DOJ Strengthens Efforts to Combat Corporate Crime with Increased Focus on Individual Culpability and Self-Disclosure
As a product of the Department of Justice’s newly minted Corporate Crime Advisory Group, the DOJ has issued follow-up guidance to its October 2021 memo on corporate criminal enforcement, which reinstated prior guidance regarding targeting individuals who may be responsible for corporate wrongdoing, the “Yates Memo.” With an eye towards transparency, the DOJ guides prosecutors in evaluating individual and corporate accountability by assessing the history of misconduct, self-disclosure and cooperation, the efficacy of existing compliance programs and the use of monitors. The 15-page memo is packed with details and specific directives to prosecutors tasked with prosecuting corporate crime.
Some of the guidelines represent the first DOJ-wide policies on certain subjects whereas other portions give additional detail to already announced guidelines. The memo can be broken down into two parts: additional protocols for prosecutors and additional protocols for corporations. This alert will focus on the guidance issued to corporations.
In its 2021 memo, the DOJ required that corporate disclosures be fulsome by including all non-privileged evidence. Now, the Department has added that those disclosures must be made in time for the prosecutor to make effective use of the disclosures in building their case. In other words, for full cooperation credit disclosures of individual wrongdoing must be made in time for the DOJ to take enforcement action, not later in the case. This could prove difficult for organizations in the midst of internal investigations when initial disclosures are made. Moreover, corporations are directed to prioritize evidence of individual culpability, even if not specifically requested by prosecutors. Proof of an intentional delay in disclosing evidence will eliminate or reduce cooperation credit.
As an additional update to the 2021 guidance, corporations are now entitled to a more nuanced evaluation of any prior misconduct. Conduct more than ten years prior to the current conduct (or five years if civil or regulatory) should be given less weight because it may not reflect the “current compliance culture” of the company. By engaging in a deep analysis of the remediation steps undertaken since the last investigation, prosecutors are directed to look specifically at the individuals involved in prior conduct and whether they are the same ones involved in the current conduct under investigation. These provisions are likely a result of criticism the DOJ received for its previous policy of considering all misconduct against a corporation — even if corporate ownership or relevant stakeholders within the corporation had changed.
To increase voluntary self-disclosure, the DOJ has announced two new rules. First, where there are no aggravating factors, the DOJ “will not seek a guilty plea where a corporation has voluntarily self-disclosed, fully cooperated and timely and appropriately remediated the criminal conduct.” Next, a corporation could avoid the imposition of a monitor if they voluntarily self-disclose and, at the time of resolution, have demonstrated an effective compliance program. The program must be both implemented and tested.
In its efforts to ensure corporate accountability, the DOJ memo is far reaching — even directing corporations to implement polices governing the use of personal devices and third-party messaging for corporate communications to ensure compliance programs survive scrutiny and cooperation credit remains available. Corporations looking to improve their compliance efforts, or to minimize risk when dealing with a government investigation, should consider the following:
If considering a self-disclosure, disclosure of wrongdoing by individuals must be timely. Do not delay disclosures. For full cooperation credit disclosures must be made in time for the DOJ to take enforcement action.
Engage in careful remediation of prior bad actions and document the same. Whether removing individuals who engaged in wrongdoing or revamping compliance programs, being able to show remediation will impact the DOJ’s consideration of prior misconduct.
Ensure all corporate communications are stored and retrievable by establishing protocols for the use of personal devices and third-party messaging platforms.