DOJ previews policy changes: Key takeaways

On March 7, 2024, Deputy Attorney General Lisa Monaco delivered keynote remarks at the American Bar Association’s 2024 National Institute on White Collar Crime, reiterating the key priorities set by the US Department of Justice (DOJ) at the beginning of the Biden administration.

In line with these priorities, Monaco announced two major new initiatives: (1) a DOJ-run whistleblower rewards program, and (2) amendments to the Criminal Division’s guidance on Evaluation of Corporate Compliance Programs (ECCP) to include assessment of the risks associated with disruptive technology risks, including artificial intelligence (AI). These initiatives align with DOJ’s ongoing efforts to incentivize responsible corporate citizenship. They also underscore other steps DOJ has taken to signal that AI has become a key enforcement priority.

In this alert, we highlight some key takeaways from these new developments.

DOJ remains focused on individual accountability, consequences for corporate recidivists, and cooperation through voluntary self-disclosure.

Monaco emphasized that DOJ’s first priority “has been and will continue to be individual accountability,” highlighting DOJ’s successful convictions of senior executives at several public companies. In a subsequent speech on March 8, 2024, Acting Assistant Attorney General Nicole Argentieri likewise discussed the Departments trial victories against individuals, stating that DOJ is “trying more white collar cases against individuals than ever before.”Monaco and Argentieri also reiterated the commitment to deliver consequences for corporate recidivists, pointing to the recent resolutions where DOJ pursued steeper monetary sanctions against companies that breached their Deferred Prosecution Agreement (DPA).

Monaco referred to the recent price-fixing resolution with Teva Pharmaceuticals, which had separately resolved Foreign Corrupt Practices Act (FCPA) violations with DOJ in 2016. In this resolution, DOJ demanded both a substantial penalty and, for the first time, required the company to sell an entire product line. Requiring such specific performance part of the remedy (which obligated the company to divest itself of a line of cholesterol drugs that was a core part of the price-fixing conspiracy at issue) as part of the remedy was a first, but Monaco signaled that we might see similar resolutions in the future.

Monaco also emphasized that DOJ is deeply committed to implementing policies that incentivize investing in a culture of compliance that prevents misconduct, noting DOJ’s recent pilot program on compensation clawbacks and its efforts to implement consistent, transparent, and predictable policies on voluntary self-disclosure. On the latter point, Monaco stressed that the DOJ’s Voluntary Self Disclosure programs condition the benefits on the company’s willingness to step up and own up, and that “no matter how good a company’s cooperation, a resolution will always be more favorable with voluntary self-disclosure.” In her own speech, Argentieri offered examples of corporations proactively cooperating as demonstrations of good corporate citizenship that ultimately resulted in reduced penalties.

Implementation of a DOJ-run whistleblower rewards program (DOJ Whistleblower Program) signals DOJ’s continued focus on corruption-related offenses.

Both Monaco and Argentieri used their speeches to announce a new tool in DOJ’s carrot-and-stick approach to incentivizing good corporate culture. She expressed DOJ’s efforts to encourage more reporting from traditional corporate whistleblowers, noting that existing whistleblower programs are limited in scope and do not cover the full range of corporate and financial misconduct that DOJ prosecutes.

To fill this gap, Monaco announced that DOJ would be launching “a 90-day sprint to develop and implement a pilot program, with a formal start date later this year.” While the specifics of the program are still being discussed, Monaco and Argentieri previewed some of its core features. Specifically, the DOJ Whistleblower Program will reward individuals:

1. Who help DOJ discover significant corporate or financial misconduct, otherwise unknown to them
2. Only after all victims have been properly compensated
3. Who submit truthful information not already known to the government, and
4. Not involved in the criminal activity itself

Notably, a whistleblower will only be eligible for a reward via this new pilot program where there is no other existing financial disclosure incentive, excluding those who could otherwise receive compensation through a qui tam action or another federal whistleblower program (including private companies who aren’t subject to Securities and Exchange Commission (SEC) oversight). Argentieri also noted that, as with other whistleblower programs, there will be a monetary threshold to focus resources “on the most significant cases” and asked for public input on what that threshold should be.

In that vein, Monaco encouraged “all potential whistleblowers listening” to be alert to misconduct, noting that DOJ is specifically interested in learning information relating to:

1. Criminal abuses of the US financial system
2. Foreign corruption cases outside the jurisdiction of the SEC, including Foreign Corrupt Practices Act (FCPA) violations by non-issuers and violations of the recently enacted Foreign Extortion Prevention Act (FEPA), and
3. Domestic corruption cases, especially involving illegal corporate payments to government officials

Echoing Monaco’s remarks, Argentieri announced that the Justice Manual would be updated to reflect DOJ’s decision to “make clear that the department will handle FEPA cases the same way we’ve [DOJ] treated FCPA cases” by having members of the Kleptocracy Initiative and the FCPA Unit handle these new cases.

AI-related risks are now expected to be part of a company’s compliance program.

Consistent with her recent pronouncements on AI at the University of Oxford and its potential impact on the US justice system, Monaco announced that, “going forward and wherever applicable, our prosecutors will assess a company’s ability to manage AI-related risks as part of its overall compliance efforts.” She specifically called upon the Criminal Division to “incorporate assessment of disruptive technology risks – including risks associated with AI” into its ECCP.

This initiative is consistent with DOJ’s recent efforts to apply existing scheme of enforcement mechanisms to any misconduct perpetrated through AI, whether it be fraud, price fixing, or any other form of market manipulation.

It is also consistent with DOJ’s implementation of President Biden’s Executive Order that seeks to restrict the sale of sensitive American data to China, Russia, Iran, North Korea, Venezuela, and Cuba to prevent those countries from accessing personally identifiable information for purposes of blackmail, surveillance, and the misuse of AI to target Americans. (Read our recent alert about these efforts here).

Key takeaways

Monaco’s remarks clarify that DOJ remains focused on individual accountability and curbing corporate recidivism. Recent enforcement actions indicate that DOJ is willing (and able) to pursue convictions against senior executives and repeat corporate offenders. We encourage companies to review and assess compliance policies for any potential shortcomings, especially for companies that operate in spaces generally considered to be outside the jurisdiction of other US federal agencies. It’s likely that we can expect increased whistleblowing for financial crimes, including misconduct under the FCPA and the Foreign Extortion Prevention Act considering DOJ’s stated intention to prioritize such violations.

While certain details regarding DOJ’s new initiatives have yet to be revealed, there are several practical steps that compliance professionals are advised to take to prepare for upcoming regulatory and enforcement developments:

1. Assess any potential disclosures of misconduct within the company to take full advantage of DOJ’s self-reporting program.
2. Conduct periodic risk assessments to determine vulnerabilities and ensure existing compliance controls are fit-for-purpose, including areas of AI-related risk and implementing programs to monitor potential misuse of company hardware.
3. Review whistleblower policies and other compliance controls to ensure that the company can effectively detect and address misconduct before a whistleblower can report any wrongdoing to DOJ.
4. Review existing compliance policies related to a company’s use of AI in its operations or designing and implementing such policies if not already developed.
5. Track enforcement actions, including those related to AI. DOJ and regulatory agencies publish enforcement actions as a way to deter certain activity and put the market on notice. They are also a good indicator of enforcement priorities, highlighting where companies, for example, have faltered.

For more information, please reach out to any of the authors or your usual DLA Piper relationship attorney.