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The White House Directs Federal Agencies to Focus on Fairness in Investigations and Enforcement

On May 19, 2020, in response to the COVID-19 pandemic, President Trump signed Executive Order 13924, to provide regulatory relief for entities economically impacted by the pandemic.  Section 6 of the Executive Order directed agencies to revise their procedures and practices in administrative investigations and enforcement in light of certain enumerated principles of fairness.  It also required the Director of the Office of Management and Budget (OMB), in consultation with the Assistant to the President for Domestic Policy and the Assistant to the President for Economic Policy, to issue memoranda needed to guide implementation of the EO.  On August 31, 2020, OMB issued such a memorandum, providing guidance on the implementation of Section 6.

OMB’s memorandum outlines a list of best practices for federal agencies to consider as they review and revise existing investigation and enforcement procedures.  In general, these best practices appear to be geared toward enhancing fairness in administrative enforcement.  They include, among others:

  1. Agencies should read any genuine statutory or regulatory ambiguities related to administrative violations and penalties in favor of the targeted party.
  2. Penalties should be proportionate, transparent, and follow consistent standards. Agencies should decline enforcement when the regulated party attempted in good faith to comply with the law.
  3. Administrative enforcement should be prompt, fair, and transparent. Tolling agreements should be disfavored, and agencies should publicize the conditions in which investigations and enforcement will occur.
  4. The Government should bear the burden of proving an alleged violation of law; the subject of enforcement should not bear the burden of proving compliance.
  5. The Government should provide favorable evidence in possession of the agency, including evidence material to the mitigation of damages or penalties, to the subject of an administrative enforcement action.
  6. All rules of evidence and procedure should be public, clear, and effective. Agencies should seek to reduce the use of hearsay evidence, with limited exceptions, and should utilize the framework in Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), to determine the veracity of scientific evidence.
  7. Administrative enforcement should not be based upon improper government coercion, or retaliatory or punitive motives.
  8. Liability should be imposed only for violations of statutes or duly issued regulations, after notice and an opportunity to respond. This requires that documents initiating investigation or enforcement include citations to the statutes or regulations at issue, along with an explanation as to how the asserted conduct is prohibited.
  9. Agencies must be accountable for their administrative enforcement decisions. Investigations and enforcement actions should be approved by an agency official who is an Officer of the United States (i.e., an agency official with significant authority), and agencies should periodically publish data regarding their enforcement adjudications, including, for example, the number of matters pending with the agency over relevant time periods and the types of matters adjudicated by the agency.

In many respects, the “best practices” outlined by OMB reaffirm settled principles of law and well established agency enforcement rules (e.g., that the government bears the burden of proof and that agencies must notify parties of the alleged violations and provide an opportunity to respond).  That said, OMB’s guidance may provide helpful ammunition to regulated persons and entities in their dealings with the enforcement arms of federal agencies.  In particular, the memorandum’s instruction that agencies should decline enforcement when the regulated party attempted in good faith to comply with the law may provide additional support to “good faith” defenses.  Several of the instructions would be contrary to the established regulations or case law at many enforcement agencies.  For example, evidence rules in agency adjudications are often more accepting of hearsay, and more open to a range of expert testimony, than under court rules.  The direction that an agency should provide favorable evidence in its possession already exists in criminal cases, but extending it to civil enforcement would be of great value in defending those cases.

Thus, the guidance is a mix of statements that describe principles that are already in place, instructions that would require legal changes at some agencies, and directions that agencies can incorporate immediately into their enforcement practices, but that may be hard to measure.  Whether the memorandum actually impacts administrative enforcement programs remains to be seen.  Still, when you are facing off with the government, it is always good to use the government’s own policies to support your arguments when possible, and OMB’s memo may prove helpful in that respect.

© Copyright 2020 Squire Patton Boggs (US) LLPNational Law Review, Volume X, Number 265



About this Author

Coates Lear Government Investigations Attorney Squire Patton Boggs Denver, CO & Washington DC

Coates Lear specializes in assisting companies, boards of directors, board committees and individuals in internal investigations, government inquiries and enforcement proceedings. Drawing on his extensive government experience, Coates has particular expertise in matters involving the US Securities and Exchange Commission (SEC). He also helps clients evaluate and improve their compliance programs, and represents clients in complex litigation.

Before joining the firm, Coates was senior counsel in the SEC’s Division of Enforcement, where he worked from 2007 to 2015. While at the SEC,...

Claiborne Clay W. Porter Partner Squire partner Boggs

Clay Porter’s practice focuses on representing clients, including financial institutions, non-bank financial institutions, cryptocurrency businesses and corporations, in complex white collar criminal defense, regulatory enforcement defense, internal investigations and compliance counseling matters. Clay has particular expertise handling cases involving economic sanctions, the Bank Secrecy Act/anti-money laundering laws and regulations (BSA/AML), sensitive employee issues, fraud and embezzlement, corruption and the Foreign Corrupt Practices Act (FCPA). In addition, Clay is routinely called on to design and evaluate BSA/AML and sanctions compliance programs.

Clay’s extensive government experience includes various leadership and supervisory roles in the Money Laundering and Asset Recovery Section of the US Department of Justice’s Criminal Division (MLARS), including Acting Principal Deputy Chief of MLARS and Chief of the Bank Integrity Unit. At MLARS, he managed a wide variety of complex domestic and international investigations of financial institutions and non-bank financial institutions and coordinated those efforts with various domestic and foreign regulators, including the Federal Reserve Board, Office of the Comptroller of Currency, Financial Crimes Enforcement Network, US Securities and Exchange Commission, Federal Trade Commission, New York State Department of Financial Services, and the United Kingdom’s Financial Conduct Authority, National Crime Agency and Crown Prosecution Service.

Clay previously served as a managing director at a large consulting firm, leading its investigations group. He also led the asset tracing and recovery practice and worked on anti-money laundering and economic sanctions matters, conducting full-scope reviews and gap analyses of BSA/AML and sanctions compliance programs.

Earlier in his career, Clay worked as an assistant district attorney in the Kings County District Attorney’s Office, as an examining attorney at the Mayor’s Commission to Combat Police Corruption and spent time as an associate at two large global law firms.


Elizabeth Weil Shaw attorney Squire Patton Boggs

Elizabeth Weil Shaw assists clients primarily with government enforcement actions and inquiries, as well as internal investigations and compliance reviews. Liz has analyzed matters involving investigations by the US Securities and Exchange Commission, Department of Justice and State Attorneys General. She is a contributor to the firm's Anticorruption Blog.