Ronald Reagan once said “The nine most terrifying words in the English language are: I’m from the Government, and I’m here to help.”
I was reminded of this quote upon reading Assistant Attorney General Kenneth Polite’s recent speech announcing the “first significant changes to the Criminal Division’s CEP [Corporate Enforcement Policy] since 2017.” (See here for a prior post analyzing the 2017 CEP).
Per Polite’s language, I guess that means that the revisions to the CEP released in early 2019 (see here) as well as late 2019 (see here) were not “significant.”
Even though the DOJ has been actively encouraging voluntary disclosure for approximately 15-20 years, Polite stated:
“The revised CEP presents another path for companies facing such a choice. 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. Namely, even if aggravating circumstances are present, although a company will not qualify for a presumption of a declination, under the revised CEP, prosecutors may nonetheless determine that a declination is the appropriate outcome, if the company can demonstrate that it has met each of the following three factors:
- The voluntary self-disclosure was made immediately upon the company becoming aware of the allegation of misconduct;
- At the time of the misconduct and the disclosure, the company had an effective compliance program and system of internal accounting controls that enabled the identification of the misconduct and led to the company’s voluntary self-disclosure; and
- The company provided extraordinary cooperation with the Department’s investigation and undertook extraordinary remediation.”
Pardon me for being that “guy,” but what does any of this actually mean?
Is the DOJ seriously suggesting that one second, one minute, one hour, or one day after an internal hotline receives an allegation of misconduct that the company disclose? What else would “immediate” mean?
Is there any actual legal standard that requires a company to have an “effective” compliance program? (No, there is not). In any event, by what standards or factors is “effective” judged by?
What does extraordinary cooperation and extraordinary remediation actually mean? What standards or factors are used to judge such issues?
In his speech, Polite anticipates that there will be questions about how prosecutors will analyze these issues, but here comes the funny part.
Polite assured the corporate community to settle down, because – well – the government knows it when it sees it.
“In many ways, we know “extraordinary cooperation” when we see it, and the differences between “full” and “extraordinary” cooperation are perhaps more in degree than kind. To receive credit for extraordinary cooperation, companies must go above and beyond the criteria for full cooperation set in our policies—not just run of the mill, or even gold-standard cooperation, but truly extraordinary.”
What in the world does this word salad actually mean?
Polite’s speech also spends time discussing the percentage ranges off the low end of the advisory sentencing guidelines when determining corporate fines (“But having a greater range of cooperation and remediation credit available—from 0% to 50%, instead of from 0% to 25%, and using the full spectrum of the Guidelines from which to apply those reductions—will allow our prosecutors to draw greater distinctions among the quality of companies’ cooperation and remediation.”).
However, it is important to note that the fine ranges that the guidelines churn out are like a big math equation and the “final number” is dependent on numerous other issues “earlier” in the equation. As to these other issues “earlier” in the equation, the DOJ still retains extreme leverage and practically unreviewable discretion in filing in the equation which yields the “final number.” Thus, the DOJ saying that it may consider lower percentages off the “final number” is not – in and of itself – meaningful.
Polite concluded his speech by saying this to “corporate citizens.”
“[Our job is not just to prosecute crime, but to deter and prevent criminal conduct. Through our enforcement efforts and our policies, we are committed to incentivizing companies to detect and prevent crime in their own operations, and to come forward and cooperate with us when they identify criminal wrongdoing. We need corporations to be our allies in the fight against crime. And we believe that our revised policies will, at the end of the day, further our ability to bring individual wrongdoers—the corporate executives, employees, and agents who engage in misconduct—to justice.”
However, as highlighted in this prior post, measured against the DOJ’s stated goal of incentivizing voluntary disclosure so that it can increase prosecution of individuals, DOJ policy – including the CEP – has failed.