Invigorating the Corporate Criminal Enforcement Program: U.S. Department of Justice Seeks to Entice Companies to Self-Report

For a side-by-side comparison of the key provisions of the November 2019 policy and this revised version, please refer to the CEP comparison chart at the end of this Update.

I. The Criminal Division’s New CEP

The revised policy contemplates three possible outcomes for companies that cooperate with the Department: (1) a presumption of declination, (2) a discretionary declination, or (3) a criminal resolution with significant credits for companies that voluntarily self-disclose misconduct.

The presumption of declination is reserved for situations in which no aggravating circumstances are present and the company voluntarily self-discloses the misconduct to the Criminal Division, fully cooperates in the investigation, and timely and appropriately remediates the misconduct.

Even if aggravating circumstances make a presumption of declination unavailable, prosecutors now have discretion to consider a declination if the company (1) voluntarily self-discloses the misconduct “immediately upon the company becoming aware of the allegation of misconduct,” (2) shows that at the time of the misconduct and disclosure it had an effective compliance program and system of internal controls, (3) goes above and beyond to provide “extraordinary” cooperation with DOJ’s investigation, and (4) undertakes “extraordinary” remediation.

Finally, even if, despite the company’s cooperation, the prosecutor decides that a declination is inappropriate and a criminal resolution is warranted, he or she can recommend “at least a 50% and up to a 75% reduction off the low end of the U.S. Sentencing Guidelines (U.S.S.G’) fine range” if the aggravating circumstance is not recidivism. In the case of a recidivist company, the reduction generally will not be from the low end of the fine range but rather a different starting point, to be determined in the prosecutor’s discretion. In addition, DOJ generally will not require a corporate guilty plea, including for recidivists, absent “particularly egregious or multiple aggravating circumstances” and generally will not require the appointment of a monitor, assuming the company can demonstrate that, at the time of the resolution, it has implemented and tested an effective compliance program and remediated the root cause of the misconduct.

Like the old policy, the new CEP allows for limited credit even for a company that did not self-disclose — with two notable changes. First, under the new CEP, where a company does not self-disclose but later fully cooperates and timely and appropriately remediates, DOJ has increased the amount of reduction in fine it may recommend from no more than 25% under the old policy to up to 50% off the low end of the USSG fine range under the new policy, assuming no aggravating circumstances. Second, in cases in which the company does not self-disclose and aggravating circumstances are present, prosecutors will still have discretion to accord a reduction of up to a 50%, but it generally will not be off of the low end of the fine range. Previously, a recidivist company could not obtain any reduction off the fine it had to pay.

The revised policy also contemplates self-disclosures in the context of mergers and acquisitions and accords acquiring companies a presumption of a declination when no aggravating circumstances are present and the company timely self-discloses the misconduct, fully cooperates, and remediates the misconduct by implementing an effective compliance program at the merged or acquired entity. If aggravating circumstances existed at the acquired entity, acquiring companies may still be eligible for a declination if they timely disclose the misconduct and otherwise take action consistent with the policy (i.e., fully cooperate and remediate).

In all cases, whether a declination is granted or the issue is resolved through some form of criminal disposition, the Department will require the company to pay a criminal penalty/fine as well as, where applicable, disgorgement, forfeiture, and/or restitution. 

II. The Changes Between the Previous Policy and the Revised Version

Applies to all criminal cases. One of the most significant changes to the policy is perhaps not a surprising one: The new CEP applies to all corporate criminal matters handled by the Criminal Division, whereas previously the CEP applied exclusively to Foreign Corrupt Practices Act cases.

A broader range of cases may qualify for a declination. The new CEP also expands the range of cases in which a company may qualify for a declination, including some in which aggravating circumstances exist, if the company voluntarily self-reports the misconduct, shows that at the time of the misconduct it had an effective compliance program, provides “extraordinary” cooperation with DOJ’s investigation, and undertakes “extraordinary” remediation. DOJ’s willingness to consider declinations despite aggravating circumstances may be one example of the Department’s looking to “invigorate” its corporate criminal enforcement efforts by enticing more companies, including those that might be understandably reluctant under prior DOJ guidance, to come forward and self-report.

Increased reductions on applicable fines and reductions available for recidivist companies and companies that do not self-disclose, in certain circumstances. Under the previous policy, nonrecidivist companies that self-disclosed misconduct could get a 50% reduction off the low end of the USSG fine range. Notably, the previous policy did not make clear how aggravating circumstances, other than recidivism, affected this 50% reduction. The new policy increases the reduction for nonrecidivist companies to as much as 75% off the low end of the applicable fine range if they can show that at the time of the misconduct they had an effective compliance program and system of internal controls in place, demonstrate extraordinary cooperation with the investigation, and undertake extraordinary remedial measures.

In a departure from the prior policy, under which recidivist companies could not obtain any reduction in fine amount even when they self-reported the misconduct, the new CEP allows recidivist companies that voluntarily self-report to obtain anywhere from a 50% to a 75% reduction when, aside from self-reporting, they can also show that at the time of the misconduct they had an effective compliance program and system of internal controls, demonstrate extraordinary cooperation with the investigation, and undertake extraordinary remediation. An important caveat here is that unlike for nonrecidivist companies, the reduction for recidivist companies generally will not be from the low end of the applicable fine range but rather a different starting point, as determined by the prosecutor.

The new policy also increases the available reductions for companies that do not self-report but fully cooperate with the investigation and timely and appropriately remediate the misconduct. Previously, companies were eligible for only up to 25% off the low end of the applicable fine range in such circumstances, but under the new policy, even in the presence of aggravating circumstances, companies that do not self-report but fully cooperate and remediate the misconduct are eligible for up to 50% off either the low end of the applicable fine range for nonrecidivist companies or another point on the fine range for recidivist companies.

Definitions or guidance regarding key terms in the policy. First, the new policy expands what is required for a company to satisfy the standard of “voluntary self-disclosure” to include providing DOJ with “all relevant, non-privileged facts known to the company, including facts and evidence about all individuals involved,¹ whether inside or outside the company.” Previously, the duty was to disclose relevant facts about “individuals substantially involved in or responsible for” the misconduct.²

Second, the new CEP explains a number of the factors that the Department considers when evaluating whether a company has provided “full cooperation.” This information generally is not new. The new CEP relies in several respects on the concept of “extraordinary cooperation,” which DOJ has somewhat opaquely indicated should be understood as anything that exceeds the factors outlined in the policy as reflecting full cooperation. It seems likely that defense counsel will have the opportunity to advocate to DOJ on whether their clients have achieved “extraordinary cooperation” given the lack of clarity surrounding how much more than full cooperation rises to the level of extraordinary.

Last, in defining “timely and appropriate remediation,” the new policy emphasizes the need for compliance programs to be tailored not only to the size and resources of the company in question (as was the case in the previous policy) but importantly to the risks attached to the company’s business. In particular, among the factors the Department will consider in determining whether a company has an adequate compliance program, the new CEP includes the effectiveness of the company’s compliance risk assessment and the manner in which the company’s compliance program has been tailored to address the identified risks.

III. Important Reminders From the Department-Wide Changes Announced by DAG Monaco Last September That Directly Affect This New CEP

Two policy directives from DAG Monaco’s September memorandum must be kept in mind when reading this new CEP.

First, regarding the issue of aggravating circumstances and specifically the way the Department now evaluates a company’s criminal or disciplinary history, DAG Monaco directed prosecutors to consider the full criminal, civil, and regulatory record of the company — both domestically and internationally — when deciding what resolution is appropriate. She further asked prosecutors to consider the form of prior resolutions, the associated sanctions or penalties, as well as the elapsed time among the instant misconduct, the prior resolution, and the conduct underlying the prior resolution. Indeed, as we stated in our September Alert on DAG Monaco’s Announcement, the Department now “disfavors” entering into a deferred prosecution agreement (DPA) or nonprosecution agreement (NPA) with a corporation that has a prior DPA or NPA, especially if the matters involve “similar types of misconduct” or if the misconduct “occurs under the same management team and executive leadership.”

Second, DAG Monaco emphasized three important aspects the Department will consider when evaluating a company’s cooperation with an investigation, namely, the company’s actions around the preservation of key documents, the production of those documents, and the timeliness of those actions. Regarding preservation, the Department’s guidance remains the same: Companies seeking to obtain credit for cooperation must timely preserve and collect relevant documents located both within the United States and overseas. For documents located overseas, companies that demonstrate diligence in the way they navigate issues of foreign law will be credited accordingly. Regarding the production of documents, DAG Monaco clarified that “even in the absence of a specific request from the prosecutors,” companies should prioritize and timely produce evidence “that is most relevant for assessing individual culpability.”

IV. Conclusion

The new CEP provides companies with additional incentives to self-disclose that companies and their counsel should weigh carefully when facing potential criminal exposure. Not surprisingly, those incentives are tied to greater expectations for the conduct of the reporting company than existed under DOJ’s prior policies. The following chart provides a side-by-side comparison of the key provisions in the prior and new policies. This space bears watching as the new policies are put into practice. 

DOJ’s Corporate Enforcement Policy

Comparison of Key Provisions, November 2019 and January 2023 Versions

¹ Notably, in her September 2022 memorandum, DAG Monaco stated that for a company to receive full cooperation credit, it had to disclose all nonprivileged information about individuals involved in or responsible for the misconduct at issue, regardless of their position, status, or seniority (or presumably even degree of involvement).
² The new policy also states that the disclosure has to be to the Criminal Division. This is a new requirement. However, the policy notes that the Division will also apply the provisions of this new policy “where a company made a good faith disclosure to another office or component of the DOJ, and the matter is partnered with or transferred to, and resolved within, the Criminal Division.”
³ According to both the 2019 and 2023 policies, aggravating circumstances include, but are not limited to, involvement by executive management of the company in the misconduct; a significant profit to the company from the misconduct; egregiousness or pervasiveness of the misconduct within the company; or criminal recidivism.