DOJ Prioritizes White-Collar Criminal Prosecutions

During a speech on October 28, 2021 Speaking to the American Bar Association’s annual National Institute on White-Collar Crime, U.S. Deputy Attorney General (Deputy AG) Lisa Monaco reaffirmed the priority accorded by current leaders of the U.S. Department of Justice ( DOJ) to prosecute white collar crimes on both an individual and corporate level. Monaco’s Deputy AG also announced three new steps the DOJ will take, effective immediately, to strengthen how the DOJ responds to corporate crime.

While Deputy AG Monaco emphasized that the DOJ will continue to focus on individual accountability in white-collar criminal investigations and prosecutions, all of the announced changes focus on how companies will be expected to conduct themselves – and will be assessed. – in the context of a DOJ investigation.

  • Firstto be eligible for any cooperation credit, companies will now be required to provide the DOJ with “all non-inside information about those involved in or responsible for the misconduct in question.” It will no longer be enough for companies to limit such disclosures to those who were “substantially involved” in the misconduct.

  • Secondwhen evaluating a corporate resolution, prosecutors are now required to consider the “full range” of a company’s prior “criminal, civil, and regulatory” state or federal wrongdoing, rather to limit this consideration to faults of the same type or factually linked to the fault in question.

  • The third, companies will again be regularly subject to the prospect of independent checks within the framework of corporate resolutions. Prosecutors will be free to demand surveillances as a condition of resolutions “whenever it is appropriate to do so to satisfy [DOJ] that a company meets its compliance and disclosure obligations.

Taken collectively, the recently announced actions suggest the DOJ will be aggressive in pursuing companies and underscore the need for companies to “actively review their compliance programs to ensure they are adequately monitoring and correcting misconduct.”

IN DEPTH


The DOJ’s Principles for the Federal Prosecution of Business Organizations (Principles), first promulgated in 1999 and amended several times since, provide the framework within which a company’s conduct, including its efforts to cooperate with a criminal investigation federal, is assessed. These principles include guidance on how a company’s “track record”, “compliance programs” and cooperative efforts are evaluated, and they provide parameters on the nature and scope of information a company may be required to provide in order to obtain a cooperation credit.

While the Principles themselves and the remarks of the Deputy AG of Monaco on October 28 underscore the DOJ’s emphasis on individual tortfeasors and “individual responsibility”, the new guidelines focus exclusively on how of which companies will be assessed by the DOJ as part of ongoing criminal investigations.

In particular, and in addition to a promised “increased resources” to help prosecutors investigate and prosecute white-collar crimes, the Deputy AG of Monaco announced three amendments to the Principles with immediate effect which collectively have the potential to impose substantial new burdens on businesses and create increased risk of increased sanctions and scrutiny.

1. Companies must now provide information on everyone involved in the behavior in question

To be eligible for any cooperation credit, companies will now be required to provide the DOJ with “all non-inside information” about “everyone involved in the misconduct, regardless of position, status, or seniority.” It will no longer be enough for companies to provide information about the people who have been “substantially involved” in the behavior in question. Companies and their attorneys will therefore no longer have the discretion to draw distinctions based on the magnitude, significance or scope of an employee’s conduct or to withhold information about small or peripheral participants in the conduct under investigation.

In practical terms, this means companies should expect the DOJ to scrutinize any disclosure made to the government during a corporate investigation. Although prosecutors are not allowed to demand inside information, they are still more likely to pressure company lawyers for additional information, particularly about the scope of any internal investigation or the identity of the employees suspected of having knowledge of the alleged misconduct at issue. Prosecutors can also threaten to suspend co-op credit if they believe a company has not disclosed enough information about possible wrongdoers or witnesses.

2. Prosecutors must now consider any prior criminal, civil or regulatory issues

When evaluating a corporate resolution, prosecutors will now be asked to consider the “full range” of a company’s prior “criminal, civil, and regulatory” state or federal wrongdoing, rather to limit this consideration to faults of the same type or factually linked to the fault in question. When evaluating a company as part of a Foreign Corrupt Practices Act (FCPA) investigation, for example, the DOJ will no longer focus primarily on the company’s prior FCPA compliance, but will instead consider any prior federal, state, or local criminal, civil, or regulatory cases the company may have faced and “will assume[] any prior misconduct is potentially relevant.

As a result, companies with any Prior civil, criminal or regulatory issues, however minor or seemingly unrelated to the alleged misconduct at issue, will now likely face increased hurdles, particularly when seeking or negotiating non-prosecution or deferred prosecution. The DOJ’s focus on “repeat offenders” will present particular risks to companies operating in heavily regulated sectors, such as healthcare, financials and energy, where past regulatory actions may now present barriers to compliance. solving seemingly unrelated criminal investigations.

For example, the DOJ can now review a health care company’s past dealings with the U.S. Department of Health and Human Services to address an unrelated matter when assessing the fine or penalty to be paid. impose to resolve a criminal tax investigation. Prosecutors could also look to a financial institution’s prior resolution of a case with the United States Department of Treasury (or even a state regulator) to determine how to resolve an unrelated FCPA criminal investigation.

These prior, unrelated civil, criminal, or regulatory matters may not only impact the fines and penalties the DOJ imposes to reach a criminal resolution, but they may also determine the type of resolution the DOJ is willing to offer. or, as noted below, notify the DOJ’s decision to require the imposition of a monitor.

3. Surveillances can be imposed more frequently

Companies will once again be subject to the prospect of independent checks under corporate resolutions. Citing a change from then-Criminal Division Chief Brian Benczkowski’s 2018 announcement that “the imposition of a monitor will not be necessary in many criminal resolutions” – and what deputy AG Monaco described as a feeling that “surveillances are disadvantaged or the exception” – prosecutors will now be free to demand surveillances as a condition of resolutions “whenever it is appropriate to do so to satisfy [DOJ] that a company meets its compliance and disclosure obligations.

It is a significant change. Companies will once again face the prospect of the scrutiny and expense associated with the imposition of corporate oversight, which will almost certainly increase in 2022 after several years in which many high-profile corporate resolutions failed. did not require the imposition of a controller. For example, in the context of FCPA resolutions, despite record fines and penalties in 2020, no surveillance was imposed under one resolution (compared to nine surveillances imposed under FCPA resolutions in 2016). More broadly, no other oversight was imposed by other units in the DOJ Fraud Section in 2020, and only one was imposed in 2021 by the Market Integrity and Major Fraud Unit. The assistant at GA Monaco has made it clear that she expects controls to be imposed in a much more systematic way.

KEY POINTS TO REMEMBER

First, Deputy AG Monaco’s remarks confirm that companies and their executives should expect increased DOJ enforcement activity in the white-collar space. Among other things, Monaco noted that the DOJ will provide “increasing resources” to DOJ prosecutors to assist with complex corporate investigations and referenced the DOJ’s continued and increased use of sophisticated data analytics. to investigate and prosecute corporate wrongdoing. Deputy AG Monaco also announced the formation of the “Corporate Crime Advisory Group”, which will provide recommendations for additional resources to “assist in more rigorous enforcement”.

Second, the need for companies to actively review compliance programs to ensure they are appropriate to the company’s risk profile and adequate to ensure ongoing compliance has never been greater. The Monaco AG deputy specifically asked companies to undertake such reviews, adding that failure to do so “would ultimately cost them”. She further underscored the importance of effective corporate compliance programs and warned that the DOJ “will ensure that the absence of such programs inevitably proves a costly oversight for companies that end up subject to ‘ministerial inquiries’.

The thirdcompanies with any A history of regulatory misconduct will need to be particularly cautious, as such misconduct, even minor or unrelated to the case at hand, may now be reviewed by the DOJ if a new issue arises. In particular, these companies may now be subject to scrutiny from the Department of Justice and they may also face additional challenges when negotiating a corporate resolution.

Companies should consider taking a number of immediate actions to respond to these important updates. Companies should proactively assess whether their compliance programs are appropriately designed to address material risk areas and whether those programs are working as intended in practice. Companies should give particular consideration to any recent litigation, investigation or regulatory matter (as well as their ongoing compliance with any recent resolution of such matter) or pending agreement with any state or federal regulatory agency. Finally, companies also need to consider whether the scope of ongoing internal investigations needs to be adjusted to ensure they capture the information that the DOJ now expects to receive in order to receive cooperation credit.

Co-authored by Michael S. Stanek, Paul M. Thompson, Sarah E. Walters.

Elizabeth J. Harless