At an October 28, 2021, speech before the American Bar Association’s Annual National Institute on White Collar Crime, US Deputy Attorney General (Deputy AG) Lisa Monaco re-emphasized the priority placed by current leadership within the US Department of Justice (DOJ) on prosecuting white-collar crime at both the individual and corporate level. Deputy AG Monaco also announced three new actions that DOJ will be taking—effective immediately—to strengthen the way DOJ responds to corporate crime.
While Deputy AG Monaco emphasized that DOJ will continue to focus on individual accountability in white-collar criminal investigations and prosecutions, all of the changes announced focus on the manner in which corporations will be expected to behave—and will be evaluated—in the context of a DOJ investigation.
First, to be eligible for any cooperation credit, corporations will now be required to provide DOJ “with all non-privileged information about individuals involved in or responsible for the misconduct at issue.” It will no longer be sufficient for companies to limit such disclosures to those individuals who were “substantially involved” in the misconduct.
Second, in evaluating a corporate resolution, prosecutors are now directed to consider “the full range” of prior state or federal “criminal, civil and regulatory” misconduct by a company, rather than limiting such consideration to misconduct of the same type or that is factually related to the misconduct at issue.
Third, corporations will once again be regularly subject to the prospect of independent monitorships as part of corporate resolutions. Prosecutors will be free to require monitorships as a condition of resolutions “whenever it is appropriate to do so to satisfy [DOJ] that a company is living up to its compliance and disclosure obligations.”
Taken collectively, the newly announced actions suggest that DOJ will be aggressive in pursuing corporations and underscore the need for companies to “actively review their compliance programs to ensure they adequately monitor for and remediate misconduct.”
DOJ’s Principles of Federal Prosecution of Business Organizations (Principles), first promulgated in 1999 and amended multiple times since, provide the framework by which the conduct of a corporation—including its efforts to cooperate with a federal criminal investigation—are evaluated. Those Principles include guidance on how a corporation’s “past history,” “compliance programs” and efforts at cooperation are assessed, and they provide parameters on the nature and scope of information that a corporation may be required to provide to earn cooperation credit.
While both the Principles themselves and Deputy AG Monaco’s October 28 remarks emphasize DOJ’s focus on individual wrongdoers and “individual accountability,” the new guidance focuses exclusively on how corporations will be evaluated by DOJ in the context of ongoing criminal investigations.
In particular, and in addition to a promised “surge of resources” to help prosecutors investigate and prosecute white-collar crime, Deputy AG Monaco announced three changes to the Principles effective immediately that collectively have the potential to impose substantial new burdens on corporations and create heightened risk of increased penalties and oversight.
1. Companies Must Now Provide Information on All Individuals Involved in the Conduct at Issue
To be eligible for any cooperation credit, corporations will now be required to provide DOJ “with all non-privileged information” about “all individuals involved in the misconduct, regardless of their position, status or seniority.” It will no longer be sufficient for companies to provide information related to those individuals who were “substantially involved” in the conduct at issue. Corporations and their counsel will thus no longer have discretion to draw distinctions based on the magnitude, significance or scope of an employee’s conduct or withhold information about modest or peripheral participants in the conduct under investigation.
As a practical matter, this means that corporations should expect DOJ to heavily scrutinize any disclosures made to the government during a corporate investigation. While prosecutors are not permitted to demand privileged information, they are still more likely to press corporate counsel for additional information, particularly as to the scope of any internal investigation or the identities of employees believed to have knowledge of the alleged misconduct at issue. Prosecutors may also threaten to withhold cooperation credit if they feel that a company has failed to disclose sufficient information regarding any potential wrongdoers or witnesses.
2. Prosecutors Must Now Consider Any Prior Criminal, Civil or Regulatory Issue
In evaluating a corporate resolution, prosecutors will now be directed to consider “the full range” of prior state or federal “criminal, civil and regulatory” misconduct by a company, rather than limiting such consideration to misconduct of the same type or that is factually related to the misconduct at issue. When evaluating a company in the context of a Foreign Corrupt Practices Act (FCPA) investigation, for example, DOJ will no longer focus principally on the company’s prior FCPA compliance but will instead look at any prior federal, state or local criminal, civil or regulatory matters the company may have faced and will “assume all 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 obstacles, particularly when seeking or negotiating non-prosecution or deferred-prosecution agreements. DOJ’s focus on “repeat offenders” will present particular risks for corporations operating in heavily regulated industries—such as healthcare, finance and energy—where prior regulatory actions may now present obstacles to resolving seemingly unrelated criminal investigations.
For example, DOJ may now look at a healthcare company’s prior dealings with the US Department of Health and Human Services in addressing an unrelated matter when evaluating the fine or penalty to be imposed in resolving a criminal tax investigation. Prosecutors could also look to a financial institution’s prior resolution of a matter with the US Department of the Treasury (or even a state regulator) in determining how to resolve an unrelated criminal FCPA investigation.
Such prior, unrelated civil, criminal or regulatory matters may not only impact the fines and penalties imposed by DOJ in reaching a criminal resolution, but they may also determine the type of resolution DOJ is willing to offer, or, as discussed below, inform DOJ’s decision to require the imposition of a monitor.
3. Monitorships May Be Imposed More Frequently
Corporations will once again be subject to the prospect of independent monitorships as part of corporate resolutions. Citing a shift from the 2018 announcement by then-head of the Criminal Division Brian Benczkowski that “the imposition of a monitor will not be necessary in many criminal resolutions”—and what Deputy AG Monaco described as a sense that “monitorships are disfavored or the exception”—prosecutors will now be free to require monitorships as a condition of resolutions “whenever it is appropriate to do so to satisfy [DOJ] that a company is living up to its compliance and disclosure obligations.”
This is a significant change. Companies will again face the prospect of the scrutiny and expense associated with the imposition of corporate monitorships, which are almost certain to increase in 2022 after several years in which numerous high-profile corporate resolutions did not require imposition of a monitor. For example, in the context of FCPA resolutions, despite record-setting fines and penalties in 2020, not a single monitorship was imposed as part of any resolution (down from nine monitorships imposed as part of FCPA resolutions in 2016). More broadly, no other monitorships were imposed by other units of DOJ’s Fraud Section in 2020, and just one has been imposed in 2021 by the Market Integrity and Major Frauds Unit. Deputy AG Monaco made clear she expects that monitorships will be imposed much more routinely.
First, Deputy AG Monaco’s remarks confirm that corporations and their executives should expect increased DOJ enforcement activity in the white-collar space. Among other things, Monaco noted that DOJ will be “surging resources” to DOJ prosecutors to assist with complex corporate investigations and referenced DOJ’s ongoing 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 regarding additional resources to “assist more rigorous enforcement.”
Second, the need for corporations 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. Deputy AG Monaco specifically directed companies to undertake such reviews, adding that a failure to do so would “cost them down the line.” She further emphasized the importance of effective corporate compliance programs and warned that DOJ “will ensure that the absence of such programs inevitably proves a costly omission for companies who end up the focus of department investigations.”
Third, companies with any history of regulatory misconduct will need to be particularly cautious as such misconduct—however minor or unrelated to the matter at hand—may now be considered by DOJ should a new issue arise. In particular, such companies may now be subjected to increased DOJ scrutiny, and they may similarly face additional challenges in negotiating a corporate resolution.
Companies should consider taking a number of immediate steps to respond to these significant updates. Companies should proactively assess whether their compliance programs are appropriately designed to address significant areas of risk and whether those programs are operating as intended in practice. Companies should take particular account of any recent litigation, investigation or regulatory matter (as well as their ongoing compliance with any recent resolution of such matter) or ongoing agreement with any state or federal regulator. Finally, companies should also consider whether any ongoing internal investigations need to be adjusted in scope to ensure they are capturing information that DOJ now expects to receive in order to receive cooperation credit.