1. Cooperation Credit and the “Timely” Disclosure of Information Learned in Internal Investigations
If DAG Monaco’s speech had a primary emphasis, it was on the speed of DOJ’s investigations. She stressed that DOJ needs to move more quickly in its investigations of individual corporate officials. “Speed is of the essence,” she said.
This discussion followed her observation that prosecutions of corporate crimes have declined “over the last decade.” The DAG’s comments seemed to reflect a dissatisfaction within DOJ’s leadership regarding the low volume of significant, recent prosecutions and resolutions involving corporate crime, in line with the widespread perception among white collar practitioners that DOJ corporate investigations have been less active more recently. “We need to do more and move faster,” said DAG Monaco.
This apparent desire for quicker results can be seen in the Monaco Memo’s heightened mandate on corporations and their counsel to conduct internal investigations more quickly and, significantly, to disclose significant information from those investigations to DOJ more quickly. The Memo states that a company cannot receive “full cooperation credit” unless it provides all relevant, non-privileged facts and evidence “on a timely basis,” and emphasizes that a company may lose its “eligibility for cooperation credit” if it “delays its disclosure” of significant facts once it identifies them.
To be sure, DOJ’s existing Corporate Enforcement Policy already says that a company’s “timely” disclosure of relevant facts is a “key measure of cooperation,” but that Policy contains no discussion of what “timely” means, or how strictly DOJ construes it, and no mention of the concept that a corporation may become “ineligible” for cooperation credit if DOJ perceives that it “delayed” disclosure of significant facts.
On this topic and others throughout the Monaco Memo, it is clear that the DAG is nudging the DOJ-wide Corporate Enforcement policy in the general direction of DOJ’s existing FCPA Investigations Policy, which contains more detailed guidance in several areas. This is in line with the approach of the prior Administration, which announced in March 2018 through a speech by the Acting AAG of the Criminal Division that the FCPA Investigations Policy would be applied as non-binding guidance in all Criminal Division cases.
On the issue of the timeliness of a corporation’s disclosures to DOJ from its internal investigation, the DOJ FCPA Policy states that a corporation can receive “maximum” cooperation credit only if it “proactively” discloses all relevant facts on a timely basis and provide “timely updates” on its internal investigation including rolling disclosures. JM § 9-47.120(3)(b). The Monaco Memo expresses similar mandates, applicable to all DOJ corporate crime investigations. As a result of the Memo, prosecutors deciding whether a company should receive cooperation credit must now assess whether the company “promptly notified prosecutors of particularly relevant information once it was discovered,” and “prioritized” the production to DOJ of the “most relevant for assessing individual culpability.” DAG Monaco restated it this way in her speech: “If a cooperating company discovers hot documents or evidence, its first reaction should be to notify the prosecutors.” In contrast, if prosecutors conclude that a company engaged in “undue or intentional delay” in production information, cooperation credit “will be reduced or eliminated.”
How strictly or seriously these guidelines will be followed remains to be seen, but the DAG was explicit that DOJ is now attempting to push companies to disclose key information from their internal investigations more quickly. As the DAG said in her speech, DOJ would like companies and their counsel to understand that, based on this “new guidance” and “new expectations,” they are “‘on the clock’ to expedite investigations.”
2. Clarifying (In the Future) the Benefits of Voluntary Self-Disclosure
The Monaco Memo and the DAG’s speech essentially acknowledged that the existing DOJ Corporate Enforcement Policy does not sufficiently communicate the “concrete benefits” to corporations for voluntarily self-disclosing corporate misconduct to DOJ. To that end, the Memo directs all DOJ components that do not have an existing policy on this point to draft and publicly issue that policy so that corporations can understand what to expect “if they meet the standards for voluntary self-disclosure.” No time frame was placed on this new policy-drafting requirement.
Time will tell whether new policies that attempt to “clarify the benefits of promptly coming forward to self-report” – the “value proposition,” as DAG Monaco said in her speech – will lead to less uncertainty and subjectivity on this topic. The existing Corporate Enforcement Policy provides that prosecutors “may consider” a corporation’s voluntary self-disclosure in deciding on the proper resolution, but also provides that “prosecution may be appropriate notwithstanding a corporation’s voluntary disclosure.” § 9-28.900. This provides little guidance about what benefits corporations can expect from voluntary self-disclosure.
A few other components of DOJ have specific policies on this point, including the existing FCPA Policy which is more concrete about the potential benefits of voluntary self-disclosure, but with numerous caveats. Under that policy, corporations meeting the voluntary self-disclosure standard “presumptively” receive a declination – but only if (i) the corporation made its self-disclosure reasonably promptly after becoming aware of the misconduct, and “prior to an imminent threat of disclosure or government investigation,” (ii) the self-disclosure disclosed all relevant facts known to the corporation, (iii) the corporation “fully cooperated,” (iv) the corporation remediated all the misconduct in a timely and appropriate fashion, and (v) there were no aggravating circumstances (which include executive management being involved in the misconduct, a significant profit resulting from the misconduct, or the misconduct being “pervasive”).
Will DOJ’s future efforts at clarifying the “concrete benefits” of voluntary self-disclosure copy the FCPA Policy standards, or will they be narrower and more concrete? The Monaco Memo said that such future policies must meet some “core principles.” One such principle mentioned by the Memo was notably less favorable than the FCPA Policy’s “presumptive declination” benefit: corporations who meet the voluntary self-disclosure test and all caveats (i) will not be required to plead guilty and (ii) no independent monitor will be imposed. These may represent substantial benefits in some circumstances, but left open is the likelihood that such corporations may still be required to agree to a Deferred Prosecution Agreement to resolve the matter – a substantially worse outcome than a declination.
Another of the Memo’s “core principles” suggested toward a narrowing of the “aggravating factor” caveat present in the FCPA Policy: the Monaco Memo said that one aggravating factor that would make a corporation ineligible for this type of benefit was if the misconduct was “deeply” pervasive – a potentially notable change from the standard of “pervasive” misconduct in the FCPA Policy. But the day after the DAG’s speech, AAG Polite “announc[ed] that, going forward, in the Criminal Division, those aggravating factors we will consider will include” the same factors listed in the FCPA Policy, including “pervasive or egregious misconduct.”
In short, clarification regarding the benefits of voluntary self-disclosure will need to wait for the new policies issued in the future.
3. Clarifying (In the Future) How To Earn Maximum Cooperation Credit
As with the topic of voluntary self-disclosure, the Monaco Memo acknowledges that there is room for improvement in how DOJ policy describes the circumstances that will lead to “maximum credit for full cooperation.” The Memo explains that DOJ will update the Justice Manual “to ensure greater consistency across [DOJ] components” on this point. No time frame was provided.
4. DOJ Scrutiny of Discrete Corporate Policies – Including Executive Compensation Policies – In Assessing Compliance Programs
The Monaco Memo discussed two discrete areas in which DOJ will now more closely scrutinize corporate policies in deciding whether a company’s compliance program is deemed “effective.”
- Compensation arrangements. The Memo emphasized that DOJ will be regularly examining a company’s policies relating to compensation arrangements to determine whether they incentivize “compliance-promoting behavior.” The Memo’s carrot-and-stick approach asks whether a company has put in place both incentives for such behavior (including performance reviews that “measure and reward” positive compliance actions), and penalties for employee’s whose actions contributed to criminal conduct (such as clawback provisions or partial escrowing of compensation). The Memo issued high-level guidance for now and stated that DOJ will develop further guidance by the end of 2022.
- Personal devices and third-party messaging apps. The Memo discussed DOJ’s expectation that a “robust compliance program” can collect work-related data and communications from an employee’s personal device or from third-party messaging applications (even if ephemeral or encrypted) that are used for work. The Memo issued high-level guidance for now and stated that DOJ will issue further guidance in the next version of its Evaluation of Corporate Compliance Programs (last revised by DOJ in June 2020).
5. Delaying Corporate Resolutions Until DOJ’s Investigation of Individuals Is Completed
It has been common for DOJ to enter into resolutions with corporations while its investigation of the corporate officials is ongoing. As a result, indictments or guilty pleas of individuals may occur after the corporation has entered into an agreement with DOJ or has received a declination.
The Monaco Memo sets a new policy that DOJ must complete its investigations into the “responsible individuals” (by filing charges or deciding not to) before reaching a resolution with the corporation. Exceptions can be made, but they will require approval from a high-level DOJ official (the AAG for the Criminal Division or the applicable U.S. Attorney).
6. Guidance for Corporations with Prior Misconduct Resolutions (Criminal and Non-Criminal)
The Monaco Memo provides detailed guidance about how DOJ will view corporations being investigated who have a prior misconduct resolution, whether criminal, civil, or regulatory. This updates more high-level guidance issued by the DAG in October 2021 that was criticized as being unfairly punitive to corporations with such prior resolutions.
The Memo has three points that may have broader applicability for corporations that have prior resolutions or are going through such a process now. First, it will be “disfavored” for DOJ to enter into a Deferred Prosecution Agreement or Non-Prosecution Agreement with a corporation who has a prior DPA or NPA, especially if the matters involve “similar types of misconduct.” Exceptions are allowed but will require high-level approval within DOJ (by the AAG of the Criminal Division or applicable U.S. Attorney). Second, a corporation’s factual admissions in prior resolutions will be taken into account – an important reminder about the importance of scrutinizing proposed factual admissions during the resolution negotiation process with an eye toward the negative effect they may have in the future. Third, a prior resolution will be worse for a corporation if the prior and current conduct “occurred under the same management team and executive leadership” – a potential indication of a “lack of commitment to compliance at the board or management level,” in DOJ’s view.
The Memo also makes several discrete points about situations in which DOJ will give less weight to prior resolutions:
- Prior resolutions that are more than ten years old (criminal) or five years old (non-criminal);
- Prior resolutions with an entity that is affiliated with the corporation but does not share common management or compliance resources;
- Prior resolutions with an acquired company as long as the acquiring corporation fully integrated it into the corporation’s effective compliance program;
- Prior regulatory resolutions when the corporation is in a heavily-regulated industry and its regulatory track record is better than its peers; and
- Prior foreign resolutions involving conduct that would not be chargeable as criminal conduct in the United States.
7. Documents Located Abroad
The Monaco Memo now provides that the FCPA Policy applies to corporations seeking cooperation credit in any DOJ investigation, not just those involving the FCPA. The existing FCPA Investigations Policy provides that corporations are only eligible for full cooperation credit if they preserve and collect relevant corporate documents located overseas. And if a corporation is prohibited from disclosing the documents to DOJ by foreign law relating to data privacy or otherwise, that Policy puts the burden on the corporation to establish that prohibition to DOJ’s satisfaction and to identify all potential legal ways to provide such documents to DOJ.
8. New Guidelines For Independent Corporate Monitor Process
Finally, the Monaco Memo attempts to address critiques that DOJ’s process for imposing a monitorship on corporations, selecting the monitor, and reviewing an ongoing monitorship is confusing and not sufficiently transparent. The Memo lays down no hard and fast rules but states that monitorship decisions “must depend on the facts and circumstances of the particular case.” However, for the first time, the Monaco Memo sets out the numerous factors DOJ will consider in deciding whether to impose a monitor. It also creates new internal DOJ processes for selecting monitors and reviewing ongoing monitorships.
About 20 months into the Biden Administration, the Monaco Memo reflects DOJ’s desire to make faster progress in corporate crime investigations and to show greater results, in part by pushing corporate internal investigations to move quicker and disclose more information earlier. The Memo also does more nuts-and-bolts work – attempting to create detailed policies on numerous discrete issues that have previously received substantial attention, and to refine and clarify several central corporate enforcement issues with a promise of more detailed guidance to come in the future. Staying attuned to these new statements will help corporations involved in DOJ investigations make smart decisions about how to proceed – both internally and with DOJ.