Department of Justice Signals Reinvigorated Corporate Enforcement for White Collar Crime

Heightened Emphasis on Individual Accountability

Reinstating a 2015 policy, the DOJ has announced that corporations now must identify and disclose the identities of all individuals involved in or responsible for misconduct if they wish to receive cooperation credit from the Department, regardless of the individual’s position, status, seniority, or affiliation with the corporation. This is a significant shift from Trump-era DOJ policy, which provided cooperation credit for corporations that disclosed individuals who were “substantially involved in or responsible for” the misconduct, affording corporations a large say in which individuals would be held individually accountable. Under the new (reinstated) policy, decisions as to the relative culpability of individuals involved in the misconduct will be left to DOJ attorneys.

DAG Monaco further emphasized that the Department’s first priority is “to prosecute the individuals who commit and profit from corporate malfeasance.” Though acknowledging the difficulty of trying cases against such individuals, DAG Monaco made clear that prosecutors are “to be bold in holding accountable those who commit criminal conduct.”

Consideration of All Prior Instances of Corporate Misconduct

When deciding whether to charge or resolve allegations of corporate misconduct, DOJ policy has previously limited prosecutors to considering only related or similar past misconduct. DAG Monaco announced, however, that prosecutors now are to consider all instances of misconduct in a corporation’s history, as identified in any criminal, civil, or regulatory enforcement action against it or its related entities—including such actions taken by enforcement authorities other than the DOJ. While not all instances of prior misconduct will be deemed relevant, prosecutors are to assume that “all prior misconduct is potentially relevant” when assessing a corporation’s likelihood of recidivism and culture of compliance (or lack thereof). For example, a prosecutor developing a Foreign Corrupt Practices Act case now must consider a corporation’s prior tax offenses, violations of environmental laws, etc., in addition to its prior FCPA violations.

Increased Use of Outside Corporate Monitors

DAG Monaco also reaffirmed the DOJ’s commitment to imposing independent corporate monitors in corporate criminal matters where appropriate. When deciding whether assignment of a monitor is appropriate, prosecutors are to consider: “(1) the potential benefits that employing a monitor may have for the corporation and the public, and (2) the cost of a monitor and its impact on the operations of a corporation.” Specifically, a monitorship program should be considered where “a corporation’s compliance program and controls are untested, ineffective, inadequately resourced, or not fully implemented at the time of a resolution.”

Formation of the Corporate Crime Advisory Group

In addition to these policy changes, DAG Monaco also announced the formation of a Corporate Crime Advisory Group that will be asked to recommend additional guidance and reforms to strengthen the Department’s approach to corporate criminal enforcement. Specifically, the group will focus on topics such as cooperation credit, corporate recidivism, whether to standardize the process for monitor selection, and the factors to be considered in determining whether to offer a deferred prosecution agreement (DPA), non-prosecution agreement (NPA), or plea agreement. While DAG Monaco did not rule out the possibility of recidivist or breaching corporations receiving additional DPAs or NPAs for future misconduct, this is an issue undergoing further review by the Department.

Key Takeaways and Lessons Going Forward

DAG Monaco summarized these announcements with the following five points:

• Companies need to actively review their compliance programs to ensure they adequately monitor for and remediate misconduct—or else it will cost them down the line.
• For companies facing investigations, as of today, the Department will review their whole criminal, civil, and regulatory record—not just a sliver of that record.
• In order to receive credit for cooperating with the government, companies will be required to identify all individuals involved in the misconduct—not just those substantially involved—and produce all non-privileged information about those individuals’ involvement.
• For companies negotiating resolutions to corporate charges, there is no presumption against corporate monitors. Decisions about whether to impose a monitor will be made according to the facts and circumstances of each case.
• Looking to the future, this is a start—and not the end—of this administration’s actions to more aggressively pursue corporate misconduct.

As companies respond to this shift in enforcement policies, they should focus on the following best practices:

• Review and invest in internal compliance programs that serve both a training and monitoring purpose. Employees must be advised of their obligations under the law and systems must be in place to root out and prevent misconduct before it takes place.
• Increase corporate focus on creating a culture of compliance and accountability across the organization, supported by documented efforts to ensure compliance at all levels.
• Assess the corporation’s history of criminal, civil, and regulatory enforcement actions and ensure compliance with the terms of any ongoing NPAs or DPAs. If there is a significant history of violations, companies should reevaluate their internal controls and develop justifications for why these prior actions are not indicative of the corporation’s present and future commitment to compliance.
• Evaluate corporate policies on indemnification for defense costs and review D&O liability insurance policies to ensure executives and employees are safeguarded from financial harm caused by sharper scrutiny into the roles of individuals in corporate misconduct.

Companies need to be keenly aware that a failure to meaningfully adopt these prophylactic measures can be very costly in the event that subsequent misconduct is discovered.