DOJ Seeks to Toughen its Corporate Criminal Enforcement Policies
On October 28, 2021, Deputy Attorney General Lisa Monaco announced three changes to the Department of Justice’s (DOJ) approach to corporate criminal enforcement. Monaco announced the changes during the Keynote Address at the American Bar Association’s National Institute on White Collar Crime and issued an accompanying memorandum with directives to DOJ components. Taken together, the policy changes reflect the Biden Administration’s stated priority to increase corporate criminal enforcement. Only time will tell if these changes will, in fact, lead to any meaningful change in how DOJ prosecutes corporations for federal criminal violations given the overall decline of corporate criminal enforcement in recent years. The announced changes are as follows.
First, for a company to earn cooperation credit, it must provide DOJ with all non-privileged information about all individuals involved in the relevant misconduct, regardless of the degree of involvement, status, or seniority. This is a return to DOJ’s 2015 “Yates Memorandum” standard, which was modified in 2018 when DOJ changed the policy to allow companies to disclose only information about individuals “substantially involved” in misconduct to receive cooperation credit.
Critically, the Monaco memorandum does not expressly state whether this requirement to disclose all individuals applies in civil matters such as False Claims Act (FCA) cases. The memorandum does, however, purport to “reinstate” the Yates Memorandum, which expressly applied to civil matters. This raises the question whether DOJ will now require companies to identify every individual involved in an FCA violation, even when doing so will slow the progress of FCA investigations and require expending investigative resources disproportionate to any potential recovery.
Second, DOJ will now require prosecutors to consider the entirety of a company’s history of misconduct, regardless of whether past misconduct is similar to the misconduct presently at issue. Prosecutors must now begin with the presumption that all misconduct — including offenses prosecuted by other divisions of the DOJ, other states, and other countries — is potentially relevant. This could lead to more severe penalties for some companies, although how this will impact corporate resolutions remains to be seen.
Third, DOJ will reverse its policy disfavoring the imposition of independent corporate monitors. In the past, DOJ had instructed prosecutors that monitors were to be the exception in corporate resolutions, reserved for instances when DOJ identified a clear need and benefit to a monitorship when weighed against its costs. DOJ now is free to require an independent monitor “whenever it is appropriate to do so” to satisfy prosecutors that a company is fulfilling its compliance and disclosure obligations.
Monaco also announced the formation of a Corporate Crime Advisory Group (CCAG). The CCAG will be composed of representatives from every DOJ division involved in corporate criminal enforcement and will have a “broad mandate” — including to consider monitorship selection, recidivism, and non-compliance with Non-Prosecution Agreements or Deferred Prosecution Agreements — and provide benchmarks to measure a company’s successful cooperation. In addition, the CCAG will consult with DOJ components broadly, making recommendations and proposing revisions to DOJ policy to facilitate more rigorous enforcement and prioritize individual accountability.
Implications of These Changes
Monaco’s announcement continues a series of recent pledges by the Biden Administration to bolster enforcement of corporate crime. This renewed focus, if properly resourced and supported by both Main Justice and the U.S. Attorney’s Offices’ prosecutors, has practical impact:
A sustained interest in corporate compliance efforts. As Monaco said, “Companies need to actively review their compliance programs to ensure they adequately monitor for and remediate misconduct — or else it’s going to cost them down the line.” Having a robust compliance program will help companies detect problems earlier and make remediation of problems easier.
The path to obtaining cooperation credit is now more difficult, requiring companies to make difficult decisions when confronting potential misconduct. If a company seeks cooperation credit, it must thoroughly investigate conduct to persuade DOJ the company has met its obligation to identify and disclose “all” non-privileged information about all individuals.
DOJ’s expanded consideration of relevant misconduct poses risks for large corporate entities, longstanding entities, and acquisitive companies — all more likely to have a broader track record to scrutinize. It will be important for company advocates to give prosecutors the broader context of the company’s history, including its compliance efforts, so prosecutors have an accurate view of the company’s responsibility.
Some corporations may take a “wait and see” approach to this announcement, given how often DOJ seems to cycle through a similar set of promises and warnings depending on whom the attorney general is. In contrast, those corporations that place a high value on compliance will likely use this announcement to help increase the focus on compliance inside those organizations.