United States: Department of Justice tweaks Criminal Division Corporate Enforcement Policy

In brief

On January 17, 2023, the US Department of Justice (DOJ or the “Department“) issued a revised version of its Corporate Enforcement Policy (CEP). The CEP sets out the Department’s approach to resolving criminal cases with corporations. In particular, it addresses how the Department will credit companies which voluntarily disclose criminal conduct and cooperate with the Department’s investigation and resolution of the matter.

The latest revisions to the CEP are an evolution of existing Department policy and practice. They add additional nuance (and complexity) to the CEP, as well as potentially more significant benefits to companies considering how best to approach disclosure and engagement with the Department on criminal matters.


In depth

Background to the Corporate Enforcement Policy

The CEP started its life in 2016 as a Pilot Program applied in the limited context of resolving Foreign Corrupt Practices Act (FCPA) cases. Since then, the Pilot Program was adopted permanently by the Department, expanded beyond the FCPA to cover all corporate criminal matters and formally integrated into the Department’s Justice Manual (a compendium of policies and procedures applicable to all US Attorneys and other DOJ prosecutors). During this time, the CEP has been revised and amended several times to take into account the Department’s evolving experience and approach to handling these cases.

As well as providing guidance to prosecutors, the CEP seeks to provide companies with greater certainty around the benefits of engaging with the Department. In doing so, the Department hopes to incentivize companies to disclose, cooperate and remediate.

Revisions made to the Corporate Enforcement Policy in January 2023

A new path to declination (open to more defendants but the bar is high and untested)

The best outcome for companies contemplated by the CEP is a declination from the Department to prosecute the case. Such declinations are nevertheless made public and require the subject company to disgorge any and all profits generated from the criminal conduct. Neither of these outcomes should be taken lightly, but they are better than the alternatives on offer. Prior versions of the CEP provided that a declination would be the presumed form of resolution if a company voluntarily disclosed criminal conduct, fully cooperated with the Department and remediated the issue in an timely and appropriate manner. However, a declination was not available if certain aggravating factors were present for the defendant company. These aggravating factors included if company had previously resolved a criminal matter, or if the case involved criminal conduct by senior company management.

The Department clearly believed that precluding declinations for such defendants altogether might disincentivize them from making voluntary disclosures. As a result, in revising the CEP it has opened a (narrow) path to declination for those companies that can demonstrate that, notwithstanding any aggravating factors:

  • A voluntary self-disclosure was made immediately upon the company becoming aware of the allegation of misconduct.
  • At the time of the misconduct and disclosure, the company had an effective compliance program and system of internal accounting controls, which enabled the identification of the misconduct and led to the company’s voluntary self-disclosure.
  • The company provided extraordinary cooperation with the Department’s investigation and undertook extraordinary remediation that exceeds the respective factors listed herein.

This is a high bar for sure. It is also not clear what the Department will consider to be sufficiently “immediate” disclosure or “extraordinary” cooperation and remediation. Neither are concepts previously contemplated in the CEP nor by the Criminal Division elsewhere. The prior versions of the CEP referred only to “prompt” disclosures, “full” cooperation, and “timely and appropriate” remediation. These standards still apply in the other scenarios discussed below. Exactly what extra needs to be done by defendants in this new category to obtain a declination remains to be seen.

Higher potential discounts on criminal penalties for disclosing and cooperating companies

Those companies for which a declination is not on the table are offered two broad types of incentives in the CEP.

The first is in the form of the resolution. Cooperating companies will be considered for resolution by means of a negotiated Non-Prosecution Agreement or a Deferred Prosecution Agreement, rather than the having to plead guilty to the Department’s charges to resolve the case. The revised CEP states that companies that disclose, cooperate and remediate will generally not be required to enter a guilty plea, even in cases that warrant a criminal resolution (rather than a declination) or even those that have aggravating factors.

The second offered incentive relates to the amount of the criminal penalty that the company will have to pay. The US Sentencing Guidelines consider both disclosure and cooperation in calculating the range of the appropriate criminal fine in each case. Further to that, the CEP provides that the Department will grant disclosing and cooperating companies who appropriately remediate additional discounts below the bottom-end of the Guidelines range. The revised CEP has increased these potential discounts as follows:

  • For companies that voluntarily disclose, fully cooperate and remediate: Between 50% and 75% discount (previously fixed at 50%).
  • For companies that do not voluntarily disclose but do fully cooperate and remediate: Up to 50% discount (previously up to 25%).

While the top-end of these discounts is higher, the Department has made clear in the revised CEP that companies will not automatically be afforded top-end discounts. The Department will consider a number of factors in determining where, within the discount range allowed by the CEP, each case will fall. This will include an assessment of the “extent and quality” of the company’s cooperation.

Of course, in assessing these elements the Department also has expectations as to when disclosures are considered truly “voluntary”, the extent of cooperation which will be considered “full,” and what level of remediation is “timely and appropriate”. Companies will have to meet these standards to the satisfaction of the Department in order to be considered eligible for these discounts. Some guidance on this is provided in the CEP (which has not been significantly amended in this latest version) but the Department retains significant discretion in making these assessments, particularly now the potential discount ranges have been expanded.

Conclusion

These latest revisions to the CEP offer further insight into how DOJ will consider resolving cases with a broader range of corporate criminal defendants. They also serve to highlight the complexities and inherent uncertainties of these cases.

The decision whether to voluntarily disclose criminal conduct, and when and how to engage with the Department, will remain a difficult one for companies and their boards to make having identified criminal conduct. These decisions will continue to be made on a case-by-case basis, taking into account all of the facts, circumstances and risks. These factors will include, but certainly not be limited to, the likely response of the DOJ outlined in its CEP. We will see whether the additional guidance, route to declination and potentially higher penalty discounts offered by the revised CEP will serve to incentivize more companies to disclose, or alter the approach of those which find themselves before the Department (whether having disclosed or not).

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