- Absent aggravating factors, the DOJ will not seek a guilty plea where a corporation has voluntarily self-disclosed, fully cooperated, and remediated the criminal conduct in a timely fashion.
- The DOJ will not require the imposition of a compliance monitor for a cooperating corporation that voluntarily self-discloses the relevant conduct if, at the time of resolution, it also demonstrates that it has implemented and tested an effective compliance program.
The Memorandum states that “[p]rosecutors should look to what has happened in practice at a corporation—not just what is written down.” In more practical terms, the Memorandum provides that prosecutors will be evaluating a corporation’s compliance program when determining the appropriate terms for a corporate resolution, including whether a compliance monitor is warranted. The Memorandum identifies several metrics relevant to this evaluation:
- Whether the corporation’s compensation agreements enable penalties to be levied against current or former employees, executives, or directors whose direct or supervisory actions or omissions contributed to criminal conduct. In particular, prosecutors should be determining whether these agreements allow for “retroactive discipline, including through the use of clawback measures, partial escrowing of compensation, or equivalent arrangements.”
- If a corporation has included such clawback provisions, whether, following the corporation’s discovery of misconduct, it has taken affirmative steps to exercise such measures.
- Whether a corporation provides “affirmative incentives for compliance-promoting behavior.” Such incentives include the use of compliance metrics in calculating compensation and “the use of performance reviews that measure and reward compliance-promoting behavior, both as to the employee and any subordinates whom they supervise.”
- How the corporation has incentivized or sanctioned employee, executive, and director behavior, including through disciplinary decisions, as part of its efforts to create a culture of compliance.
Time is of the essence for companies seeking cooperation credit. The Memorandum makes clear that to receive cooperation credit to any degree, corporations must disclose all relevant, non-privileged facts about individual misconduct. Going forward, prosecutors must specifically assess the following:
- Whether the corporation has provided cooperation in a timely fashion, for example, whether a company has promptly notified prosecutors of relevant information once it was discovered, or if the company instead delayed disclosure.
- Whether the corporation has preserved, collected, and disclosed relevant documents located both within the United States and overseas. In instances where companies encounter data privacy laws, blocking statutes, or other restrictions imposed by foreign law, the corporation “bears the burden” of establishing the existence of any such restriction, and is expected to work diligently to identify all available legal bases to preserve, collect, and produce such documents, data, and other evidence expeditiously. Whereas this requirement applied only to investigations involving potential violations of the Foreign Corrupt Practices Act, this requirement now applies to all corporations under investigation.
- Whether the corporation has implemented effective policies and procedures governing the use of personal devices and third-party messaging platforms to ensure that business-related electronic data and communications are preserved. The Memorandum states that corporations should be providing “clear training to employees about such policies and should be enforcing such policies when violations are identified.”
- Whether a corporation has instituted policies to ensure that it will be able to collect and provide to the government all non-privileged responsive documents relevant to the investigation, “including work-related communications (e.g., texts, e-messages, or chats), and data contained on phones, tablets, or other devices that are used by its employees for business.”
The Memorandum provides guidance for prosecutors about how to identify the need for a compliance monitor, how to select one, and how to oversee its work to increase the likelihood of success. The need for a compliance monitor will be determined on a case-by-case basis, including through an assessment of several factors, including whether:
- The corporation has voluntarily self-disclosed the misconduct consistent with applicable DOJ policies.
- The underlying criminal conduct involved the exploitation of an inadequate compliance program or system of internal controls.
- The corporation has, at the time of the resolution and after a thorough risk assessment, implemented an effective compliance program and sufficient internal controls to detect and prevent similar misconduct in the future.
The Memorandum also states that in matters where a compliance monitor is imposed pursuant to a resolution with the DOJ, “prosecutors should ensure that the monitor’s responsibilities and scope of authority are well-defined and recorded in writing, and that a clear workplan is agreed upon between the monitor and the corporation.”
Finally, the Memorandum contains guidance aimed at expediting resolutions against corporations and individuals. The Memorandum states that prosecutors must strive to complete its investigations into individuals “prior to or simultaneously with” its resolution against the corporation. Additionally, in making decisions regarding cooperation credit, prosecutors should be assessing “the adequacy and effectiveness” of the corporation’s compliance program at the time of the misconduct and the time of a charging decision.
The Memorandum is a clear and unambiguous signal to all public and private entities to revisit their policies and approach to compliance, particularly the degree to which existing policies and practices contribute to a culture of compliance and serve to aid, rather than hinder, a corporate criminal investigation. In this regard, corporations would be well served by retaining experienced attorneys specializing in white-collar criminal defense to review and assess their compliance programs and practices in light of these new policies.
Ballard Spahr attorneys in the White Collar/Internal Investigations Group have deep experience in assisting individuals and entities in navigating federal criminal laws, including the development and oversight of effective compliance programs and document collection and preservation practices. Please contact us for more information.
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