{"id":6911,"date":"2022-09-28T13:51:07","date_gmt":"2022-09-28T13:51:07","guid":{"rendered":"https:\/\/www.americanconference.com\/fcpa-dc\/?page_id=6911"},"modified":"2023-01-19T16:55:35","modified_gmt":"2023-01-19T16:55:35","slug":"carrots-and-sticks","status":"publish","type":"page","link":"https:\/\/www.americanconference.com\/fcpa-dc\/aci-insights\/carrots-and-sticks\/","title":{"rendered":"Carrots and Sticks: Analyzing the DoJ\u2019s New Enforcement Policies"},"content":{"rendered":"
\r\n

By Jaclyn Jaeger<\/p>\r\n

Wednesday, September 28, 2022<\/p>\r\n<\/div>\r\n\r\n

U.S. Deputy Attorney General (DAG) Lisa Monaco recently announced several important updates to the Department of Justice\u2019s criminal enforcement policies. While many of the updates reemphasize longstanding practice, a few new initiatives promise to change how prosecutors will assess and reach resolutions resulting from corporate crime cases going forward.<\/p>\r\n\r\n

On Sept. 15, DAG Monaco issued to DoJ prosecutors her second memorandum<\/a> of the year. In her first memo<\/a>, issued in October 2021, DAG Monaco announced formation of the Corporate Crime Advisory Group and initial revisions to the agency\u2019s corporate criminal enforcement policies. This second memo outlines further revisions to those policies based on the advisory group\u2019s findings.<\/p>\r\n\r\n

\u201cTo get a wide range of perspectives, we met with a broad group of outside experts, including public interest groups, ethicists, academics, audit committee members, in-house<\/span> attorneys, former corporate monitors, and members of the business community and defense bar,\u201d DAG Monaco said in a Sept. 15 speech at New York University Law School. The new DoJ policies are a result of those discussions.<\/p>\r\n\r\n

For corporate counsel and chief compliance officers alike, the second memo provides an inside look at how prosecutors not only continue to assess corporate compliance programs, but also what new ways they intend to approach corporate criminal cases going forward. The most significant of those policies changes are explored in more detail below.<\/p>\r\n\r\n

Individual accountability<\/h5>\r\n\r\n

In her remarks, DAG Monaco reemphasized individual accountability as being the DoJ\u2019s number one priority, specifically prosecuting those who commit and profit from corporate crimes. \u201cIn individual prosecutions, speed is of the essence,\u201d she said.<\/p>\r\n\r\n

The Monaco Memo reinstates what was already previously established by the 2015 Yates Memo<\/a>: \u201cTo receive full cooperation credit, corporations must produce on a timely basis all relevant, non-privileged<\/span> facts and evidence about individual misconduct such that prosecutors have the opportunity to effectively investigate and seek criminal charges against culpable individuals.\u201d<\/p>\r\n\r\n

What is new this time around, however, is the enhanced emphasis DAG Monaco places on the interplay between individual accountability and the pace of internal investigations, stating that prosecutors no longer will tolerate companies and their counsel intentionally delaying critical documents or information that point to individual culpability, \u201cwhile they consider how to mitigate the damage or investigate on their own.\u201d Doing so may result in reduced or outright denial of cooperation credit, she said.<\/p>\r\n\r\n

What exactly is meant by the \u201ctimely\u201d production of documents is likely to spark much debate between the DoJ and companies looking to resolve a criminal case. Dan Tehrani, a partner at Morgan Lewis told ACI Insights that may mean turning information over even in the middle of an internal investigation. \u201cIt\u2019s not acceptable in the Department\u2019s view for a company to complete its investigation before turning over information about culpable individuals,\u201d he said.<\/p>\r\n\r\n

\u201cI think it\u2019s going to cause companies to have very difficult conversations and make very difficult decisions very early on in their internal investigations,\u201d Tehrani added. Those conversations are likely to concern many thorny issues, he said, like attorney-client<\/span> privilege concerns and employment-related<\/span> concerns.<\/p>\r\n\r\n

Compensation systems<\/h5>\r\n\r\n

Another significant implication of the DoJ\u2019s new policies will be heightened scrutiny over companies\u2019 compensation structures in evaluating the strength of a compliance program. \u201cCompensation systems that clearly and effectively impose financial penalties for misconduct can deter risky behavior and foster a culture of compliance,\u201d DAG Monaco said in her remarks.<\/p>\r\n\r\n

Moving forward, prosecutors will consider whether compensation structures not only incentivize compliance-promoting<\/span> practices, but also whether companies \u201cimpose financial sanctions on employees, executives, or directors whose direct or supervisory actions or omission contributed to the criminal conduct,\u201d DAG Monaco stated.<\/p>\r\n\r\n

Specifically, prosecutors will \u201cevaluate what companies say and what they do, including whether, after learning of misconduct, a company actually claws back compensation or otherwise imposes financial penalties,\u201d she added.<\/p>\r\n\r\n

The memo further makes clear that just having a claw back policy is not going to be sufficient. \u201cThey have to actually be enforced,\u201d Tehrani said.<\/p>\r\n\r\n

Geoff Martin, a partner at Baker & McKenzie, told ACI Insights that implementing and enforcing claw backs is likely to pose practical challenges for companies. \u201cOn the one hand, a company facing a criminal enforcement action may be incentivized to attribute blame to certain executives by clawing back their compensation in order to receive cooperation credit with the Department,\u201d Martin said. \u201cOn the other hand, this could create challenges in balancing the defense rights and interests of individual executives who may be simultaneously defending themselves against the company\u2019s claim for claw back and criminal charges brought against them.\u201d<\/p>\r\n\r\n

The new memo also directs prosecutors to consider whether the company \u201cuses or has used non-disclosure<\/span> or non-disparagement<\/span> provisions in compensation agreements, severance agreements, or other financial arrangements so as to inhibit the public disclosure of criminal misconduct by the corporation or its employees.\u201d<\/p>\r\n\r\n

More guidance will be forthcoming. The Criminal Division has been directed to develop guidance by the end of the year on how to reward companies that employ claw back arrangements.<\/p>\r\n\r\n\"Anti-Corruption<\/a>\r\n\r\n

Voluntary self-disclosure<\/span><\/h5>\r\n\r\n

Regarding corporate accountability, the memo reemphasizes the importance of assuring companies about the benefits of voluntary self-disclosure<\/span>—a point DoJ officials have stressed on multiple occasions and in various other guidance, including in the FCPA Corporate Enforcement Policy<\/a>.<\/p>\r\n\r\n

However, many departments within the agency do not currently have formal, documented policies on voluntary self-disclosure<\/span>. DAG Monaco said she wants to change that by expanding those policies Department-wide<\/span>: \u201cFor the first time ever, every Department component that prosecutes corporate crime will have a program that incentivizes voluntary self-disclosure<\/span>. If a component currently lacks a formal, documented policy, it must draft one.\u201d<\/p>\r\n\r\n

DAG Monaco further stated her intent to establish common principles that will apply across these Department-wide<\/span> voluntary self-disclosure<\/span> policies. \u201cAbsent aggravating factors, the Department will not seek a guilty plea when a company has voluntarily self-disclosed<\/span>, cooperated, and remediated misconduct,\u201d she stated.<\/p>\r\n\r\n

Assistant Attorney General Kenneth Polite clarified this point further in follow-up<\/span> remarks<\/a> at the University of Texas Law School on Sept. 16. In his remarks, Polite noted that even companies with a history of prior misconduct may still benefit from voluntarily self-disclosing<\/span> known misconduct.<\/p>\r\n\r\n

\u201cA history of misconduct will not necessarily mean an automatic guilty plea, unless aggravating factors—such as misconduct posing a national security threat, or deeply pervasive conduct—are present,\u201d Polite said. Examples of aggravating factors the Criminal Division will consider going forward include, but are not limited to, \u201cinvolvement by executive management of the company in the misconduct, significant profit to the company from the misconduct, or pervasive or egregious misconduct,\u201d he said.<\/p>\r\n\r\n

Corporate recidivism<\/h5>\r\n\r\n

Further regarding companies with a history of misconduct, the new Monaco memo describes a new policy for prioritizing these types of cases: \u201cThe most significant types of prior misconduct will be criminal resolutions here in the United States, as well as prior wrongdoing involving the same personnel or management as the current misconduct,\u201d DAG Monaco explained.<\/p>\r\n\r\n

Because past actions don\u2019t always reflect a company\u2019s current culture and commitment to compliance, DAG Monaco added that the agency will give less weight to \u201ccriminal resolutions that occurred more than 10 years before the conduct under investigation, and civil or regulatory resolutions that took place more than five years before the current conduct.\u201d<\/p>\r\n\r\n

DAG Monaco said the DoJ also will consider the \u201cnature and circumstances of the prior misconduct, including whether it shared the same root causes as the present misconduct.\u201d And if a company operates in a highly regulated industry, prosecutors are directed to compare its history with similarly situated companies \u201cto determine if the company is an outlier,\u201d she explained.<\/p>\r\n\r\n

DAG Monaco further warned that the DoJ will \u201cdisfavor multiple, successive\u201d non-prosecution<\/span> agreements or deferred prosecution agreements (DPAs). \u201cCompanies cannot assume that they are entitled to an NPA or a DPA, particularly when they are frequent flyers. We will not shy away from bringing charges or requiring guilty pleas where facts and circumstances require.\u201d<\/p>\r\n\r\n

Third-party<\/span> messaging apps<\/h5>\r\n\r\n

Another area addressed in the Monaco Memo is companies\u2019 use of personal devices and third-party<\/span> messaging applications. As Polite stated in his remarks, \u201cWe have seen a rise in companies and individuals using these types of messaging systems, and companies must ensure that they can monitor and retain these communications as appropriate.\u201d<\/p>\r\n\r\n

To help companies in this effort, Polite said the Criminal Division is currently examining whether additional guidance is necessary regarding best practices for companies on the use of personal devices and third-party<\/span> messaging apps.<\/p>\r\n\r\n

\u201cAs a general rule, all corporations with robust compliance programs should have effective policies governing the use of personal devices and third-party<\/span> messaging platforms for corporate communications, should provide clear training to employees about such policies, and should enforce such policies when violations are identified,\u201d DAG Monaco stated in the memo.<\/p>\r\n\r\n

She continued, \u201cprosecutors should also consider whether a corporation seeking cooperation credit in connection with an investigation has instituted policies to ensure that it will be able to collect and provide to the government all non-privileged<\/span> responsive documents relevant to the investigation, including work-related<\/span> communications (e.g., texts, e-messages<\/span>, or chats), and data contained on phones, tablets, or other devices that are used by its employees for business purposes.\u201d<\/p>\r\n\r\n

Compliance monitor oversight<\/h5>\r\n\r\n

Additionally, prosecutors now have new guidance on \u201chow to identify the need for a monitor, how to select a monitor, and how to oversee the monitor\u2019s work to increase the likelihood of success.\u201d<\/p>\r\n\r\n

In the past, the Department has faced criticism for not overseeing the activities of monitors extensively enough. In her remarks, Monaco addressed this criticism by announcing that Department prosecutors are now also being directed \u201cto monitor those monitors: to ensure they remain on the job, on task, and on budget.\u201d<\/p>\r\n\r\n

ACI will be holding a session on corporate and individual liability risks at its \u201c39th<\/sup> International Conference on the FCPA,\u201d taking place Nov. 30-Dec. 1, 2022, at the Gaylord National Resort and Convention Center in Washington D.C.<\/em> | www.FCPAconference.com<\/a><\/p>\r\n\r\n

For questions, concerns or more information about ACI Insights, please contact:<\/strong>
Chris Corbin
Associate Director of Marketing
American Conference Institute |<\/span> The Canadian Institute |<\/span> C5
E: c.corbin@americanconference.com<\/a><\/p>","protected":false},"excerpt":{"rendered":"By Jaclyn Jaeger Wednesday, September 28, 2022 U.S. Deputy Attorney General (DAG) Lisa Monaco recently announced several important updates to the Department of Justice\u2019s criminal enforcement policies. 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