DOJ Announces Shift in Approach to Prosecuting Corporate Crime

The Memorandum also announced changes to three of the Criminal Division’s core policies: the Corporate Whistleblower Awards (CWA) Program, the Corporate Enforcement Policy (CEP) and the Memorandum on Selection of Monitors. While revisions to the CWA Program expand the incentive to self-report misconduct to DOJ, the changes to the CEP and Monitor Memo are designed to reduce the costs of self-reporting. In making these changes, the Criminal Division’s stated goal was to strike “an appropriate balance between the need to effectively identify, investigate, and prosecute corporate and individuals’ criminal wrongdoing while minimizing unnecessary burdens on American enterprise.”

This Alert summarizes the changes to each of the revised policies. While these revisions may increase the likelihood of identifying and resolving prosecutions more quickly and at lower cost, they also underscore that white-collar criminal enforcement will remain a focus at DOJ—notwithstanding the agency’s change in tenor.

Expanding Scope of Corporate Whistleblower Awards Program
The first change expands the Corporate Whistleblower Awards (CWA) Program to include the criminal offenses identified as priorities in the May 12 Memo.

The CWA Program was launched in August 2024 to increase the likelihood that DOJ would learn about corporate wrongdoing. Originally, the program was focused on filling gaps in existing whistleblower programs to identify corporate crime that might otherwise go undetected in four specific areas: (1) abuses of the financial system not covered by the Financial Crimes Enforcement Network (FinCEN) whistleblower program; (2) foreign corruption schemes not covered by the Securities and Exchange Commission (SEC) whistleblower program; (3) domestic corruption schemes committed by or through corporations; and (4) federal health care offenses not covered by the False Claims Act. The rationale was that, by incentivizing whistleblowers to disclose misconduct to DOJ—but requiring them to first report it internally—the CWA Program would encourage more self-reporting by companies, who would be incentivized to beat whistleblowers to the punch.

The Criminal Division’s changes to the CWA Program double down on this theory. Not only do the original four areas of misconduct remain eligible for whistleblower awards, but the May 12 Memo expands the program to include additional corporate crimes that are among the offenses the Memo identifies as priorities for the Criminal Division. The additional crimes are:

• Violations by corporations related to international cartels or transnational criminal organizations, including money laundering, narcotics, Controlled Substances Act, and other violations.
• Violations by corporations of federal immigration law.
• Violations by corporations involving material support of terrorism.
• Corporate sanctions offenses.
• Trade, tariff and customs fraud by corporations.
• Corporate procurement fraud.

By expanding the number of offenses that are eligible for whistleblower awards, the revised Program increases the likelihood that corporate misconduct will be reported—either internally or to DOJ. If law enforcement resources are to remain consistent, the result could actually be an expansion in the number of white-collar investigations. In light of this possibility, companies should evaluate their internal procedures to ensure that whistleblower complaints are properly received and recorded, thoroughly investigated and appropriately handled.

Enhancing Benefits of Voluntary Self-Disclosure
At the same time the revised CWA Program increases the likelihood of revealing corporate misconduct, the revisions to the Corporate Enforcement Policy (CEP) could also make it more likely that companies will decide to voluntarily self-disclose that misconduct to DOJ.

The most significant change relates to a company’s ability to obtain a declination from the Criminal Division. Under the prior version of the CEP, if a company voluntarily self-disclosed misconduct, fully cooperated and remediated, and agreed to pay applicable disgorgement, absent “aggravating circumstances” the company would be entitled to a presumption of a declination. Even when aggravating circumstances were present, the company could still seek a declination if it could show that its self-disclosure was immediate, its compliance program was effective, and its cooperation was extraordinary.

Under the May 12 revisions to the CEP, rather than a presumption of a declination, a company that voluntarily self-discloses, fully cooperates and remediates, and pays all forfeiture and restitution “will” receive a declination in the absence of aggravating circumstances. And, even where there are aggravating circumstances, or the company acts in good faith but fails to meet the requirements of a voluntary self-disclosure, the revised CEP states the Criminal Division “shall” (1) provide a non-prosecution agreement (unless there are “particularly egregious or multiple aggravating factors”), (2) allow a term length of fewer than three years, (3) not impose a compliance monitor, and (4) provide a 75% reduction from the low end of the fine range established by the U.S. Sentencing Guidelines.

In announcing these changes, the Head of the Criminal Division explained that the CEP revisions “put an end to the guessing game companies previously faced under these circumstances.” While corporations may welcome greater certainty about the availability of declinations and the reduced severity of consequences for “near-miss” self-disclosures, it is likely too soon to conclude that the revised CEP will, in fact, drive a significant change in the volume of self-disclosures.

For one thing, the Criminal Division retains the discretion to decide whether “aggravating circumstances” are present in any particular case, and the analysis includes a number of potentially subjective factors: “the nature and seriousness of the offense,” the “egregiousness or pervasiveness of the misconduct,” the “severity of harm caused by the misconduct,” or any “criminal adjudication or resolution within the last five years based on similar misconduct,” and it is impossible to know how prosecutors will evaluate these factors in advance of the disclosure decision. In addition, as has always been true, the likelihood and nature of any DOJ enforcement action is only one consideration that companies must take into account when deciding whether to make a voluntary self-disclosure. Companies also must consider enforcement by foreign prosecutors, federal regulators, state officials, and private plaintiffs—among other factors.

Given the continued significance of voluntary self-disclosures, the CEP revisions underscore the need for companies to position themselves to act quickly in the event misconduct comes to light. If misconduct surfaces through a whistleblower report, the company has only 120 days to self-report to remain eligible for a CEP declination. That leaves limited time to conduct an investigation, analyze the results, and assess the enforcement landscape and consequences of disclosure.

Limiting Use of Corporate Monitorships
Finally, the Criminal Division announced that it has revised its Memorandum on Selection of Monitors to limit the use of monitors in corporate resolutions. Historically, monitorships have been imposed in only certain corporate resolutions. According to the Head of the Criminal Division, however, “the value monitors add is often outweighed by the costs they impose,” so observers “can expect to see fewer of them going forward.”

To focus prosecutors on ensuring that a monitorship’s costs are “proportionate to the severity of the underlying conduct, the profits of the company, and the company’s present size and risk profile,” the revised Memorandum on Selection of Monitors alters the Division’s approach in two primary ways.

First, it directs prosecutors to consider the following four factors in determining whether imposition of a monitor is necessary:

1. The nature and seriousness of the conduct and the risk that it will happen again, focusing chiefly on harms to Americans and American business;
2. The availability of other effective independent government oversight—i.e., regulator oversight;
3. The efficacy of the company’s compliance program and culture of compliance at the time of resolution; and
4. The maturity of the company’s controls and ability of the company to test and update its compliance program.

While the prior Memorandum on Selection of Monitors that was issued in 2023 identified 10 factors for prosecutors to consider, the 10 factors overlap with the four new factors to a large degree. Specifically, new factors (2), (3), and (4)—an alternate means of oversight, the efficacy and culture of compliance, and the maturity of controls and testing—were all part of the analysis in the 2023 Memorandum.

Factor (1), however, reflects the most significant difference because it requires prosecutors to focus “chiefly on harms to Americans and American business.” On the one hand, this change could reduce the use of monitors in future resolutions, insofar as monitorships were previously imposed in cases resolving investigations into foreign corruption. On the other hand, in light of the Attorney General’s recent hold on enforcement of the Foreign Corrupt Practices Act (FCPA), it remains to be seen whether FCPA investigations will continue to result in criminal resolutions, much less criminal resolutions involving monitorships.

Second, in cases where prosecutors decide it is appropriate to impose a monitorship, the Criminal Division will limit the costs of monitorships by imposing a fee cap, approving budgets for all workplans, and requiring biannual meetings among DOJ, the monitor and the company. These changes, too, are consistent with the Criminal Division’s new goal of reducing the cost of white-collar enforcement.

These revisions to the Memorandum on Selection of Monitors underscore the importance of strengthening compliance programs well before any misconduct arises. In the event that wrongdoing does surface, companies are less likely to see monitorships imposed when they have fostered cultures of compliance and developed mature and effective compliance programs. Because these programs take time to build, the best time to focus these efforts is sooner rather than later.

Conclusion
The Criminal Division’s new approach to white-collar enforcement emphasizes speed and efficiency. It seeks to uncover more misconduct faster by expanding the pool of eligible whistleblowers and improving the benefits for companies that self-report wrongdoing. The revisions to longstanding policies may also make corporate investigations less costly to resolve. But what the new approach does not do is abandon the Criminal Division’s traditional role in leading corporate enforcement. The May 12 Memorandum outlines a significant number of priority offenses, describes a plan for pursuing and resolving related investigations more quickly and effectively, and reiterates an intent to continue combatting white-collar crime. In other words, this is not a time to divest from compliance and ignore best practices for mitigating legal risk.