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Assistant Attorney General Benczkowski On Corporate Compliance And His Odd Use Of The Term “Deterrence”

Last week Assistant Attorney General Brian Benczkowski gave this speech [1] at the 20th Annual Pharmaceutical and Medical Device Compliance Congress – an event frequently on the DOJ’s speech calendar.

As highlighted below, Benczkowski delivered typical Department of Justice corporate compliance talking points.

However, what stood out in his speech was his repeated odd use of the word “deterrence.”

As to corporate compliance, Benczkowski delivered the typical DOJ talking points, stating in pertinent part, as follows:

“The role of the federal prosecutor is, of course, different from that of a corporate compliance professional, but in many ways our goals are aligned.  We both want to deter corporate criminal misconduct, and we both want to detect such misconduct when it does occur, holding wrongdoers to account in our respective ways.

With apologies for repeating a cliché — the corporate compliance function is in some ways more important than the prosecution function.

It can actually prevent misconduct in the first place through robust systems of controls, and by fostering a culture where compliance is valued and rewarded. […]

For at least the last two decades, the Department has made it clear that it expects companies to invest in effective compliance programs.  But I don’t think the Department has always been as clear about what that means – both in terms of what the Department would look for in an effective program, and with regard to how the Department’s prosecutors would factor compliance into resolving their corporate cases.

Over the last few years, including before I arrived, the Criminal Division has worked to be more transparent about how it approaches its evaluation of compliance programs, including developing new policies and guidance designed to help encourage responsible companies to fully invest in compliance, but also to invest wisely and efficiently.

Building on past efforts, in April of this year, the Criminal Division issued a newly expanded and refined guidance document for our white-collar prosecutors clarifying how to evaluate corporate compliance programs.

This guidance promotes greater transparency in the specific factors we will use to evaluate the design and effectiveness of a compliance program.  It spells out numerous factors that the Criminal Division has frequently found relevant, but organizes them around three fundamental questions, which are always at the heart of our inquiry:

1) Is the compliance program well designed?

2) Is the program being implemented effectively and in good faith?

3) And does the compliance program work in practice?

In setting forth these various factors, we were not seeking to be prescriptive.  We are not regulators, and we recognize that every company and industry is different. There is no such thing as a one-size-fits-all compliance program, nor should there be.

We also know that no compliance program is 100% effective.  No system of controls is absolutely bulletproof.

Corporations employ people, and not all of those people are going to be uniformly law-abiding and ethical.  Bad actors in a company will work to identify and exploit weak controls and compliance structures.

The Criminal Division’s policies need to reflect that reality, especially because our prosecutors will invariably find themselves assessing a compliance program’s adequacy in hindsight, after a problematic event has already occurred.

The policies and tools they bring to their analysis need to account for the fact that misconduct is sometimes going to happen, even within good organizations.  Our prosecution efforts need to differentiate between companies that are investing adequately in compliance and working hard to build a strong culture, and those that are not.

Our written compliance guidance is crafted to avoid being overly rigid, allowing for each company’s program to be evaluated based on its unique risk profile.

But the Division’s written guidance document is only part of what we’ve done to improve our prosecutors’ understanding of corporate compliance programs.

In concert with our development of written compliance program guidance, we also trained all Criminal Division attorneys who work on corporate investigations to give them a range of perspectives on compliance program effectiveness.

As part of that training, we brought in experts from inside the Department of Justice, as well as outside voices from industry and the accounting profession to share their views on various compliance challenges and how industry is confronting them.

We looked at compliance challenges in high-risk markets and industries, as well as challenges that come with M&A due diligence and post-acquisition integration. We also focused on an area of growing attention in your industries, namely the evolution of compliance technology and data tools.

All of this is part and parcel of a common effort in the Criminal Division to promote effective compliance regimes.  By training our prosecutors, we are making them better able to objectively assess the role of compliance in any corporate resolution, including whether to impose a monitor.  And by providing written guidance, our prosecutors should be working from a common understanding of how to do those assessments.

But we also want you all to have a window into our thinking, so you can make wise, informed, and cost-effective decisions about whether and how to develop, grow, and enhance your compliance programs.

This transparency hopefully will foster better alignment of the common goals I mentioned at the outset – deterrence of corporate crime on the front end, holding bad actors accountable on the back end, and doing so in a way that is fair and objective.

We’ve made other policy changes as well that align with these goals.  Deterrence, of course, also is the objective behind applying the FCPA Corporate Enforcement Policy in all of our corporate criminal cases, including health care fraud cases.  Under this policy, a company receives the presumption of a declination if it voluntarily self-discloses the misconduct, fully cooperates with the Department, and engages in timely and appropriate remediation.

Even if aggravating circumstances call for a criminal resolution, companies can get up to a 50% reduction off the bottom of the applicable fine range if the conditions of voluntarily self-disclosure, full cooperation, and timely and appropriately remediation are met.

In a nutshell, the policy makes clear that when a company is serious about maintaining a culture of compliance, it can enjoy the peace of mind that the government will recognize that fact, and treat it fairly.

Deterrence is also the objective behind the so-called “anti-piling on” policy.  That policy encourages enforcement components inside and outside of the Department of Justice to coordinate with one another when imposing penalties for the same conduct.

Coordination includes crediting and allocating financial penalties and forfeitures to avoid disproportionate punishment.

The “anti-piling on” policy is designed to encourage companies to aggressively root out perpetrators without fearing that they later will be subject to multiple penalties from multiple regulators.

Deterrence is likewise the common thread behind our decision to be more transparent about corporate declinations under the enforcement policy.

We now routinely publish corporate declinations on our website so that defense attorneys and corporate counsel can refer to these declination memoranda to understand the analysis behind our decision to not bring criminal charges.

All of these efforts have been geared toward enhancing transparency and fostering ethical corporate practices and behaviors so that companies will have the tools and information needed to invest fully in compliance, and so that criminal wrongdoing is deterred before it ever calls for the attention of the Department of Justice.”

[2]

Benczkowski used the word “deterrence” several times in his speech, but its frequent use was odd.

For starters, deterrence (as stated by Black’s Law Dictionary) is generally defined to mean “the act or process of discouraging certain behavior, particularly by fear; especially as a goal of criminal law, the prevention of criminal behavior by fear of punishment.”

Given this definition, how is deterrence, as Benczkowski stated, “the objective behind applying the FCPA Corporate Enforcement Policy (CEP) in all of our corporate criminal cases” when the CEP – by its own terms –  “is aimed at providing additional benefits to companies based on their corporate behavior once they learn of misconduct.” (emphasis added).

Given the definition of definition of deterrence, how is deterrence, as Benczkowski stated “the objective behind the so-called ‘anti-piling’ policy” when the policy – by its own terms – concerns “coordination of corporate resolution penalties in parallel and/or joint investigations and proceedings arising from the same misconduct.” (emphasis added).

Given the definition of deterrence, how is deterrence, as Benczkowski stated “the common thread behind our decision to be more transparent about corporate declinations under the enforcement policy.” All of the so-called declinations on the DOJ’s FCPA page (see here [3]) concern alleged misconduct that already occurred, but because of various factors, the DOJ decided to resolve the matter short of actual criminal charges.

In short, Benczkowski’s frequent use of the term deterrence is odd and the term should not be used to describe DOJ policies that are only implicated once alleged misconduct occurs. In fact, by lessening the impact or consequences of alleged misconduct based on post-conduct factors the DOJ’s policies don’t achieve deterrence at all.

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