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Volume XIII, Number 32

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January 30, 2023

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DOJ’s Criminal Division Announces Revised Corporate Enforcement Policy

On January 17, 2023, Assistant Attorney General for the Criminal Division (“AAG”) Kenneth A. Polite, Jr. announced significant revisions to the U.S. Department of Justice, Criminal Division, corporate criminal enforcement policy (“CEP”).[1] The new CEP changes offer additional incentives to companies for voluntary self-disclosures, cooperation, and remediation.  The new CEP reflects an increased emphasis on voluntary self-disclosure and cooperation, and also constitutes a formal name change to the “Corporate Enforcement and Voluntary Self-Disclosure Policy,” replacing the prior version of the CEP in the Justice Manual (JM 9-47.120).  The revisions come in response to Deputy Attorney General Lisa O. Monaco’s request in September 2022 that all U.S. Department of Justice (“Department” or “DOJ”) components clarify the benefits of voluntary self-disclosure so that corporate decisionmakers can better understand the potential benefits and decide whether voluntary self-disclosure is in the company’s best interests.  We expect that other Department components will issue similar guidance following the Criminal Division’s recent CEP updates. 

Since launching its voluntary self-disclosure incentive program in 2016, the Department has repeatedly stressed that when a company discovers criminal misconduct “the clearest path for a company to avoid a guilty plea or an indictment is voluntary self-disclosure.”[2]  However, the Department acknowledged the difficult choice facing companies considering voluntary self-disclosure of alleged misconduct, particularly when aggravating factors may prevent a company from obtaining a declination.  In these instances, rational companies may decide that the potential benefits of self-disclosure do not outweigh the risks, and may instead elect not to disclose such misconduct.  The revisions to the CEP attempt to address these concerns by rewarding companies that have implemented robust compliance programs and who have made “extraordinary” efforts to remediate and cooperate with the Department.

CEP Revisions

The CEP revisions provide incentives for companies that fall within one of three categories:

  1. Companies with aggravating circumstances who ordinarily would not qualify for a declination;

  2. Companies who voluntarily self-disclose, fully cooperate, and timely and appropriately remediate, but for whom the Criminal Division determines a criminal resolution is still warranted; and 

  3. Companies who do not voluntarily self-disclose, but fully cooperate and timely and appropriately remediate.

I. Companies with Aggravating Circumstances

Under the revised CEP, DOJ prosecutors may now determine that a declination is the appropriate outcome for companies that discovered misconduct involving aggravating circumstances that previously may have prevented the company from obtaining a declination, if the following three factors are present:

  1. Upon becoming aware of the allegation of misconduct, the company immediately makes a voluntary self- disclosure;

  2. At the time of misconduct and disclosure, the company had an effective compliance program and system of internal accounting controls that enabled the identification of the misconduct and led to the company’s voluntary self-disclosure; and

  3. The company provided extraordinary cooperation with the Department’s investigation and undertook extraordinary remediation.  Our analysis below explains what qualifies as extraordinary. 

II. When a Criminal Resolution is Still Warranted Despite Self-disclosure, Cooperation, and Remediation

Under the revised CEP, for companies that voluntarily self-disclose misconduct, fully cooperate, and timely and appropriately remediate, but the Criminal Division determines that a criminal resolution is still warranted, the company may achieve a 50% to 75% discount off the low end of the U.S. Sentencing Guidelines (the “Guidelines”) range, except in the case of a criminal recidivist.  In cases of criminal recidivism, the reduction will not be from the low end of the fine range.  Instead, prosecutors will have discretion to determine the starting point within the Guidelines range for recidivist companies. Additionally, in either of the above circumstances in this category, DOJ will generally not require a corporate guilty plea, absent multiple egregious aggravating factors.

III. Companies Who Cooperate and Remediate, but Do Not Self-disclose

Companies that do not voluntarily self-disclose but still fully cooperate and timely and appropriately remediate, are now eligible for an up to 50% reduction off the low end of the Guidelines range as opposed to the previous maximum of a 25% reduction. 

In the case of a criminal recidivist in this category, a discount will still be available, however it is unlikely that the discount will be off the low end of the Guidelines range.  In all cases in this category, the AAG explained that prosecutors will have discretion to determine the specific percentage reduction and starting point in the range based on the particular facts and circumstances of each company and individual.

Extraordinary Cooperation Credit

To qualify for “extraordinary” cooperation credit rather than “full cooperation” credit, according to the policy, “companies must go above and beyond the criteria for full cooperation.”  In assessing what is “extraordinary,” AAG notes four concepts: the immediacy, consistency, degree, and impact of cooperation, which will apply to both the individual officers and the company itself.  For example, the
Criminal Division notes that it values when an individual or company begins to cooperate immediately, consistently tells the truth, allows the Department to obtain evidence it otherwise could not obtain, and that the cooperation produces tangible results (e.g., testifying at a trial or offering information that leads to additional convictions). 

Notably, the AAG explained that “each and every company starts at zero cooperation credit and must earn credit based on the parameters and factors outlined in the CEP.”  He also explained that cooperation remains a constant, such that extraordinary cooperation is assessed before, during, and after the Criminal Division’s investigation.

Takeaway

The Criminal Division intends the revisions to the CEP to signal unequivocally to companies that failing to take the steps outlined in the policy will increase companies’ criminal exposure and monetary penalties.  AAG Polite stressed that this “policy is sending an undeniable message: come forward, cooperate, and remediate.”  The CEP revisions indicate that the Department is laser focused on enhancing its voluntary self-disclosure incentive program to increase self-disclosures, cooperation, and remediation.  However, the concepts of “extraordinary cooperation,” and “extraordinary remediation” as described in the new CEP policy can be viewed subjectively, and there is little guidance and no case law that define them.  This means that any company seeking to benefit from the new CEP incentives will have to continue to monitor developments.  Further, without specific definitions of what constitutes “extraordinary” cooperation or remediation, when a company has voluntarily self-disclosed and disagreements develop with DOJ during settlement discussions, companies may have only limited recourse.  And, while “extraordinary” cooperation and remediation may involve a significant resource allocation or disruption to a business that may not be incurred if authorities do not learn of the misconduct, this should be balanced against the penalties and consequences of a criminal enforcement action that will follow when a company chooses not to voluntarily self-disclose and the authorities learn of the conduct and initiate their own investigation.

With this in mind, companies should review their existing compliance programs and assess whether the existing programs, policies, and procedures constitute a robust compliance framework that can effectively detect and prevent misconduct, and remediate any identified shortcomings.  Companies that are considering voluntary self-disclosure will need to think about the state of their existing compliance program at the time the conduct occurred, as well as enhancements that may be warranted as part of any cooperation and resolution.  Companies also will need to think about appropriate remediation steps and implement these as part of the self-disclosure and resolution process.  Companies should also consider how to best cooperate with any government investigation that may follow, including what may be necessary to be perceived as providing “extraordinary” cooperation. 

Whether to self-disclose identified misconduct is a fact-specific process that should take into account a number of factors related to the misconduct itself, the company involved, and its existing compliance program.  The Criminal Division intends the additional incentives in the revised CEP to increase the likelihood that companies facing this difficult decision elect to self-disclose, cooperate, and remediate.  Only time and the Criminal Division’s application of these revised factors in practice will determine whether these changes have a meaningful effect on corporate disclosures.


FOOTNOTES

[1] See Criminal Division Corporate Enforcement and Voluntary Self-Disclosure Policy (Jan. 17, 2023), https://www.justice.gov/opa/speech/file/1562851/download.  The CEP applies to all Foreign Corrupt Practices Act (“FCPA”) cases nationwide and all other corporate criminal matters handled by the Criminal Division, but not to corporate criminal matters involving other U.S. Department of Justice components such as the Antitrust Division, Tax Division, Environmental and Natural Resources Division, or various U.S. Attorney’s Offices, when the Criminal Division is not otherwise involved. 

[2] Lisa O. Monaco, Deputy Attorney General of the U.S. Department of Justice, Remarks on Corporate Criminal Enforcement (Sept. 15, 2022), https://www.justice.gov/opa/speech/deputy-attorney-general-lisa-o-monaco-delivers-remarks-corporate-criminal-enforcementsee also Kenneth A. Polite, Jr., Assistant Attorney General of the U.S. Department of Justice, Remarks on Revisions to the Criminal Division’s Corporate Enforcement Policy (Jan. 17, 2023), https://www.justice.gov/opa/speech/assistant-attorney-general-kenneth-polite-jr-delivers-remarks-georgetown-university-law.

© Copyright 2023 Squire Patton Boggs (US) LLPNational Law Review, Volume XIII, Number 23
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