Deputy AG announces changes to DOJ corporate criminal enforcement policy

During a recent speech at the American Bar Association (ABA)’s White Collar Crime National Institute Summit in Miami, the second-in-command at the Department of Justice (DOJ) announced three important policy changes affecting how the Department will approach corporate criminal enforcement – and hinted that others may be coming.  Deputy Attorney General Lisa Monaco identified the following modifications to existing policy:

1. Reversing the Trump Administration’s scaling back of the use of corporate monitors in criminal resolutions
2. Expanding the scope of a company’s prior enforcement and regulatory entanglements DOJ will consider when weighing an appropriate solution and
3. Broadening the scope of individuals a company must identify in connection with an investigation to secure full cooperation credit.

These initiatives may well have significant effects on how companies protect themselves from and during a criminal investigation. 

Increased use of monitorships

Historically, considerable ink was spilled concerning DOJ’s requirement that companies accept the imposition of a corporate monitor as part of a criminal resolution to ensure that companies comply with the resolution’s terms, as well as applicable laws and regulations. Over the years, critics argued that the considerable costs – financial and otherwise – associated with a monitor often outweighed their value to the company and the government. During the Trump Administration, DOJ announced that it would scale back the use of corporate monitors in light of such criticism. 

Monaco said last week that the DOJ was rescinding that guidance and that it would be “free to require” the imposition of independent monitors to ensure corporate compliance resolution obligations.  Monaco did note, however, that the decision to use monitors would entail consideration of “how the monitorship is administered and the standards by which monitors are expected to do their work.” She also said the DOJ would study data to determine whether the monitor selection process merits further standardization.

Consideration of prior misconduct

Previously, the DOJ advised federal prosecutors only to consider a target corporation’s history of “similar” prior misconduct when evaluating potential resolutions, including those short of criminal pleas. For example, the fact that a company under investigation by DOJ for a potential FCPA violation had previously resolved a relatively routine corporate disclosure issue with the SEC may not have factored into DOJ’s analysis of the appropriate resolution of the FCPA matter.

Now, however, Monaco said that the DOJ will examine all historical conduct by a target corporation, which necessarily includes its “full criminal, civil and regulatory record.” Although she acknowledged that some instances of prior misconduct will likely be unrelated and thus ultimately deemed immaterial, a company’s entire “record” is now potentially relevant.

Identification of all individuals involved to receive cooperation credit

In 2015, then-Deputy Attorney General Sally Yates issued an eponymous memo in which the DOJ announced that companies seeking full cooperation credit would need to identify “all relevant facts relating to the individuals responsible for the misconduct” at issue.  In 2018, Yates’s successor, Rod Rosenstein, refined this guidance and announced that companies would need only identify individuals who were “responsible” for or “substantially involved” in the misconduct.

Monaco, however, stated that the DOJ would now revert to the broader mandate under the Yates Memo and require identification of every individual responsible for or "involved in" – not just those "substantially involved in" – the misconduct for the corporation to receive cooperation credit.  Monaco explained that allowing companies to draw such distinctions between those "involved" and "substantially involved" creates confusion, ignores the fact that peripherally involved actors might have relevant information and, perhaps most importantly, affords companies too much discretion in deciding whose identities should be disclosed to the government.  She did add, however, that this change should not be interpreted as an indication that the government will increase its prosecution efforts against minimally involved participants.

More changes coming?

Monaco said the specific changes she described are part of a broader effort to revisit the DOJ’s approach to corporate criminal enforcement, and she suggested other areas of scrutiny, such as whether companies are taking the terms of non-prosecution agreements and deferred prosecution agreements sufficiently seriously.  “[T]his is a start — and not the end,” Monaco warned “of this administration’s actions to better combat corporate crime.”

Monaco also announced the formation of a Corporate Crime Advisory Group within the DOJ, which will include representatives from every department of the DOJ that is involved in any sort of criminal enforcement. This group will be vested with a “broad mandate” and will make recommendations as to benchmarks for cooperation, allocation of enforcement resources and other mechanisms of “ensur[ing] that individual accountability is prioritized.”

Takeaways

The changes Monaco announced may well impact many companies facing DOJ scrutiny.  Among other things:

• The fact that DOJ will review a company’s “whole criminal, civil and regulatory record — not just a sliver of that record,” as Monaco explained, could have significant impacts on companies that operate in highly regulated environments, such as those in the life sciences and financial services sectors. Regulatory scrutiny, especially for larger companies, is often routine and, thus, the fact that the DOJ will now consider any and all prior run-ins – big or small – with government agencies when deciding how lenient or aggressive to be in resolution discussions will likely affect risk analyses and strategic decision-making for companies engaged with the DOJ.
• DOJ’s withdrawal of a “default presumption against corporate monitors” presents both opportunities and risks for companies negotiating criminal resolutions.  Monitors can be hugely expensive both in terms of financial and in-kind resources, imposing significant operational and other burdens on companies.  And yet, agreeing to a monitor may provide the DOJ the assurance it seeks if a company is trying to avoid a more severe criminal sanction.  Understanding at the outset of an investigation that the DOJ is now more likely to consider imposing a monitor will be an important part of a company’s strategic calculus.
• Now that the DOJ is requiring a company seeking cooperation credit to “identify all individuals involved in the misconduct — not just those substantially involved — and produce all non-privileged information about those individuals’ involvement,” companies are now encouraged to carefully consider how broad of a net to cast when scoping an investigation.  What may have appeared to be an unnecessary “ocean-boiling” exercise may now be something the government will expect in return for full cooperation credit. How to balance the risk of being sucked into an endless investigation against the risk of being viewed by the DOJ as less than forthright is likely to be an even more fraught task now.
• Finally, all of these changes and their associated impacts will no doubt influence a company’s decision about whether to self-report potential misconduct to the DOJ.

As Monaco warned, these may be just the beginning of important policy changes the DOJ will adopt. Experienced counsel can help corporate clients wade through the increasingly dense thicket of strategic choices that a federal investigation presents.