meritorious Service Medal awarded on multiple occasions as well as the Army Commendation Medal.

Josh is not admitted to practice in Washington, DC. He is admitted to practice only in Washington state.

Education

  • Seattle Pacific University  (B.A., 1997)

    • Business Administration

  • Baylor University  (J.D., 2001)

Bar Admissions

  • Washington

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Daniel B. Schulson, Environmental Attorney, Beveridge & Diamond Law Firm
Associate

Daniel Schulson applies rich and diverse experience gained from working in the Office of General Counsel at the U.S. Environmental Protection Agency (EPA) to clients’ challenges on a broad array of issues. He assists clients with many aspects of environmental and administrative law, including compliance counseling, permitting, due diligence, audits, commenting on agency rulemakings, administrative enforcement defense, and litigation. 

Examples of Mr. Schulson’s experience include:

  • Negotiating favorable...
(202) 789-6007
Brooklyn Hildebrandt, environmental litigation lawyer, Beveridge
Associate

Brooklyn maintains a diverse environmental litigation and regulatory practice, which includes experience with the Clean Water Act, the Clean Air Act, and CERCLA. Brooklyn joined the firm following her graduation from the University of North Carolina School of Law.

During her time at the University of North Carolina School of Law, Brooklyn worked on the North Carolina Journal of International Law and Commercial Regulation and competed as a member of the Environmental Appellate Advocacy team at the West Virginia University energy and Pace University environmental moot court...

(202) 789-6021