DOJ Further Incentivizes Companies to “Do the Right Thing” With Changes to Corporate Enforcement Policy

On January 17, 2023, Kenneth A. Polite, Jr, Assistant Attorney General for the Department of Justice (DOJ)’s Criminal Division, delivered a speech at Georgetown Law School announcing the first significant changes to the Criminal Division’s Corporate Enforcement Policy (“CEP”) since 2017. The changes answer the call of Deputy Attorney General Lisa Monaco and provide companies with new and concrete incentives to self-disclose wrongdoing and meaningfully cooperate with DOJ investigations. Most notably, DOJ is offering both a new path to avoid prosecution, and, in cases where a criminal resolution is warranted, the opportunity to obtain as much as 75% off the low end of the U.S. Sentencing Guidelines fine range. The revisions also include incentives for companies that do not voluntarily self-disclose, but still fully cooperate and remediate—even these companies can obtain a 50% reduction in fines.

Changes to the CEP

Declination available even with aggravating factors.

Previously, absent certain aggravating factors, there was a presumption that prosecutors would decline criminal charges against companies that voluntarily and quickly self-report criminal conduct, cooperate during criminal investigations, and appropriately remediate the misconduct. Aggravating factors negating this presumption for a company can include: executive management involvement in the misconduct; a significant profit from the wrongdoing; egregiousness or pervasiveness of the misconduct; or recidivism.

Recognizing that some companies might choose not to self-report because an aggravating factor might eliminate a declination, AAG Polite offered another path. Under the revised CEP, even with aggravating circumstances, prosecutors may now decline a matter if a company can demonstrate each of the following three factors:

• The company voluntarily self-disclosed immediately upon discovering misconduct or being made aware of an allegation of misconduct;
• At the time of the misconduct and disclosure, the company had an effective compliance program and system of internal controls that enabled detection of the misconduct; and
• The company provided extraordinary cooperation with the DOJ’s investigation and undertook extraordinary remediation.

According to AAG Polite, this is a path that “incentivizes even more robust compliance on the front-end, to prevent misconduct, and requires even more robust cooperation and remediation on the back-end, if a crime occurs.”

Avoiding criminal charges and 50-75% reduction in fines available to all companies that self-report and cooperate.

The revised CEP provides that if a self-reporting company fully cooperates and remediates, the DOJ will generally not seek a guilty plea, including for criminal recidivists, absent multiple or particularly egregious aggravating circumstances. Further, in cases where a non-recidivist company voluntarily self-reports, cooperates, and remediates, but a criminal resolution is still warranted, DOJ will recommend to a sentencing court at least 50% and up to 75% off the low end of the Guidelines fine range. This represents a significant increase from the CEP’s prior guidance, which provided for a maximum of 50% reduction off the Guidelines range.

Non self-reporting Companies now eligible for 50% reduction in fines.

Finally, the revised CEP provides an opportunity for companies to double their fine reduction even absent a voluntary self-disclosure. Indeed, if a company fully cooperates and timely remediates corporate misconduct raised by DOJ, it can receive up to a 50% reduction off the low end of the Guidelines fine range, rather than only 25% under the prior policy. AAG Polite warned, however, that a 50% reduction will not be the new norm: “each and every company starts at zero cooperation credit and must earn credit based on the parameters and factors outlined in the CEP.” In other words, 50% is the goal and will only be achieved by companies that provide extraordinary cooperation and remediation efforts. According to AAG Polite, although undefined, extraordinary means above-and-beyond DOJ’s published criteria for full cooperation.

Takeaways

As has been the trend over the past year, the changes to the CEP announced by AAG Polite demonstrate DOJ’s continued efforts to incentivize self-reporting and cooperation by companies. While DOJ has long rewarded companies for implementing robust compliance practices and self-reporting, these new changes provide even more incentives to come forward, cooperate, and remediate. Indeed, the revised CEP’s message is that companies who take compliance and cooperation seriously—before, during, and after a DOJ investigation—have a real opportunity for a better outcome. In light of these changes, companies should closely examine the systems they have in place to detect and prevent misconduct, including employee discipline, and to consider the added benefits of self-reporting.