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Former DOJ Fraud Section Chief Questions Whether Recent DOJ Policy Pronouncements May Deter Corporate Voluntary Disclosures


This prior post highlighted Deputy Attorney General Lisa Monaco’s recent speech in which she made various policy pronouncements on behalf of the DOJ relevant to corporate crime investigations and prosecutions.

Sandra Moser (currently a lawyer in private practice at Morgan Lewis & Bockius LLP) knows a thing or two about DOJ policy relevant to those topics as she previously served as Chief of the DOJ’s Fraud Section.

In this recent Law360 column Moser (and her co-authors) write:

“The real impact of the DOJ’s announcement has yet to be seen but could result in companies being less willing to self-report corporate wrongdoing and thereby unravel years of progressive efforts by the department to incentivize companies to come forward. Reasons for such include the following:

High-level and senior executives might be less willing to self-report to the government now that the DOJ’s first priority is to prosecute individuals engaged in wrongdoing. This is particularly likely given the DOJ’s restoration of guidance that states companies must divulge nonprivileged information about any individual involved in misconduct regardless of their substantial involvement — a standard that the companies themselves will no longer be allowed to determine.

Companies may be less willing to self-report based on the DOJ’s elimination of the presumption against corporate monitors. Now, self-reporting carries a much greater risk that the DOJ will regularly require corporate monitors, which can be an onerous, disruptive and expensive burden on a company seeking to recover and carry on with its normal course of business following a government investigation. The broad discretion the DOJ holds in deciding when and how to impose corporate monitors, coupled with uncertainty regarding how that discretion will be imposed, creates a disincentive for companies to self-report corporate wrongdoing and may have the opposite effect of what the DOJ is seeking to accomplish.

The announcement that the DOJ will judge a company based on all prior misconduct will potentially deter a company from self-reporting. Not only is this guidance a stark departure from the past, but it tends to neglect the fact that in the years after an investigation, companies may undergo significant structural changes such that the individuals involved in prior misconduct are no longer employed by the company. It also ignores the practical realities that large multinational companies, particularly those operating in highly regulated industries, may reach corporate resolutions with regulators that do not reflect a lack of commitment to compliance or a deficient compliance program. Indeed, this is one reason the U.S. Sentencing Guidelines do not consider the full scope of a company’s record of misconduct when making sentencing recommendations.

One other potential result of the DOJ’s announcement stems from the department’s focus on corporate recidivism and the view that companies with a history of misconduct may not be able to avail themselves of a deferred or nonprosecution agreement.

Based on this view, especially when combined with the guidance that prosecutors must consider the company’s entire history of misconduct, it is possible that companies will be less willing to enter into resolutions with the government and, instead, may be incentivized to proceed with defending an investigation through to completion.

Especially when considering companies that are publicly traded, the DOJ’s guidance could affect the calculus of corporate directors when deciding what course of action — resolution or investigation — is in the best interest of shareholders.”

See here for a 2019 FCPA Flash podcast episode with Moser in which she discusses: (i) things that corporate counsel or FCPA practitioners fail to realize or understand about the DOJ’s FCPA enforcement program; (ii) the DOJ’s so-called “no piling on” policy and whether the time has come for the DOJ simply to back off of FCPA enforcement actions against foreign companies from OECD Convention countries; (iii) whether the FCPA has been successful in achieving its objectives; and (iv) where the FCPA is headed and predictions for what corporate counsel, FCPA practitioners, and government enforcement officials will be talking about in 10 years.

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