DOJ Wants Companies To Name Names

The DOJ has formally announced new enforcement policies targeting corporate crime. A September 15 memorandum from Deputy Attorney General Lisa O. Monaco “provides guidance on how prosecutors should ensure individual and corporate accountability, including through evaluation of: a corporation’s history of misconduct; self-disclosure and cooperation provided by a corporation; the strength of a corporation’ s existing compliance program; and the use of monitors, including their selection and the appropriate scope of a monitor’s work.”

The document makes clear DOJ is putting heavy emphasis on nailing individual violators, as a matter of justice and deterrence, to elevate public confidence. To be eligible for cooperation credit, it says, companies must disclose “all relevant, non-privileged facts about individual misconduct.”

The memorandum states explicitly that, while an effective compliance program (and an “ethical corporate culture”) will not be a defense in a prosecution of corporate misconduct, they can bear significantly on a resolution. Among factors to be considered are the resources these programs receive, how they measure risk, and specific design elements, such as “how they monitor payment and vendor systems for suspicious transactions.” Also part of the evaluation: the degree to which compensation systems promote compliance and penalize misconduct. In the near future, Monaco says, the Criminal Division will be trying to figure out how to reward companies that develop clawback policies that may “shift the burden of corporate financial penalties away from shareholders – who in many cases do not have a role in misconduct – onto those more directly responsible.”

Looking ahead, the memorandum has an interesting take on some of the implications of increasing use of personal devices and third party messaging platforms, specifically with regard to their potential for enabling misconduct without leaving tracks. Prosecutors doing an evaluation may consider how companies have addressed this issue. “To assist prosecutors in this evaluation,” Monaco says, “I have asked the Criminal Division to further study best corporate practices regarding use of personal devices and third-party messaging platforms and incorporate the product of that effort into the next edition of its Evaluation of Corporate Compliance Programs.”

Two other important areas addressed in the September 15 memorandum are how DOJ will evaluate a company’s history of misconduct when considering a resolution, and the concept of voluntary self-disclosure. An analysis of the memorandum from law firm Womble Bond Dickinson looks closely at these sections, and calls the Deputy Attorney General’s remarks on self-disclosure possibly the most significant element of this memorandum. DOJ, it notes, has described voluntary disclosure as “the clearest path for a company to avoid a guilty plea or an indictment.”