DOJ Intensifies Focus on Corporate Culture and Compliance Programs
In a recent memorandum, United States Deputy Attorney General Lisa Monaco outlined the Department of Justice’s (DOJ) renewed focus on corporate criminal prosecutions, including detailed and expanded directives for corporate governance and compliance.
Monaco's speech, given on September 15, 2022 outlining these new directives, emphasizes how DOJ’s new policies are meant to encourage and bolster a culture of compliance at companies with an intent to truly change corporate culture moving forward.
Deputy Attorney General Monaco’s pronouncement of these significant developments in DOJ’s corporate criminal enforcement, as well as DOJ’s prioritization of these types of actions, should be a wakeup call to companies and their leadership to employ experienced counsel who have worked in DOJ and know how to navigate these potentially treacherous waters. Below we summarize more details regarding the DOJ’s guidance on corporate accountability:
Corporate Compliance Programs
Significantly, DOJ has directed its prosecutors to evaluate a company’s compliance program, both at the time of the offense and at the time of the charging decision, in determining an appropriate corporate resolution to a criminal matter (including whether an independent compliance monitor is needed).
DOJ prosecutors have also been instructed to consider a company’s commitment to fostering a strong culture of compliance throughout the business, including how it has incentivized or sanctioned the behavior of its employees, executives or directors, including through compensation plans, as part of its efforts to create a culture of compliance. According to Monaco, “it all comes back to corporate culture.”
DOJ’s memo sets forth several factors to be considered when evaluating a company’s compliance program, including whether it is well designed, adequately resourced, empowered to function effectively and working in practice, among other factors. However, DOJ’s memo does warn that the mere existence of a compliance program is not enough, in and of itself, to justify not charging a company for criminal misconduct undertaken by its officers, directors, employees or agents.
Compensation Structure
In one of the more significant policy changes in recent memory relating to corporate criminal enforcement, DOJ will now be considering, for the first time ever, when assessing compliance programs, whether a “corporation's compensation agreements, arrangements, and packages incorporate elements – such as compensation clawback provisions – that enable penalties to be levied against current or former employees, executives, or directors whose direct or supervisory actions or omissions contributed to criminal conduct.”
And it’s not just the compliance program itself. Prosecutors will also now look at a company’s actions, that is, whether such agreements and clawback provisions have been enforced against current and former executives whose actions or omissions resulting in, or contributed to, the criminal conduct at issue.
Prosecutors are also instructed to consider whether the compliance program has “affirmative incentives” that use compliance metrics and benchmarks in compensation calculations and the use of performance reviews that measure and reward compliance-promoting behavior.
Monaco stated that she has instructed DOJ’s Criminal Division to further develop guidance by the end of 2022 on how to reward companies that employ clawback provisions and similar arrangements.
Use of Personal Devices and Third-Party Applications
Finally, DOJ is also mandating that for companies to be considered to have robust compliance programs they must have effective policies governing the use of personal devices and third-party messaging platforms for corporate communications. The concern here is the company’s ability to monitor and recover relevant data involving misconduct from such personal devices or platforms during an investigation. A company’s policies on these topics will inform a prosecutor’s assessment of a company’s compliance program and its cooperation during a criminal investigation.
Companies are directed to have such policies in place, to provide clear training to its employees and to enforce such policies when violations are identified. When evaluating cooperation credit for a corporation, a prosecutor will consider a company’s instituted policies, particularly whether a company can ensure that it will be able to collect and provide to the government all non-privileged responsive documents relevant to an investigation, including work-related communications (e.g., texts, e-mails, chats) and data contained on phones, tablets and other devices used by employees for business purposes.
DOJ guidance and directives can seem confusing and overwhelming. That’s why you need knowledgeable counselors in your corner. If you have questions or need help navigating this complex maze of DOJ policies and enforcement, Phelps’ unparalleled team of former U.S. Attorneys and federal and state prosecutors have the experience and relationships to assist you through enforcement actions and can help you develop compliance programs and executive swift, comprehensive internal investigations in order to avoid problems in the future. For more information, please contact Mike Hurst or another member of Phelps’ White Collar Defense and Investigations team.
