Summary
The Department of Justice (DOJ) last week issued revisions to the Criminal Division’s Corporate Enforcement Policy that incentivize companies to promptly self-disclose corporate misconduct, cooperate with the DOJ, and swiftly remediate wrongdoing. The revisions provide for expanded declination eligibility and potential discounts on fines under the U.S. Sentencing Guidelines (Guidelines).
The Upshot
- In the past, even if a company self-disclosed, fully cooperated, and remediated the wrongdoing, aggravating circumstances would have ordinarily precluded it from receiving a declination.
- The revision provides an avenue for greater reduction in fines.
- If a company fails to self-disclose but later demonstrates full cooperation and appropriate remediation, the DOJ will recommend up to a 50 percent reduction off the low end of the applicable Guidelines fine range.
The Bottom Line
Companies should be aware of the revised policy and its emphasis on strong internal controls designed to identify wrongdoing. If companies become aware of wrongdoing, they should consider the benefits of self-disclosing and cooperating with the government’s investigation.
On January 17, 2023, in a speech at Georgetown University, Assistant Attorney General Kenneth A. Polite, Jr. announced a new set of revisions to the Criminal Division’s Corporate Enforcement Policy. The new revisions follow the September 15, 2022 memorandum from Deputy Attorney General Lisa Monaco (Monaco Memo), which represented one of the most comprehensive updates in years to the DOJ’s approach to combating corporate criminal conduct.
These recent revisions incentivize companies to promptly self-disclose corporate misconduct, cooperate with the DOJ, and swiftly remediate any wrongdoing. The revised policy provides several incentives for cooperation under the U.S. Sentencing Guidelines (Guidelines), including expanded declination eligibility and discounts on fines.
The revised policy includes three main changes. First, companies with aggravating circumstances that self-disclose corporate misconduct may now be eligible for declinations. In the past, even if a company self-disclosed, fully cooperated, and remediated the wrongdoing, aggravating circumstances (egregious or pervasive misconduct, involvement by executive management, significant corporate profits from the wrongdoing, or criminal recidivism) would have ordinarily precluded it from receiving a declination. With the revised policy, a company still can qualify for a declination if the following conditions are met: (1) the company voluntarily self-discloses immediately upon becoming aware of the alleged wrongdoing; (2) the company has effective compliance programs and internal controls that enabled it to identify and remediate the wrongdoing; and (3) the company provides “extraordinary cooperation” during the investigation. As defined in Polite’s speech, extraordinary cooperation means exhibiting “immediacy, consistency, degree, and impact” and going “above and beyond the criteria for full cooperation.”
Second, in cases where DOJ determines that a criminal resolution is warranted despite the fact that a company self-disclosed, fully cooperated, and has taken meaningful steps to remediate, the revision provides an avenue for greater reduction in fines. Under the revision, the DOJ will recommend a reduction of at least 50 percent and up to 75 percent off of the low end of the applicable Guidelines range for companies that are not criminal recidivists, and, for companies that are recidivists, it will recommend a 50 percent to 75 percent reduction, but generally not from the low end of the Guidelines range (previously, the reduction available was 50 percent off of the low end of the Guidelines range). Moreover, absent egregious, aggravating circumstances, the DOJ will likely not require a company to plead guilty.
Third, where a company fails to self-disclose but later demonstrates full cooperation and timely and appropriate remediation, the DOJ will recommend up to a 50 percent reduction off of the low end of the applicable Guidelines fine range (previously, DOJ policy provided for a maximum penalty reduction of 25 percent off of the low end of the Guidelines range).
As a follow-up to the Monaco Memo, which emphasized the DOJ’s tougher approach to corporate criminal enforcement, it is important for companies to ensure that they have strong internal compliance programs designed to detect wrongdoing. With the new incentives, if presented with wrongdoing, companies should strongly consider the benefits to self-disclosure and cooperation in investigations.
Government scrutiny of corporate conduct has high-stakes ramifications for executives and organizations. The attorneys in Ballard Spahr’s White Collar Defense/Internal Investigations Practice conduct internal investigations and represent clients facing actual or threatened enforcement. We also represent clients in civil fraud litigation and administrative proceedings. Please contact us for more information.
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