What 2022 can tell us about corporate criminal enforcement in 2023

The year 2022 featured important policy pronouncements on corporate criminal enforcement by the US Department of Justice (DOJ).

These major policy pronouncements mark a shift in the way DOJ intends to prosecute corporate crimes going forward, placing both an organization’s cooperation and the effectiveness of its compliance program at the forefront of its consideration when assessing the type and scope of a resolution.

In this issue of The Global Anti-Corruption Perspective, we analyze this shift through the settlements that followed these pronouncements.

A bit of background

In spring 2022, Assistant Attorney General Kenneth A. Polite, Jr. delivered remarks on DOJ’s expectations for corporate compliance programs and how those programs will be assessed and considered in determining appropriate resolutions of investigations of corporate misconduct. In Fall 2022, Deputy Attorney General Lisa O. Monaco gave a speech highlighting upcoming shifts in DOJ’s corporate crime initiatives and previewing new guidance in the way DOJ assesses a history of misconduct and imposes an independent compliance monitor.

More recently, in January 2023, Polite introduced the first significant changes to DOJ Criminal Division’s Corporate Enforcement Policy (CEP), offering companies “new, significant, and concrete incentives to both self-disclose misconduct and timely cooperate and remediate the misconduct.”

The Safran declination: Companies that self-disclose and fully cooperate can still expect a declination

On December 21, 2022, DOJ declined to prosecute Safran SA after it disclosed FCPA violations that it had uncovered during post-acquisition due diligence.

The misconduct occurred between 1999 and 2015, but the company nonetheless (i) made a full disclosure; (ii) fully and proactively cooperated with DOJ by providing all known relevant facts about the misconduct; (iii) timely and fully remediated the misconduct, which included the termination of a remaining employee involved in the misconduct, withholding compensation of another employee involved in the misconduct who had already left the company and the company’s efforts to enhance its anti-corruption training and compliance program; and (iv) agreed to disgorge the full amount of ill-gotten gains to the government.

DOJ’s decision to decline is consistent with the new CEP and previews the Department’s expectations of “full cooperation” in instances where a company voluntarily self-disclose the misconduct.

ABB and Honeywell resolutions: Companies showing extraordinary cooperation and extensive remedial measures may benefit in the type and scope of their resolution with regulators, despite a history of prior misconduct and not self-disclosing

In December 2022, Honeywell entered into a three-year Deferred Prosecution Agreement (DPA) to resolve criminal charges alleging that the company had violated the FCPA; it agreed to pay more than $160 million to resolve parallel investigations by DOJ, Securities and Exchange Commission (SEC), and Brazilian authorities.

Notably, the company managed to avoid a criminal conviction as well as the imposition of a compliance monitor, even though it did not voluntarily disclose the misconduct and its parent company had a prior criminal history. The DPA noted Honeywell received full cooperation credit for (i) proactively disclosing evidence which DOJ was previously unaware of; (ii) providing information obtained through its internal investigation which allowed the government to preserve and obtain evidence as part of its own independent investigation; (iii) making detailed presentations to DOJ; (iv) voluntarily facilitating interviews; and (v) collecting and producing voluminous relevant documents and translations to DOJ, including documents located outside of the US.

DOJ also noted the company’s “extensive” remedial efforts, which began prior to commencement of the government’s investigation and included (i) expanding its compliance function with experienced and qualified personnel and taking steps to embed compliance and ethical values at all levels of its business organization; (ii) establishing monitor and audit processes to regularly review and update the compliance program; and (iii) substantially reducing its anti-corruption risk profile by taking steps to eliminate the company’s use of sales intermediaries and, in the interim, rolling out a single, automated sales intermediary due diligence tool that requires responsible managers to provide quarterly compliance certifications for all existing sales intermediaries.

Finally, while the DPA noted the parent company’s prior environmental criminal resolution, DOJ still allowed its subsidiary to enter into a DPA and receive full cooperation credit, suggesting that DOJ’s new broader consideration of criminal and regulatory history may not negatively impact a company’s settlement if the prior conduct is sufficiently removed in time and subject matter.

Likewise, DOJ’s resolutions with ABB entities in December 2022 illustrate how the new CEP may apply to companies that fully cooperate and remediate, even where they do not voluntarily self-disclose and have a history of prior misconduct. The DPA noted that ABB, in the wake of its prior misconduct, implemented a compliance program that detected the new FCPA misconduct at issue, and that the company had planned to promptly self-disclose it and even planned a meeting with the government to do so. In deciding to enter into a DPA and give full cooperation credit, DOJ noted ABB’s “extraordinary cooperation” with the government, which included identical efforts as the ones outlined in the Honeywell resolution.

The Honeywell DPA also noted the company’s “extensive remedial measures,” in deciding to not impose a compliance monitor, including: (i) hiring experienced compliance personnel; (ii) following a root-cause analysis of the misconduct; (iii) investing significant additional resources in compliance testing and monitoring throughout the organization; (iv) implementing targeted training programs, as well as onsite supplementary case-study sessions; (v) conducting continuing monitoring and testing to assess engagement with new training measures; (vi) restructuring of reporting by internal project teams to ensure compliance oversight; and (vii) and promptly disciplining employees involved in the misconduct.

While DOJ noted Honeywell’s prior FCPA criminal history, the Department allowed the company to enter into a DPA and receive full cooperation credit and did not impose a monitor, suggesting that in deciding whether to impose a monitor, DOJ will likely focus on the state of a company’s compliance program at the time of the resolution.

Glencore and Stericycle resolutions: Companies with compliance enhancements that are new and not fully tested may be subject to a compliance monitor, even where they show extraordinary cooperation and extensive remediation

In Spring 2022, DOJ announced that as part of its resolutions with Stericycle and Glencore, the companies will be required to retain a compliance monitor. These resolutions came on the heels of Monaco’s revised DOJ guidance on corporate monitorship, which outlined key considerations to take into account when deciding whether to impose a compliance monitor, including the status of the corporation’s compliance program and controls at the time of the resolution.

The Glencore and Stericycle resolutions illustrate how DOJ may assess the status of a company’s compliance program when deciding to impose a monitor going forward. In both resolutions, DOJ noted the companies’ extensive remedial measures, but nonetheless stressed that an independent compliance monitor was warranted because “certain of the defendant’s compliance enhancements are new and have not been fully implemented or tested to demonstrate that they would prevent and detect similar misconduct in the future,” such that “the imposition of a monitor is necessary to reduce the risk of recurrence of misconduct.”

Notably, unlike Glencore, Stericyle received full cooperation and remediation credit, suggesting that these factors are irrelevant in assessing the need for a monitorship.

Key takeaways

Last year’s pronouncements and the resolutions that ensued offer a first look at DOJ’s current expectations of a company’s compliance program, and how DOJ will use these expectations when determining the type and scope of a resolution.

As Polite said last spring, DOJ will be devoting greater resources to conducting extensive evaluations of compliance programs during investigations and resolutions, giving “significant credit to companies that build strong controls to detect and prevent misconduct]” and expecting companies to follow new practices.

All these factors share a common purpose: to empower Chief Compliance Officers (CCOs) and promote organizational commitment to compliance. DOJ expects CCOs to participate more fully in the company – for instance, increasing their participation in DOJ presentations – and it expects companies to use data analytics to demonstrate the continuous testing, effectiveness and adaptation of the compliance program.

These takeaways have significant implications for companies, their officers, and their compliance programs. To find out more, contact your usual DLA Piper relationship attorney or any of the authors.