On January 17, 2023, the U.S. Department of Justice (DOJ) announced revisions to the Criminal Division’s Enforcement Policy. Revisions follow Deputy Attorney General (DAG) Lisa Monaco September 2022 memo directing all components of the DOJ to adopt clear policies on certain issues, including a written policy to encourage companies to voluntarily disclose themselves. (See our November 21, 2022, October 6, 2022And September 16, 2022customer alerts on the subject.)
The revisions largely focus on GM expectations and policies designed to further encourage early and voluntary self-disclosures. For example, even a company implicated in gross misconduct with aggravating circumstances (such as management involvement, recurrence, or pervasiveness of the fault within the company) may be able to avoid prosecution. . This would occur if the company had an effective compliance program and a system of internal accounting controls that identified misconduct and led to voluntary self-disclosure by the company, and if the company was engaging in extraordinary cooperation and corrective action.
Importantly, the revised policy emphasizes that companies are encouraged to self-disclose immediately after identifying allegations of potential misconduct, even though an internal investigation has not been completed.
The revised policy also gives prosecutors more latitude to:
- grant variations;
- deal with repeat business; And
- seek reduced penalties for companies that meet certain criteria.
The policy further clarifies that it applies to all corporate cases prosecuted by the Criminal Division, not just cases under the Foreign Corrupt Practices Act (FCPA).
Below, we summarize the key takeaways from the revised policy.
New incentives for companies to disclose early, cooperate fully and remedy
- Prosecutors will have the discretion to determine that a denial is appropriate, even if there are aggravating circumstances, if a company meets the following criteria:
- The voluntary self-disclosure was made as soon as the company became aware of the allegation of misconduct (even if the company did not conduct an internal investigation);
- At the time of the misconduct and disclosure, the company had an effective compliance program and system of internal accounting controls that identified the misconduct and led to voluntary self-disclosure of the misconduct. ‘business ;
- Company provided ‘extraordinary’ cooperation with DOJ investigation; And
- The company has undertaken an “extraordinary” rehabilitation.
- Under the previous policy, a company would not qualify for a deemed refusal if aggravating circumstances were present, such as the involvement of senior management of the company in the misconduct, significant profit for the company of the misconduct, the flagrant or widespread nature of the misconduct within the company or the criminal recidivism.
- Where the DOJ finds that a criminal resolution, as opposed to a denial, is nonetheless warranted for a company that has voluntarily self-disclosed, cooperated fully, and remedied in a timely and appropriate manner:
- Prosecutors generally will not require a corporate guilty plea – including for repeat criminal offenders – absent particularly egregious or multiple aggravating circumstances, and may instead seek another type of resolution, such as a deferred prosecution agreement. .
- The DOJ can now grant, or recommend to a sentencing court, a greater reduction in the range of fines than in previous versions of the policy. Where the policy previously provided for a reduction of up to 50% from the bottom of the U.S. sentencing guidelines, the revised policy provides for a reduction of at least 50% and allows a reduction of up to 75%. A 50% cap will still apply where a company has not voluntarily self-disclosed.
- Consistent with the DOJ’s emphasis on dealing tougher conduct with repeat offenders, for repeat offenders, fine reductions will not start from the bottom of the guidelines fine range, but rather from a higher point in the range, as determined by the DOJ based on the particular facts and circumstances.
- The DOJ generally will not require the appointment of a monitor if a company has, at the time of resolution, demonstrated that it has implemented and tested an effective compliance program and remedied the root cause of the misconduct.
Clarity on voluntary self-disclosures
- The revised policy states that the Criminal Division will review the extent to which the timeliness of disclosure enabled it to preserve and obtain evidence as part of its investigation to assess the circumstances of the disclosure.
- The revisions also address the expected timing of self-disclosures, noting that the Criminal Division “encourages self-disclosure of potential wrongdoing as early as possible, even when a company has not yet completed an internal investigation.” The company bears the burden of demonstrating that the disclosure was made in a timely manner.
- Companies will receive credit for voluntary self-disclosure if:
- The disclosure is made to the criminal chamber;
- The company had no pre-existing obligation to disclose the misconduct;
- The disclosure occurred prior to an imminent threat of disclosure or a government investigation; And
- The Company has disclosed all relevant, non-privileged facts of which it is aware, including all relevant facts and evidence regarding all persons involved in or responsible for the misconduct at issue. This includes people inside and outside the company, regardless of position, status or seniority.
- Where a company does not self-report but cooperates fully and corrects in a timely and appropriate manner, the DOJ will recommend up to 50% reduction from the lower end of the guidelines fine range. on the penalty. (The previous version of the policy only contemplated a 25% reduction.) In his speech announcing the revisions, Assistant Attorney General (AAG) Kenneth Polite explained that the specific reduction percentage is left to the discretion of prosecutors. and will vary depending on a company’s level of cooperation and remediation.
Full cooperation at the earliest opportunity
The policy points out that prosecutors have discretion to analyze a company’s cooperation when calculating penalties, but companies that fail to demonstrate full cooperation in a timely manner may not receive full cooperation credit.
Policy revisions explain that companies will start with zero co-op credit and earn credit for specific co-op actions (instead of starting with the maximum credit available and receiving reduced credit for co-op gaps).
Although the revised policy outlines the requirements for full cooperation, it does not define “extraordinary” cooperation. AAG Polite described the extraordinary cooperation as going “beyond the criteria of full cooperation”, which is considered to include, among others:
- immediate cooperation and constant candour in communications with prosecutors;
- enable prosecutors to obtain evidence in a timely manner that they otherwise would not be able to obtain, such as securing and imaging electronic devices, and recording conversations; And
- provide a level of cooperation that produces results for prosecutors, such as testifying at trial or providing information that leads to additional convictions or advances the investigation.
It is clear from recent DOJ statements, including the September 2022 DAG Monaco Memorandum and Corporate Enforcement Policy Update, that the Criminal Division is serious about inducing self-disclosure. , cooperation and reparation. The DOJ offers significant benefits to companies that engage early and proactively with prosecutors, even in cases of gross misconduct. At the same time, it will take a tougher stance on evaluating corporate efforts to single out and reward those that are truly meaningful and helpful to prosecutors.
The DOJ is expected to issue further guidance this year on topics such as:
- compensation structures that allow for clawback provisions or other compensation-related consequences for those involved in the misconduct; And
- how prosecutors should assess companies’ policies and practices regarding the use of ephemeral or encrypted messaging platforms.