October 29, 2021

New Administration: Expect More "Rigorous" Corporate Criminal Enforcement

Holland & Knight Government Contracts Blog
Megan Mocho | Eddie A. Jauregui
Government Contracts Blog

New Deputy Attorney General Lisa Monaco on October 28, 2021, previewed the U.S. Department of Justice's (DOJ) enhanced stance on corporate crime. Monaco announced the formation of a Corporate Crime Advisory Group, which will be made up of representatives from every part of DOJ involved in corporate criminal enforcement. The group will make recommendations on what resources are needed for "more rigorous enforcement" of corporate crime.

She concluded her remarks with a stern notice to industry: "[l]ooking to the future, this is a start — and not the end — of this administration's actions to better combat corporate crime."

Monaco's speech identified three policy changes that roll back changes made by the prior administration.

Renewed Focus on Individual Accountability

Noting that DOJ's "first priority in corporate criminal matters to prosecute the individuals who commit and profit from corporate malfeasance," Monaco announced that DOJ would "restore prior guidance making clear that to be eligible for any cooperation credit, companies must provide the Department with all non-privileged information about individuals involved in or responsible for the misconduct at issue."

This means that companies must again provide the government with all non-privileged information about individual wrongdoing in order to receive cooperation credit in criminal prosecutions. Corporations will be required to identify "all individuals involved in the misconduct, regardless of their position, status or seniority"; it will no longer be enough to limit disclosures to those deemed by the company to be substantially involved" in the wrongdoing. This stance echoes the directive in the "Yates Memo," issued by then Deputy Attorney General Sally Yates in September 2015, which also required companies to identify all individuals involved in or responsible for the misconduct at issue. That memo was modified by then-Deputy Attorney General Rod Rosenstein in 2018 to restore the federal government's civil attorneys' discretion to accept settlement agreements without investigating every individual employee who may be liable for the misconduct.

Holistic View of Past Misconduct, Even for Unrelated Conduct

Monaco also announced that DOJ would evaluate all prior misconduct by a company prior to reaching a resolution, not just conduct similar in nature to that being investigated. Monaco stated that DOJ would "consider the full criminal, civil and regulatory record of any company when deciding what resolution is appropriate for a company that is the subject or target of a criminal investigation."

Going forward, prosecutors will be encouraged to consider all prior misconduct by the company, not just a "narrower subset of similar misconduct." Monaco noted that a company's "record of misconduct speaks directly to a company's overall commitment to compliance programs and the appropriate culture to disincentivize criminal activity." She also noted that a "taking the broader view" of a company's historical misconduct would "harmonize the way we treat corporate and individual criminal histories[.]"

Encouraging Use of External Monitors

Finally, and importantly, Monaco announced that "prior Justice Department guidance suggest[ing] that [corporate] monitorships are disfavored or are the exception" has been "rescind[ed]." She noted: "I am making clear that DOJ is free to require the imposition of independent monitors whenever it is appropriate to do so in order to satisfy our prosecutors that a company is living up to its compliance and disclosure obligations" under deferred prosecution agreements and non-prosecution agreements. This statement was coupled with insight into DOJ's current concern over companies' recidivism and failure to amend conduct in light of prior settlements with DOJ.

Monaco's announcement reverses then-Assistant Attorney General Brian A. Benczkowski's 2018 memorandum, which directed that DOJ should favor the imposition of a monitor only where there is only "where there is a demonstrated need for, and clear benefit to be derived from, a monitorship relative to the projected costs and burden." The Benczkowski Memo was largely read to mean that monitorships should be the exception, rather than the rule.

DOJ: Guidance to Companies Going Forward

Concluding her remarks, Monaco provided "answers" to corporations seeking to understand DOJ's new positions:  

  1. Companies need to actively review their compliance programs to ensure they adequately monitor for and remediate misconduct — or else it's going to cost them down the line.
  2. For clients facing investigations, as of today, the Department will review their whole criminal, civil and regulatory record — not just a sliver of that record.
  3. For clients cooperating with the government, they need to identify all individuals involved in the misconduct — not just those substantially involved — and produce all non-privileged information about those individuals' involvement.
  4. For clients negotiating resolutions, there is no default presumption against corporate monitors. The decision about a monitor will be made based upon the facts and circumstances of each case.

Formal memorandums and amendments to the Justice Manual on these points will undoubtedly follow. These documents will shed light on whether these stances will trickle down to civil investigations and settlements such as those under the False Claims Act (FCA), which make up a significant portion of criminal enforcement actions in certain industries.

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