In September 2020, Patrick MinceyZachary Bolitho and I presented on the changes and trends we expected to see in SEC and DOJ enforcement of white-collar cases.  We cautioned our clients that the government was going to shift its focus and efforts towards C-suite executives, corporate gatekeepers and inadequate or poorly-designed corporate compliance programs.  While our clients’ investigative matters and reported decisions have reinforced those beliefs, Deputy Attorney General Lisa O. Monaco recently cemented them during an address at the ABA’s White Collar Crime Conference.

Monaco, who previously served as a corporate board member, emphasized the DOJ’s priority on top-down enforcement and echoed Attorney General Merrick Garland’s recent statement that the DOJ’s “first priority in corporate criminal matters [is] to prosecute the individuals who commit and profit from corporate malfeasance.”  While recognizing that cases against C-suite executives and corporate gatekeepers “are among some of the most difficult that the department brings,” the DOJ will urge prosecutors to “be bold” in holding these individuals accountable.  As we discussed in 2020, this stems from the government’s belief that holding upper-level executives responsible will result in a trickle-down compliance effect and encourage better behavior throughout corporate ranks.  As Monaco put it, “corporate culture matters.”  

For the same reason, the government plans to increase the scrutiny paid to corporate compliance programs and punish those who fail to actively invest in compliance efforts.  In 2020, we argued that corporate compliance programs must be well-designed and applied in a manner which not only resolves, but prevents, compliance issues.  Monaco affirmed these beliefs by stating that the DOJ’s responsibility is to incentivize responsible corporate citizenship by ensuring that corporations adopt compliance programs which anticipate problems and avoid regulatory action through proactive planning.  “Paper” programs which do not effectively address specific risks of a corporation will not impress DOJ investigators.

Monaco expanded upon the DOJ’s enforcement priorities and made three announcements of which all corporations and corporate employees should take note.  First, in an effort to ensure individual accountability, companies must now identify all individuals involved in criminal misconduct – not just those the company deems substantially involved – during government investigations.  Failure to provide that information, regardless of position, status or seniority, will bar a company from receiving cooperation credit.  Second, the DOJ will look at a company’s “overall commitment to compliance” when determining how to resolve cases.  Whereas the DOJ previously only looked at similar misconduct (e.g., prior instances of tax fraud in a tax investigation), it will now look at a company’s entire history of misconduct.  The DOJ will now look outside of whether a company has run afoul of whatever body is prosecuting it and assume that all misconduct is relevant – even foreign investigations will be considered.  Third, Monaco announced that DOJ will consider increasing its use of corporate monitors.  While monitor usage was previously the exception and not the rule, DOJ has decided to implement a plan to fairly select and utilize corporate monitors in a way that ensures disclosure and compliance obligations are met while avoiding perceptions of favoritism.

Monaco also announced the formation of a new body – the Corporate Crime Advisory Group – to be comprised of representatives from every DOJ section involved in corporate criminal enforcement and which will have a broad mandate to consider how to better the DOJ’s enforcement mechanisms.  In conclusion, Monaco recognized that white collar attorneys “are going to get calls from clients over the next few days with questions about what this all means,” and provided five answers:

  • 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.
  • For clients facing investigations, as of today, the Department will review their whole criminal, civil and regulatory record — not just a sliver of that record.
  • For clients cooperating with the government, they need to identify all individuals involved in the misconduct — not just those substantially involved — and produce all non-privileged information about those individuals’ involvement.
  • For clients negotiating resolutions, there is no default presumption against corporate monitors. That decision about a monitor will be made by the facts and circumstances of each case.
  • Looking to the future, this is a start — and not the end — of this administration’s actions to better combat corporate crime.