The DOJ’s New Approach to White-Collar Crime Enforcement

In the past year and a half, the U.S. Department of Justice (DOJ) has taken a tougher stance on white-collar crime. In October 2021, six months after she was sworn in as U.S. Deputy Attorney General, Lisa Monaco announced that the DOJ was making significant revisions to its corporate criminal enforcement policies and practices to better combat corporate crime. In the months following this initial announcement, additional memorandums and comments by senior DOJ officials have further clarified the DOJ’s new approach to corporate crime. This approach emphasizes a hard line on both cooperation and self-disclosure.

At the American Bar Association’s 38th Annual National Institute on White Collar Crime, multiple DOJ representatives spoke about the DOJ’s increased focus on corporate prosecution and its decision to commit additional resources to the initiative against white-collar crime. Leaders of companies subject to DOJ enforcement should understand the DOJ’s focus areas and consider how to address them within their own organizations.

The following are five focus areas the DOJ has recently emphasized:

1. Individual accountability

Individual accountability is a top priority of the DOJ. Although corporate criminal prosecutions have declined over the past decade, the DOJ plans to do more, faster. Consistent with that goal, when companies delay producing documents, they may not receive cooperation credit. The DOJ has made it clear that dragging out document production does not constitute cooperation, and it will more strongly consider timeliness in choosing whether to give companies cooperation credit.

2. History of misconduct

When deciding resolutions of enforcement matters, the DOJ will consider the history of misconduct. Criminal resolutions in the United States and prior wrongdoing involving the same personnel will be given the most weight. The DOJ will consider whether recent misconduct shares the same root cause as past misconduct, as well as whether the prior misconduct occurred within the past 10 years for criminal matters and five years for civil matters. The DOJ acknowledged that it did not want to discourage acquisitions, so companies should work to ensure any problems with predecessor companies are addressed promptly post-acquisition.

3. Voluntary self-disclosure

A voluntary self-disclosure policy existed within certain divisions of the DOJ and is now being deployed across all divisions. Following Deputy Attorney General Lisa Monaco’s remarks in September 2022, other DOJ representatives have continued to emphasize this point. For example, the criminal division of the DOJ issued guidance that declinations can still occur when aggravating conditions are present as long as self-disclosure was made immediately, the company had an effective compliance program, and the company provided “extraordinary cooperation” with the DOJ’s investigation. If a criminal resolution is still warranted when these factors occur, the DOJ will recommend at least a 50% reduction from the sentencing guidelines.

4. Monitors

Companies generally prefer to avoid having a monitor imposed after a resolution, and the DOJ has clearly addressed this. If a company implements and tests an effective compliance program (effective being the key word), then a monitor will not be imposed. In addition, the DOJ will supervise the monitors to ensure they stay on task and on budget with their scope.

5. Incentive compensation

The DOJ looks favorably upon companies with compensation systems that use affirmative metrics and benchmarks to reward compliance-promoting behavior. The DOJ also expects companies to establish compensation structures that discourage improperly risky behavior. Executives should not benefit financially from engaging in questionable behavior or ignoring red flags. Further, the DOJ has indicated that it will reward companies for clawing back compensation when there is misconduct. The criminal division of the DOJ is piloting a program that offers reductions of fines if companies seek to clawback compensation when appropriate.

Company leaders should strongly consider where the DOJ is currently focusing its attention and ensure their internal goals are aligned. It is critical for leaders to be aware of the DOJ’s updated guidance and memorandums and to address any gaps or shortfalls in their own compliance programs.

A robust compliance program is a good place to start. Compliance is not just critical to a company’s overall success, but also to its ability to respond proactively to a DOJ investigation. However, simply having written policies does not equate to an effective compliance program. Compliance programs must be tested on a regular basis and communicated throughout an organization. The DOJ has been very clear that compliance is not a check-the-box activity to be sequestered in a siloed, underfunded department. Rather, it is a way of doing things that should be integrated throughout an entire company. The DOJ will assess the adequacy of compliance programs at the time of the offense and when it makes a charging decision, so it will not be sufficient to create a robust compliance program after something has gone wrong.

As it relates to acquisitions, the DOJ has emphasized that it is in the acquirer’s best interest to address any risks within the acquired company and to do so quickly. Acquired companies should be integrated into the acquirer’s compliance program, which will require strong communication and training. To achieve this, acquirers must identify any known issues or concerns at the acquired company and take steps to address those risks. It is critical to maintain thorough documentation of any past issues or resolutions, as well as how those risks were directly addressed, in case the acquirer ever finds itself involved in a DOJ investigation. For an example of the benefit of this post-acquisition analysis, consider the DOJ’s decision not to prosecute a company after it disclosed FCPA violations identified during its post-acquisition due diligence process.

Finally, now is the time for companies to assess their compensation programs to consider whether they support the company’s corporate culture and compliance goals. The DOJ directly suggests that companies should consider including clawback provisions or escrowing compensation. At their core, compensation programs should reward compliance and impose sanctions on misconduct. This includes sanctions on individuals directly responsible for misconduct and individuals with supervisory authority over the employees or business area directly responsible for misconduct.

As the DOJ continues to emphasize its tougher approach to white-collar crime, companies should evaluate how their internal compliance structure aligns with the DOJ’s approach.

Marcum’s forensic practice can help organizations understand risks; respond to inquiries and investigations by regulators; and conduct internal investigations of alleged misconduct. Contact your Marcum advisory professional for assistance.

Sources

• Further Revisions to Corporate Criminal Enforcement Policies Following Discussions with Corporate Crime Advisory Group Memorandum from The Deputy Attorney General Lisa Monaco dated September 15, 2022, via https://www.justice.gov/opa/speech/file/1535301/download
• Deputy Attorney General Lisa O. Monaco Delivers Remarks on Corporate Criminal Enforcement, September 15, 2022, via https://www.justice.gov/opa/speech/deputy-attorney-general-lisa-o-monaco-delivers-remarks-corporate-criminal-enforcement
• Assistant Attorney General Kenneth A. Polite, Jr. Delivers Remarks on Revisions to the Criminal Division’s Corporate Enforcement Policy, January 17, 2023, via https://www.justice.gov/opa/speech/assistant-attorney-general-kenneth-polite-jr-delivers-remarks-georgetown-university-law
• Readout of Deputy Attorney General Lisa Monaco’s Trip to Florida, March 3, 2023, via https://www.justice.gov/opa/pr/readout-deputy-attorney-general-lisa-monaco-s-trip-florida
• Assistant Attorney General Kenneth A. Polite, Jr. Delivers Keynote at the ABA’s 38th Annual National Institute on White Collar Crime, March 3, 2023, via https://www.justice.gov/opa/speech/assistant-attorney-general-kenneth-polite-jr-delivers-keynote-aba-s-38th-annual-national