In September of 2022, the Justice Department made significant revisions to its policy on corporate criminal enforcement. Deputy AG Lisa Monaco announced these revisions during remarks at New York University, and they were simultaneously released as part of a Justice Department memorandum. Going into the new year, practitioners should be aware of these revisions.
Monaco reiterated that for the Justice Department, the pursuit of individual bad actors is the top priority. To successfully go after those individuals, the Justice Department needs the help of corporations. And to achieve that outcome, it is willing to extend favorable treatment to cooperating corporations.
Under the new policy, corporations stand to gain the most from voluntary self-disclosures. If a corporation discloses information about a bad actor when it was not legally required to do so, and when the misconduct was not on the verge of being exposed already, the Justice Department will treat the corporation as having voluntarily self-disclosed.
The benefits of voluntary self-disclosure are significant. Absent aggravating factors, Monaco stressed, the Justice Department will not prosecute a corporation that has “voluntarily self-disclosed, fully cooperated, and timely and appropriately remediated the criminal conduct.” And, if the cooperating corporation demonstrates that it has an effective compliance program, it will not be burdened by a Justice Department-imposed compliance monitor, either.
Before, there was no similar across-the-board policy, and the ability to obtain this sort of treatment for voluntary self-disclosure depended on the policy preferences of the various regional branches of the Justice Department. Now, all regional branches of the Justice Departments must create formal policies on voluntary self-disclosure that comport with the September memorandum.
The Justice Department is willing to make this offer for several reasons. First, it wants to convince corporations that voluntary self-disclosure makes good business sense. Second, these disclosures help the Justice Department to do its job more efficiently. And third, it views this sort of conduct as demonstrating a healthy culture of compliance within the corporation.
For those corporations that did not voluntarily self-disclose but do decide to cooperate in a later investigation, there is still the possibility of “cooperation credit.” Corporations that collect, preserve, and disclose relevant, non-privileged documents related to individual misconduct are eligible for this credit.
Monaco expressed that the Justice Department will gauge the corporation’s forthcomingness when determining whether credit is appropriate. If it believes the corporation promptly provided the requested documents, then it is more likely to award this credit than if it believes the corporation is stalling or hiding something. To that end, the new Justice Department policy instructs prosecutors to delay entering a resolution with the corporation until it has completed its investigation and brought charges against the individual bad actors.
Monaco also stated the Justice Department would consider a corporation’s history of misconduct when determining what, if any, penalty to pursue against the corporation. For those with a clean record, this is obviously an altogether good thing. But for those with prior misconduct, the Justice Department’s analysis is more complicated and will depend on the specifics of the prior misconduct. Monaco stated that if the prior misconduct occurred in the U.S., and occurred recently, it would be looked at more unfavorably. Likewise, if the prior misconduct involved the same acts, actors, or root causes, it would be viewed even more unfavorably. In contrast, unrelated bad acts that occurred long ago are likely to be less troublesome.
In essence, the Justice Department wants to see corporations with a culture of compliance. This suggests corporations can take a proactive approach to detecting and preventing crime by their officers and employees through conducting internal investigations before government intervention. Corporations that do so are likely to find themselves in a much a better position than those that take a reactive approach to the Justice Department’s criminal investigations.
Nathan Coyne is an associate at Flannery | Georgalis with a focus on complex criminal investigations. Previously, Coyne served as a law clerk for Justice R. Pat DeWine and Judge Edmund A. Sargus, Jr. Coyne is a new member of the Cincinnati Bar Association, having joined in 2022. Matthew Jalandoni is an experienced criminal litigator and partner at Flannery | Georgalis. Jalandoni was previously an assistant Ohio attorney general, military prosecutor and defense counsel in the United States Army JAG Corps, and special assistant United States attorney.