On Thursday, September 15, 2022, Deputy Attorney General Lisa A. Monaco outlined new steps the Department of Justice will be taking in its ongoing efforts to police corporate crime. The next day, Assistant Attorney General Kenneth Polite and Deputy Assistant Attorney General Lisa Miller discussed the new policy at the University of Texas School of Law’s Government Enforcement Institute—a two-day conference held in Dallas, Texas.
Deputy Attorney General Monaco highlighted five areas of focus:
1. Prioritizing Individual Accountability
The Department will take several steps to pursue greater individual accountability for corporate misconduct.
- The government will require corporations to fully disclose all non-privileged information about potential employee involvement in misconduct;
- Prosecutors will be instructed to reduce or deny cooperation credit for corporate defendants if there is undue or intentional delay in producing information or documents that demonstrate potential culpability of an individual; and
- The Department will recommend that prosecutors bring criminal charges against an individual either before or concurrent with any corporate resolution. This is meant to further incentivize cooperation during the pendency of an investigation. If it is not possible to prosecute an individual before or concurrent with a corporate resolution, prosecutors will need to create an investigative plan and timeline for pursuing individual accountability.
2. Revising How DOJ Will Evaluate Prior Misconduct
The Department has always considered prior misconduct when fashioning an appropriate punishment for current misconduct, but Monaco explained how that consideration will evolve.
- The Department will give the most weight to criminal resolutions in the United States and any prior wrongdoing involving the same employees;
- The government will give less weight to criminal resolutions that occurred more than ten years before the current misconduct and will give less weight to any civil or regulatory resolutions that occurred more than five years before the current misconduct;
- Prosecutors will evaluate whether the instant misconduct shares any root causes with the prior misconduct. If it does, this may demonstrate a weakness in the company’s compliance practices and be given greater weight in crafting a punishment. The government will also consider whether the same leadership was involved in both instances of misconduct; and
- The Department will disfavor giving multiple or successive non-prosecution or deferred prosecution agreements to the same company.
3. Promoting Cooperation and Voluntarily Self-Disclosure
Monaco announced that the Department will require each DOJ component that prosecutes corporate crime to put in place a systematic approach towards voluntary self-disclosures, building off of existing programs in the Antitrust Division, National Security Division, and Foreign Corrupt Practices Act Unit. Each component will be required to formalize a policy that defines the expectations of what qualifies as a voluntary self-disclosure and the benefits for making such a disclosure. Absent aggravating factors, the DOJ will not seek a guilty plea from a corporation so long as it has voluntarily self-disclosed, cooperated with an investigation, and taken steps to remediate the misconduct; And the DOJ will not seek the imposition of a corporate monitor if the company has demonstrated that it has implemented an effective compliance program.
4. Consideration of Compensation Structures in Compliance Programs
The DOJ will, as it has always done, continue to evaluate a company’s compliance program when fashioning a resolution in an investigation. But Monaco emphasized that, going forward, prosecutors will also consider how a corporation’s compensation system affects compliance. For example, DOJ will consider whether the company’s compensation system encourages adherence to the compliance program and imposes financial punishments on any employee whose actions have contributed to misconduct. In particular, the government will pay attention to whether a company engages in the “claw back” of compensation to individuals who have been found to be responsible for misconduct.
5. Guidelines on How DOJ Will Use Monitors
Monaco emphasized that the DOJ will endeavor to select monitors through an established process that is transparent and operates in a consistent manner across all cases. Additionally, DOJ will ensure that it receives regular updates on the work of monitors to ensure that they are adequately performing their duties and staying on budget.
Assistant A.G. Polite, who runs the Department’s Criminal Division, and Deputy Assistant A.G. Miller, who oversees the Criminal Division’s Fraud and Appellate Sections, discussed the policy at the UT Law CLE conference. Jackson Walker’s Erica Giese and Jennifer Freel attended the conference, with Giese serving on a panel and Freel serving on the planning committee. Polite and Miller highlighted three areas where the Division will focus in the coming months.
1. Ephemeral Messaging
The Criminal Division will be evaluating whether “best practices” guidance should be issued to guide corporations on the use of personal devices and third-party messaging applications, including those offering ephemeral messages. Ephemeral—or disappearing—messaging applications enable users to automatically delete messages after they are received. There has been a significant rise in recent years of the use of systems that offer ephemeral messaging capabilities, such as Signal, Whatsapp, Slack (via the app “Shred”), and Facebook Messenger (vanish mode). Ephemeral messages pose a problem for traditional monitoring and retention practices because the disappearance of messages is often in the control of the individual user and not a corporate information technology department.
Polite’s focus on guidance that governs the usage of ephemeral messaging is notable because it demonstrates that the Department is not going to take a backseat to the industry in sorting out how compliance programs must evolve with emerging technologies.
2. Compensation Claw Back Procedures
Polite also highlighted Monaco’s discussion of the interaction between compensation structures and compliance programs. In particular, he announced that the Criminal Division will be providing guidance to prosecutors on how to appropriately reward corporations that apply compensation claw back policies—contractual terms that allow a corporation to recover compensation from executives who have had a role in the misconduct. These policies are meant to penalize the wrongdoers who are responsible for the corporate misconduct, as opposed to penalizing shareholders who would otherwise be on the hook for financial penalties or harm suffered by the corporation.
Polite announced that his team will be meeting with both agency partners and experts on executive compensation to gather more information on how these aspects of compensation systems operate. Based on that information, the Criminal Division will issue formal guidance to prosecutors concerning how to reward corporations that utilize compensation claw back policies.
3. Voluntary Self-Disclosure Despite a History of Misconduct
Under Department policy, a corporation with a history of misconduct may be ineligible for a declination. But at the same time, Monaco made clear in her remarks how significant it will be for a corporation to voluntarily and timely disclose potential misconduct. In his remarks, also Polite addressed head-on the issue that often frustrates corporations: if they are going to be punished because of a history of prior misconduct anyway, why should they voluntarily self-disclose any current misconduct?
Polite explained that the Department’s new policy makes clear that there is still a benefit to be achieved from voluntary self-disclosure. Under the new policies, a history of misconduct does not preclude a declination unless there are aggravating factors present. Polite announced that for the Criminal Division, aggravating factors that may prevent a declination include, but are not limited to: threats to national security, pervasive or egregious misconduct, involvement by executive management in the misconduct, and significant profit to the company from the misconduct.
The bottom line from this DOJ news:
- Corporations must continually monitor the shifting guidance from government investigators and be prepared to reevaluate their compliance programs.
- A strong compliance program should not only reduce the risk of misconduct, but also swiftly identify and resolve any misconduct that does occur.
- Companies should also evaluate their compensation structures to determine if there are additional steps they should take to further insulate the company from liability in a future government investigation.
The opinions expressed are those of the authors and do not necessarily reflect the views of the firm, its clients, or any of its or their respective affiliates. This article is for informational purposes only and does not constitute legal advice. For additional assistance related to the Department of Justice’s ongoing efforts to police corporate crime, please contact Jennifer Freel, Erica Giese, or a member of the Investigations & White Collar Defense practice.
Jennifer S. Freel is a partner in the Investigations & White Collar Defense practice of Jackson Walker’s Austin office. A former federal prosecutor, Jennifer advises businesses and individuals under investigation by the government and conducts internal investigations for companies seeking an independent party. She also represents clients in civil disputes at the pre-trial, trial, and appellate levels in state and federal court. She is an elected Fellow of the Texas Bar Foundation, a member of the Texas Supreme Court Historical Society’s Board of Trustees, a past chair of the Criminal Law Section of the Federal Bar Association, and a past president of the Austin Chapter of the Federal Bar Association. She has been ranked among the top Texas attorneys for Litigation: White-Collar Crime & Government Investigations by Chambers USA: America’s Leading Lawyers for Business since 2021, and was named among The Best Lawyers in America for Criminal Defense: White Collar (Austin) in 2022.
Erica Benites Giese is a partner and the chair of Jackson Walker’s Investigations & White Collar Defense practice. A former Assistant U.S. Attorney in the Western District of Texas, Erica served as Chief of the Financial Litigation Unit and the San Antonio and Del Rio divisions and spearheaded the creation of a Suspicious Activity Report Review Team in the San Antonio and Del Rio divisions. In her practice, Erica handles civil and criminal white collar investigation and litigation matters, qui tam complaints and investigations, healthcare fraud matters, government contract fraud inquiries, bank and wire fraud investigations, and immigration worksite enforcement actions. Erica also advises and advocates for individual and corporate victims of fraud. A Certified Fraud Examiner, she is equipped to handle all types of fraud matters and internal investigations. Since 2019, Scene in S.A. has recognized Erica as one of the “Best S.A. Lawyers” in the area of criminal defense. Outside of Jackson Walker, Erica serves as the Hispanic National Bar Association as Deputy Region XII President and as a member of the Compliance and Ethics Section. She is also a member of the U.S. District Court Admissions Committee, the Association of Certified Fraud Examiners, the American Bar Association’s Women’s White Collar Defense Section, and the Federal Bar Association’s San Antonio Chapter.
Bethany R. Pickett is an associate in the Trial & Appellate Litigation and Investigations & White Collar Defense sections of Jackson Walker’s Houston office. An experienced litigator, Bethany has tried four federal jury trials to verdict and presented oral argument before the U.S. Court of Appeals for the Fifth Circuit. Prior to joining the firm, Bethany served as a Special Assistant United States Attorney in the Eastern District of Texas, representing the United States in criminal prosecutions and complex civil litigation. Before becoming a federal prosecutor, Bethany worked at the White House as Deputy Associate Counsel to the President and at the Department of Justice as a Counsel in the Civil Rights Division and in the Office of Legal Policy. In 2019, she received the Attorney General’s Award for Distinguished Service for her work at the U.S. Department of Justice.