Overview
Since 2021, the US Department of Justice (DOJ) and other regulators have been “surging” resources into corporate criminal and civil enforcement. At the same time, DOJ has made significant updates to its Corporate Enforcement Policy, which add incentives for self-disclosure and cooperation and emphasize the need for companies and prosecutors to move quickly to resolve cases. Corporations’ compliance function remains critical as DOJ continues to update its guidance regarding expectations for compliance programs.
During this webinar recorded on February 2, 2023, McDermott Partners Ted Diskant and Sarah Walters examined DOJ’s current compliance and enforcement priorities, what they mean for your business and what you should consider doing now in light of the updated DOJ policies. Below are top takeaways from the discussion.
2021 AND 2022 ENFORCEMENT POLICIES AND GUIDANCE
- June 2021: President Biden hailed a new era of collaboration between federal agencies, making countering corruption a “core US national security interest” and directing various law enforcement agencies to coordinate enforcement efforts through data sharing and enhanced investigative coordination.
- October 2021: Deputy Attorney General (DAG) Lisa Monaco announced updates to DOJ’s Corporate Enforcement Policy, including the following: increasing the burden on companies to identify compliance issues; clarifying that to be eligible for cooperation credit, companies must provide DOJ with all non-privileged information about individuals involved; stating that DOJ will review and consider a company’s entire criminal, civil and regulatory history when evaluating a resolution; and eliminating a default presumption against the imposition of a corporate compliance monitor following a resolution.
- March 2022: Attorney General Merrick Garland reemphasized DOJ’s focus on corporate criminal enforcement, noting that DOJ would increase its use of data analytics to identify and prosecute corporate crime, would focus on “individual accountability,” and would devote more resources to healthcare and securities fraud, the Foreign Corrupt Practices Act (FCPA), Antitrust, COVID-19 fraud and cryptocurrency.
- March 2022: Assistant Attorney General Kenneth Polite, head of the Criminal Division (and a former compliance officer), re-emphasized that DOJ expects chief compliance officers to have resources and independence, and that prosecutors resolving matters are to consider requiring that the chief executive officer and the chief compliance officer certify that the compliance program is “reasonably designed and implemented to detect and prevent violations of law . . . and is functioning effectively.”
- September 2022: DAG Monaco announced further revisions to DOJ’s Corporate Enforcement Policy, including the development of a formal program to incentivize voluntary self-disclosure, which would include benefits such as DOJ declining to seek a guilty plea when it has voluntarily self-disclosed quickly, cooperated in DOJ’s investigation and remediated misconduct. DAG Monaco also emphasized that DOJ will encourage companies to hold in escrow or claw back compensation from executives and employees responsible for wrongdoing, consider a company’s history of prior misconduct when entering into a resolution, emphasize corporate compliance culture and examine how companies govern employee use of personal devices and ephemeral communication technologies.
JANUARY 2023 CORPORATE ENFORCEMENT POLICY UPDATES
- DOJ’s January 2023 revisions to the Corporate Enforcement Policy (CEP) seek to encourage more voluntary self-disclosure by offering larger and clearer potential rewards and providing companies facing aggravating circumstances a path to a possible declination. The revised CEP aims to provide companies more transparency and predictability for companies deciding whether to self-disclose.
- Under the revised CEP, prosecutors may still decline even in the face of aggravating factors, where:
- The voluntary self-disclosure was made immediately upon the company becoming aware of the allegation of misconduct;
- At the time of the misconduct, the company had an effective compliance program; and
- The company provides “extraordinary cooperation” and undertakes “extraordinary remediation.”
- The revised CEP provides additional clarity on the financial benefits to self-disclosure, noting that:
- The highest discounts with cooperation credit will be “reserved for companies that truly distinguish themselves and demonstrate extraordinary cooperation and remediation”;
- DOJ will not require the appointment of a monitor if, at the time of resolution, the corporation has implemented and tested an effective compliance program; and
- “While relevant and important, criminal recidivism alone will not always mean a plea.”
LESSONS LEARNED FROM RECENT CASES
- Safran S.A. — DOJ Declination
- On December 21, 2022, DOJ announced that it declined to prosecute Safran S.A. (Safran), a French aerospace company, after Safran self-reported FCPA violations uncovered during post-acquisition due diligence.
- In declining to prosecute, DOJ cited:
- Safran’s timely and voluntary self-disclosure of the misconduct (as soon as it learned of the conduct);
- Safran’s full and proactive cooperation and its agreement to continue to cooperate in any ongoing government investigations;
- Safran’s timely and full remediation (terminating remaining employees involved in the misconduct and withholding deferred compensation to another employee involved in the misconduct); and
- The bribery actions ceased prior to Safran’s acquisition of the subsidiaries where the misconduct occurred.
- ABB Ltd. — Deferred Prosecution Agreement
- On December 2, 2022, DOJ announced that ABB Ltd. (ABB), a Swiss-based global technology company, had entered into a deferred prosecution agreement (DPA) to resolve FCPA violations.
- In announcing the DPA, DOJ cited the following factors:
- ABB’s demonstrated intent to disclose the misconduct promptly to the department;
- ABB’s history or misconduct (ABB had two prior criminal resolutions with DOJ for FCPA violations in 2004 and 2010, as well as a guilty plea by an ABB entity for bid rigging in 2001);
- ABB’s “extraordinary cooperation” with the department’s investigation;
- ABB’s extensive remediation (e.g., root cause analysis of the misconduct and significant investments in compliance personnel); and
- ABB’s commitment to further enhance its compliance program and internal controls.
- Balfour Beatty Communities — Felony Plea
- On December 22, 2021, Balfour Beatty Communities (BBC), a private military housing contractor, plead guilty to one count of major fraud against the United States.
- DOJ determined that a felony plea was appropriate based on:
- The pervasiveness of the misconduct (i.e., the involvement of several BCC employees at multiple military installations);
- No voluntary disclosure;
- BBC did not conduct appropriate remedial actions in a timely manner;
- The limited extent of BBC’s cooperation; and
- BBC had an inadequate and ineffective compliance program and internal controls during the period of the conduct (BBC only began improving its compliance program after the initiation of the DOJ investigation).
- Glencore and Glencore Ltd. — Felony Pleas
- On May 24, 2022, Glencore International A.G. and Glencore Ltd. both pled guilty and agreed to pay over $1.1 billion to resolve violations of the FCPA and a Commodity Price Manipulation (CPM) scheme, respectively.
- In requiring felony pleas as to the FCPA and CPM violations, DOJ highlighted the following factors:
- Glencore and Glencore Ltd.’s failure to fully, voluntarily, and timely self disclose the offense conduct to DOJ; and
- Glencore’s lack of “full” cooperation, slow remediation and lack of a fully implemented compliance program at the time of resolution.
THE YEAR AHEAD
- DOJ is laser-focused on compliance. According to DAG Monaco: “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.”
- The incentives to self-report have never been clearer or greater. DOJ will increasingly be looking for “extraordinary cooperation” which may entail immediate self-reporting, voluntary production of documents located abroad if applicable, compensation claw back provisions and extraordinary remediation.
Check out past recordings and materials from our Enforcement Outlook webinar series.
