DOJ focuses on compliance programs in criminal investigations

Strong points

  • DOJ issues new guidance to prosecutors on how to resolve malpractice investigations

  • Companies with an effective compliance program and a strong compliance culture can expect tangible benefits

  • DOJ seeks to urge companies to promptly investigate allegations of misconduct and promptly report findings to government

In remarks made in New York on September 15, 2022, Deputy Attorney General Lisa O. Monaco of the United States Department of Justice (DOJ) highlighted the increased emphasis on corporate compliance programs and individual accountability in the Department’s investigation and resolution of corporate wrongdoing.

Specifically, Monaco noted what it called new changes to the DOJ’s enforcement policy in investigating corporate criminal acts, with a focus on five main topics:

  • Individual responsibility

  • History of misconduct;

  • Voluntary self-disclosure;

  • Independent compliance monitors

  • Corporate culture

Monaco’s comments are in line with the extension and strategic deployment of the orientations it has previously given on these issues. That said, it is clear that the DOJ intends to step up its game and increase its investment in resources for the investigation and prosecution of corporate bad actors. Now more than ever, companies need to consider a strong corporate culture of compliance and a well-developed compliance program as an essential part of good business.

Individual responsibility

In his speech at New York University Law School, Monaco noted that corporate lawyers often strategically delay the production of evidence indicating individual criminal culpability, stating:

“If a cooperating company discovers hot documents or evidence, its first reaction should be to notify prosecutors. This requirement is in addition to advance directives that companies must provide all relevant, non-privileged facts about individual fault to receive cooperation credit.

Going forward, Monaco said prosecutors will prioritize individual investigations alongside any resolution with the company. The DOJ wants corporate lawyers and prosecutors to feel “on time” to hold individuals accountable and resolve corporate liability. Monaco’s statement may signal a tacit acknowledgment of the DOJ’s history of taking years to resolve corporate criminal investigations, even in cases where companies are actively cooperating.

History of misconduct

Monaco explained how the DOJ will assess a company’s past misconduct to determine whether to treat it as a repeat offender. Going forward, the DOJ will weigh more heavily on past domestic criminal resolutions and past misconduct involving the same staff or management. Emphasis will be placed on recent conduct, with criminal resolutions over ten years old and civil penalties over five years old having less weight. The DOJ will not consider companies with a historically effective compliance program as repeat offenders following the acquisition of a company with a history of misconduct, as long as the issues of the acquired company have been promptly resolved. during the acquisition. However, successive resolutions of Deferred Prosecution Agreements or Non-Prosecution Agreements will now need to be reviewed by GM leadership before being approved.

Notably, Monaco has indicated that past misconduct will be examined through the lens of a company’s industry, with highly regulated sectors being assessed differently than less regulated sectors. This could be particularly beneficial for healthcare and financial services companies, as they often face greater application frequency and variety.

Voluntary self-disclosure

Monaco’s comments underscored the importance of self-disclosure to the DOJ’s assessment of a company’s conduct. Specifically, she said each element suing the corporate defendants must develop and follow a clear self-disclosure protocol that provides distinct expectations for what self-disclosure entails.

Going forward, self-disclosure will not result in a criminal guilty plea if the relevant requirements have been met. Additionally, when a defendant has implemented and tested an effective compliance program, the DOJ will no longer need a monitor.

Independent compliance monitors

Monaco highlighted the value of corporate oversight as well as the burden on companies to resolve allegations of criminal conduct. The DOJ intends to issue new guidelines for screener selection and oversight to increase the likelihood of success. A documented selection process will be followed for business monitors, which Monaco believes would be transparent and consistent.

Additionally, she said the DOJ will work to tailor controls more closely to the conduct and compliance shortcomings identified in the investigation. The DOJ will place the burden on prosecutors to “watch the monitor” and ensure that the surveillances meet their objectives and stay on budget.

Corporate culture

Monaco directed the Criminal Division to develop new compliance-focused compensation guidelines by the end of 2022. It stressed the importance of a culture of compliance to support and encourage a program of effective compliance. Cooperation with DOJ investigations will now include an assessment of company policies on compensation incentives and penalties for employees found guilty of misconduct. The DOJ will also expect to see evidence of the implementation of these incentives and penalties over time.

Mark M. Gagnon