DOJ Announces Tougher Corporate Enforcement and Self-Policing Policies
On September 15, Criminal Division Assistant Attorney General Lisa Monaco issued a memorandum outlining new Department of Justice corporate criminal enforcement policies. The memorandum emphasizes that the Department intends to hold individuals criminally responsible for corporate violations and that it expects companies to disclose misconduct voluntarily and promptly. In a speech delivered the same day as release of the memorandum, Assistant AG Monaco elaborated on these points, stating that “the Department’s number one priority is individual accountability * * * . Whether wrongdoers are on the trading floor or in the C-suite, we will hold those who break the law account-able, regardless of their position, status, or seniority.” As to self-reporting, she added: “We expect good companies to step up and own up to misconduct. Voluntary self-disclosure is an indicator of a working compliance program and a healthy corporate culture. Those companies who own up will be appropriately rewarded in the Department’s approach to corporate crime.”
Other key points in the DOJ memorandum include:
In order to obtain credit for cooperation, a company’s voluntary disclosure must include information relevant to individual culpability. “To be eligible for any cooperation credit, corporations must disclose to the Department all relevant, non-privileged facts about individual misconduct. * * * [P]roduction of evidence to the government that is most relevant for assessing individual culpability should be prioritized.”
Past misconduct will be a factor in the Department’s consideration of how to resolve a corporate criminal investigation. Prosecutors will weigh whether the conduct in prior and current matters reflects broader weaknesses in company compliance culture or practices. “One consideration is whether the conduct occurred under the same management team and executive leadership. Overlap in involved personnel -- at any level -- could indicate a lack of commitment to compliance or insufficient oversight of compliance risk at the management or board level.” This comment suggests that, if the company is involved in a criminal matter, the board should consider the need for executive level management changes.
In evaluating a company’s compliance program, compensation policy will be an important factor. Ms. Monaco also makes clear in her speech that companies should employ compensation claw backs to hold individuals who contribute to criminal misconduct accountable. As the memorandum states, “Compensation systems that clearly and effectively impose financial penalties for misconduct can incentivize compliant conduct, deter risky behavior, and instill a corporate culture in which employees follow the law and avoid legal ‘gray areas.’”
Audit committees often have responsibility for the corporate compliance program. The Monaco memo could serve as an opportunity to revisit whether the company’s program is appropriately designed and functioning effectively and whether conduct that could trigger a criminal investigation is brought promptly to the board’s attention. The decision whether to make a voluntary disclosure to the Department of Justice is difficult and complex and should only be made with the guidance of experienced counsel. But, if the Board does not receive prompt notice of potential criminal exposure, it will not be in a position to make a well-considered decision.