December 10, 2019

December 09, 2019

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New DOJ Corporate Compliance Guidance Gives Corporations Insight into Evaluating Their Programs

On April 30, 2019, the U.S. Department of Justice (DOJ) Criminal Division issued updated guidance to prosecutors for assessing corporate compliance programs.  The new “Evaluation of Corporate Compliance Programs” (Updated Guidance) replaces the February 2017 Guidance (Prior Guidance).  The Updated Guidance provides structure to prosecutors’ charging, case disposition, sentencing, and monitoring decisions by encouraging prosecutors to examine three fundamental questions on compliance programs:  (1) Is the program well-designed?  (2) Is the program effectively implemented?  (3) Does the program actually work in the real world?  The Updated Guidance also provides insight to help corporations proactively assess their compliance programs.

In announcing the new guidance, Assistant Attorney General Brian A. Benczkowski underscored the importance of well-designed, effectively implemented, and regularly reviewed compliance programs to corporations:  “Effective corporate compliance programs play a critical role in preventing misconduct, facilitating investigations, and informing fair resolutions.”  He framed the update as part of DOJ’s “broader efforts . . . to help promote corporate behaviors that benefit the American public and ensure that prosecutors evaluate the effectiveness of compliance in a rigorous and transparent manner.”

While announcing no momentous policy departures, the Updated Guidance furnishes a more detailed and transparent road map.  Triple the length of the Prior Guidance, which consisted chiefly of a summary checklist, the Updated Guidance offers a narrative on prosecutors’ analytical framework, diagnostic questions, instructive examples of compliance program features the DOJ considers effective, and cross-references to other DOJ guidance and legal standards. 

The Updated Guidance is streamlined along the three key themes of design, implementation, and effectiveness:

Design

In evaluating whether a compliance program is well-designed, the DOJ will examine policies, procedures, training, internal reporting channels, and disciplinary procedures to assess whether the program is grounded in risk analysis based on the corporation’s industry, location, regulatory landscape, transactions with foreign governments, and other relevant factors.  As part of this risk analysis, the DOJ will determine whether the corporation applies risk-based due diligence to third-party relationships, such as with consultants or distributors.  Another focus is on how the corporation scrutinizes companies targeted for acquisition, including by identifying misconduct and evaluating its costs to be borne by the target.

Implementation

The DOJ will evaluate whether a compliance program is merely a “paper program” or whether it is implemented with real effectiveness in mind.  A key question is whether the corporation dedicates adequate resources, including sufficient staff to track, audit, analyze, and utilize the results of compliance efforts.  The DOJ will also evaluate whether corporate leadership just talks about a “culture of compliance” or if there is a commitment to such a culture that extends from senior leadership to middle management—whether management demonstrates support for and knowledge of compliance issues and models proper behavior.  Another measure will be whether disciplinary actions have been applied consistently and fairly across the organization.

Effectiveness

The most pronounced departure from the Prior Guidance is in the third section, which asks how a corporation’s compliance program works in practice.  Much of the answer lies in how thoughtfully and systematically a corporation evaluates its compliance program and incorporates what it learns so the program can “improve and evolve.” This greatly expanded section (formerly three lines of text) now maps with considerable clarity the kinds of steps companies can take to help avert future problems, and, where alleged misconduct is under investigation, possibly to favorably influence charging decisions, resolutions, or sentencing recommendations.  Among the key questions the DOJ will ask in evaluating the effectiveness of a program are:

  • Does the corporation periodically conduct meaningful review of its compliance program? 

  • Does it include internal audits at appropriate intervals, particularly in high-risk parts of corporate operations? 

  • How often and how does the corporation measure its culture of compliance, and does it survey employee perceptions at all levels regarding management’s commitment to compliance? 

  • Has gap analysis been performed to identify insufficiently addressed areas of risk? 

  • Do assessments include pertinent third parties?

This Updated Guidance from the DOJ offers corporations a valuable tool to help them assess and strengthen their compliance programs.

© 2019 Dinsmore & Shohl LLP. All rights reserved.

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D Michael Crites, white collar criminal defense lawyer, Dinsmore Shohl, law firm
Partner

D. Michael Crites’ practice focuses exclusively on white collar criminal defense and complex business litigation. As the former United States Attorney for the Southern District of Ohio and an Assistant United States Attorney for the Southern District of Ohio, he has years of grand jury and litigation experience in federal court and regularly litigates and negotiates global settlements of criminal, civil and regulatory matters on behalf of corporations and businesses throughout the United States. He also serves as Special Counsel to the Ohio Attorney General.

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MIchael Ferrara, Dinsmore, trial and appellate lawyer, litigation, white collar crime, false crimes act, Columbus, Ohio, Government investigations,
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Michael is a former federal prosecutor and experienced trial and appellate lawyer who focuses his practice on white collar criminal defense, internal investigations and False Claims Act litigation as a member of Dinsmore’s Litigation practice group. Prior to joining Dinsmore, he spent a decade as an assistant U.S. attorney in Chicago, where he served as the deputy chief of the narcotics section and lead attorney of a strike force which targeted organized crime for the U.S. Attorney’s Office for the Northern District of Illinois. In these roles, Michael handled and oversaw complex fraud matters and managed the office’s international money laundering and cartel prosecutions, leading teams of lawyers and investigators in years-long investigations of multi-billion dollar criminal enterprises.

In his time as a federal prosecutor, Michael gained substantial experience in litigation, trials and appellate work throughout the country, including the investigation and prosecution of a cyber-fraud organization which defrauded more than one million victims of over $100 million, criminal fraud matters related to parallel False Claims Act proceedings, and the prosecution of the leadership structure of the Sinaloa Cartel. He built his reputation as a respected, hands-on investigator by working with a wide variety of federal, state and foreign investigative and regulatory authorities. He successfully briefed and argued cases to the Seventh and Eighth Circuit Courts of Appeals, including matters of the First Amendment and complex evidentiary and federal sentencing guidelines issues.

He knows what clients facing investigations, subpoenas, trials and appeals should expect. He guides them through each process step by step, ensuring they know what to expect and counseling them on the best way to proceed along the way.

He is a graduate of Loyola University of Chicago School of Law, where he also served as an adjunct professor for more than a decade. Earlier in his career, Michael was local prosecutor in Chicago, where he specialized in forensic sciences while assigned as an assistant state’s attorney in the Cook County State’s Attorney’s Office’s cold case homicide unit.

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He engages in international arbitration of commercial and international government contract...

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Harvey Cohen is a long-standing, accomplished corporate attorney, uniquely focused on helping clients win by practically, pro-actively and efficiently assisting with their domestic and foreign transactions. With years of studies and dealings abroad, Harvey applies his global experience to address cross-border strategies and complex issues in tandem with client product or service needs, specific industry situations, as well as "must haves" and "must avoids" before crafting any solution or agreement. 

Harvey is known for asking the hard, practical...

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Pablo J. Davis Attorney  Dinsmore Cincinnati Litigation False Claims Act Spanish Speaking
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Pablo’s practice focuses on False Claims Act (FCA) litigation and conducting investigations in response to government subpoenas and Civil Investigative Demands, as well as general commercial litigation. Pablo brings an international and multilingual background (including native fluency in Spanish) to his practice and is an experienced legal interpreter and translator.

Prior to joining Dinsmore, Pablo served as law clerk to Judge Bernice B. Donald of the United States Court of Appeals for the Sixth Circuit. He also worked as a law clerk with the general counsel of the Shelby County (...

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