With the holiday season upon us, companies waiting for a nice surprise this Christmas are more likely to find a lump of coal in their stocking. In a series of recent announcements, Department of Justice (“DOJ”) officials have signaled a number of key changes to white collar crime enforcement that harken the return of the Ghost of DOJ Past.
Among these changes are three significant policy shifts by President Biden’s DOJ that renew Obama-era approaches to enforcement over some of the more corporate-friendly policies that took hold under the Trump Administration.1 First, to land on the nice list and receive full cooperation credit by DOJ, companies will again be required to disclose the names of all people involved in a matter instead of only those company counsel finds to have been “substantially” involved. Second, a company seeking a second chance with the government may find DOJ less accommodating if the company has landed on DOJ’s naughty list before. Finally, DOJ officials have signaled a desire to resurrect the use of independent compliance monitors on companies that resolve their matters with DOJ. Taken as a whole, those accustomed to gifts from the government over the past few years should prepare for prosecutors to act more like Scrooge than Santa this holiday season and well into the new year.
Bad Santa: Companies Again Must Name All Names if They Want to Avoid the Naughty List
While high-dollar settlements with multinational corporations tend to dominate the headlines in the white collar space, those settlements typically result only after the government manages to build cases against individual wrongdoers. DOJ’s policy of prioritizing cases against individuals gained notoriety under the Obama Administration with the issuance of the “Yates Memo” in 2015. Through that memo, the DOJ changed its policy to specifically require companies to focus their cooperation efforts on helping the DOJ bring charges against culpable individuals.2 The Trump Administration largely continued these policies, and brought a number of white collar cases against individuals, especially in cases involving alleged violations of the Foreign Corrupt Practices Act (“FCPA”). In 2018, however, the Trump DOJ tweaked the corporate enforcement policy to loosen the requirements for a company to receive full cooperation credit by allowing companies to provide information only about individuals who were “substantially involved” in a matter under investigation instead of requiring a company to identify all of the people involved.3 The Trump-era policy shift gave companies more leeway to cooperate and investigate alleged wrongdoing while providing a degree of protection to its employees with less-apparent involvement in the alleged criminal activity.
However, during her keynote address at the American Bar Association’s (“ABA”) 36th National Institute on White Collar Crime on October 28, 2021, Deputy Attorney General Lisa O. Monaco announced that DOJ would be returning to the Yates Memo standard, and that to receive full cooperation credit from DOJ, “companies must provide the department with all non-privileged information about individuals involved in or responsible for the misconduct at issue . . . [and] must identify all individuals involved in the misconduct, regardless of their position, status or seniority.”4
According to DOJ officials charged with enforcement of the corporate enforcement policy under the Trump Administration, the prior policy proved unworkable in practice. At a recent conference for FCPA attorneys, the DOJ FCPA Unit Chief David Last explained that federal prosecutors are best equipped to “decide based on looking at the evidence who was substantially involved or who might have less involvement.”5
Moving forward, a cooperating company should be prepared to provide the government with an exhaustive list of all individuals whose conduct touched on the scope of an internal investigation, though company counsel would be well served to advocate for narrow follow-up requests by the government by clarifying which individuals are likely to have relevant and actionable information for the government and which were only tangentially involved.
Die Harder: Companies Facing Sequels May See Fewer Second Chances
In a move that may make the most giant of corporations feel more like an elf, especially if it has dealt with the government in the past, DOJ officials also announced that prosecutors would be taking a closer look at all instances of prior misconduct by a company when DOJ considers whether to bring charges. While a company’s criminal history has long been one of the factors that DOJ considers when dealing with a business organization,6 a company’s recidivist nature did not seem to carry much weight in a number of recent resolutions with the government.7 DOJ officials’ recent statements suggest that a company’s enforcement history will now play a larger role in decision-making.
Explaining that the new policy was “part of a holistic approach to looking at the full nature and characteristics of a company,” DOJ’s FCPA Unit chief specifically stated that the government would be examining both domestic and foreign enforcement actions against a company.8 And while the full range of enforcement actions — from environmental to antitrust to bribery, for example — will now be considered relevant, DOJ officials have been quick to explain that not every prior enforcement action will be afforded the same weight. Prosecutors should be expected to focus on the seriousness of a prior offense, the recency of the misconduct, the extent to which senior management was involved, and the similarity of misconduct when determining how much a company’s enforcement history should factor into a new enforcement decision.
While the full impact of this policy change will not be understood until more company resolutions are made public, DOJ has already begun to take action. On December 21, 2021, the DOJ announced a plea agreement with UK financial services firm NatWest Markets plc, in which the government dubbed NatWest a “repeat offender” after it admitted to a securities fraud scheme in violation of its Non-Prosecution Agreement with DOJ.9 Under the terms of the plea deal, NatWest agreed to pay a new $35 million fine and enter into a three-year corporate monitorship. In the short term, we should expect more of the same type of aggressive policing by DOJ as prosecutors take a harder line with companies they have recently penalized, leading to longer negotiations, higher penalties and more corporate monitorships.
A Frosty Approach by DOJ: More Monitorships on the Horizon
Finally, in what may be the most significant departure from recent DOJ’s practice under the Trump Administration, DOJ appears to be poised to require the imposition of corporate monitorships as part of future corporate resolutions, which had been used with far less frequency in recent years.
Under the most recent DOJ guidance on the use of corporate monitorships from 2018, it was generally understood that monitors would be imposed upon a company only when DOJ found a clear benefit in light of the intrusive nature of monitorships and the high costs that are typically involved.10 During her October 2021 keynote address to the white collar bar, however, Deputy Attorney General Monaco announced DOJ’s pivot away from the Trump Administration’s approach, stating that DOJ “is free to require the imposition of independent monitors whenever it is appropriate” to satisfy prosecutors that a company will comply with the terms of its resolution with the government.11 Monaco even went so far as to specifically rescind previous guidance to the extent it was understood to find that the use of monitorships by DOJ was disfavored.
For many companies under an existing investigation with DOJ, especially those with a prior criminal history or with ongoing compliance issues, this change in DOJ’s enforcement policy is likely to lead to a dramatic increase in costs and could even turn into a Nightmare Before Christmas scenario.
How to Turn This into a Merry Christmas and Happy New Year
The recent statements and policy changes by DOJ might seem frightful, it should not take a miracle on 14th Street12 to get a fair result with the government. If you or your company are facing the ominous prospect of negotiating a corporate resolution with DOJ, then you should take stock of the situation and seek sound advice from competent counsel with the relevant experience and strategic know-how to win the day with DOJ. Only then can you be sure to get the best result for you and your company this holiday season and beyond.
1 Prior to his presidency, President Trump was perhaps best known for his appearance in Home Alone 2. See https://www.youtube.com/watch?v=YXE3Ku-mGrk.
2 See Memorandum from Sally Quillian Yates, Deputy Attorney General, U.S. Dep’t of Justice, Individual Accountability for Corporate Wrongdoing (Sept. 9, 2015), https://www.justice.gov/archives/dag/file/769036/download.
3 See Deputy Attorney General Rod J. Rosenstein Delivers Remarks at the American Conference Institute’s 35th International Conference on the Foreign Corrupt Practices Act, Dep’t of Justice (Nov. 29, 2018), at https://www.justice.gov/opa/speech/deputy-attorney-general-rod-j-rosenstein-delivers-remarks-american-conference-institute-0.
4 See Deputy Attorney General Lisa O. Monaco Gives Keynote Address at ABA’s 36th National Institute on White Collar Crime, Dep’t of Justice (Oct. 28, 2021), https://www.justice.gov/opa/speech/deputy-attorney-general-lisa-o-monaco-gives-keynote-address-abas-36th-national-institute.
5 Ines Kagubare, FCPA Chief: Companies Shouldn’t Determine Employee Culpability in Our Cases, Glob. Investigations Review (Dec. 1, 2021), https://globalinvestigationsreview.com/just-anti-corruption/enforcement-policy/fcpa-chief-companies-shouldnt-determine-employee-culpability-in-our-cases.
6 See Justice Manual § 9-28.600 (including “The Corporation’s Past History” as a relevant factor when a prosecutor determines whether to bring charges against a company).
7 For example, DOJ’s FCPA resolution with Technip FMC in 2019 resulted in a deferred prosecution agreement (“DPA”) with the parent company and no monitorship, even though its predecessor company (Technip S.A.) previously had a foreign bribery resolution with DOJ and the Securities and Exchange Commission in 2010.
8 See note 5 supra.
9 See U.S. Dep’t of Justice, NatWest Markets Pleads Guilty to Fraud in U.S. Treasury Markets (Dec. 21, 2021), https://www.justice.gov/opa/pr/natwest-markets-pleads-guilty-fraud-us-treasury-markets.
10 See Memorandum from Brian A. Benczkowski, Assistant Attorney General, U.S. Dep’t of Justice, to All Criminal Division Personnel, Selection of Monitors in Criminal Division Matters (Oct. 11, 2018), https://www.justice.gov/criminal-fraud/file/1100366/download.
11 See note 4 supra.
12 Before most cases are elevated to DOJ headquarters at the Robert F. Kennedy Department of Justice Building at 9th and Pennsylvania Avenue in Washington, D.C., they first must get through the line prosecutors staffed at the Bond Building at the corner of New York Avenue and 14th Street.