Recently, Principal Associate Deputy Attorney General Marshall Miller delivered this speech.
He focused his remarks on “how today’s world demands that the Department of Justice expand, innovate, and modernize our corporate enforcement efforts to meet the moment, and how the private sector can also adapt to combat misconduct and promote compliance.”
Miller began:
“First, our corporate enforcement efforts are evolving to address the rapidly increasing intersection between corporate crime and the risks that threaten both U.S. and global security. From terrorist financing, sanctions evasion, and export control circumvention to cybercrime and crypto-enabled crime, sophisticated white-collar criminals are contributing to global instability and threatening U.S. national security to a degree never seen before.
And we are also seeing national security dimensions in more familiar areas of corporate crime – intellectual property theft and international corruption, for example, interrupt supply chains, divert disruptive technologies to dark places, and fuel the misdeeds of rogue nation-states.
With a mounting number and growing share of the Department’s corporate investigations and resolutions implicating national security, we are surging resources to address the challenge – adding more than 25 new corporate crime prosecutors to our National Security Division and increasing by 40% the number of prosecutors in the Criminal Division’s Bank Integrity Unit, which prosecutes violations of U.S. sanctions and the Bank Secrecy Act by financial institutions and executives.”
Miller next spoke about “targeting [DOJ] efforts to the most important white-collar cases, where we can make the most impact [and that] includes charging the most culpable corporate executives, no matter how high they rank on the company org chart – and taking those cases to trial on an increasingly frequent basis.”
He stated:
“This approach is resource-intensive: prosecuting the most important cases requires breaking down complex criminal schemes, understanding cutting-edge markets, and analyzing terabytes of data, with high-powered defendants mounting aggressive defenses and hiring sophisticated counsel (like many of you in this room). But we will not shy away from the challenge.”
Query what the terms “high-powered,” “aggressive,” and “sophisticated” even mean, but I digress.
Miller continued:
“[W]e are holding companies and individual executives accountable when they violate the law. But we aren’t just measuring success in the number of prosecutions we bring or the higher sentences we are securing; we’re also providing incentives for good corporate compliance to detect and deter bad actors and discourage recidivism. Improved corporate compliance safeguards the public, increases the fairness and reliability of markets, and protects our collective security.
One way we are promoting good corporate compliance is through the Department’s Voluntary Self-Disclosure (VSD) policies. At the direction of the Deputy Attorney General, every DOJ component that did not already have a leniency or voluntary self-disclosure policy has now adopted one. For the first time, all 94 U.S. Attorneys’ Offices have now adopted a single Voluntary Self-Disclosure policy that applies from Anchorage to Honolulu to right here in New York – and everywhere in between.
The goal of these VSD policies is to identify misconduct at the earliest possible opportunity. That way, we can put a stop to the conduct and take swift and effective action against individual wrongdoers – enhancing the individual accountability that is our top priority in fighting white-collar crime.
The VSD policies also ensure that companies that invest in effective compliance programs that enable swift identification of misconduct of which the government was not aware, then step up and own up by promptly self-reporting and remediating that misconduct, will fare better – in some cases by qualifying for a declination of prosecution. The criteria and predictable results of voluntary self-disclosure are laid out in black and white in DOJ component policies that are publicly available on the DOJ website.
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Policy changes like these take time to bear fruit, so it’s premature for a full assessment. But we’ve seen multiple companies voluntarily self-report in connection with a wide range of misconduct, with resulting investigations under way. So, stay tuned.
The value proposition of voluntary self-disclosure extends with particular force to the mergers and acquisitions (M&A) space, where the disclosing company is essentially operating as a corporate whistleblower, diming out illegal conduct that took place at a different entity – the M&A target. The Deputy Attorney General recently announced the core elements of the Department’s policy on M&A-related voluntary disclosure, which provides transparency and consistency and standardizes across the Department an approach already taken by components like the Criminal Division.
This Justice Department, through our Antitrust Division, has elevated and prioritized competition-promoting enforcement, including in the mergers and acquisitions space, more than any DOJ in recent memory. And nothing in the VSD policy for mergers and acquisitions changes that – in fact, the policy will make that clear in black and white. As the Deputy Attorney General has clearly stated, the policy will have no impact on civil merger enforcement.
Every component that receives an M&A-related self-disclosure will coordinate with our Antitrust and National Security Divisions – both at the time of initial disclosure and before a charging decision – to ensure nothing runs counter to antitrust or CFIUS enforcement efforts.
And since the policy only applies to bona fide, arm’s length transactions, our prosecutors will be scrutinizing every disclosure. Not only would a sham transaction not qualify, but it may even subject the disclosing company to additional criminal liability. For example, if we find out that a company improperly structured a transaction to avoid applicable reporting obligations, it would not qualify for the protections of the policy.
What we expect the VSD policy will do is incentivize corporate whistleblowing – where a company not involved in criminal conduct spills the beans on corporate executives that were – all so that we can continue to target our efforts at holding the most culpable individuals accountable for their white-collar crimes.”
As discussed in this recent post, the DOJ has long asserted that a policy goal of obtaining voluntary disclosures is to facilitate the prosecution of individuals. In the FCPA context, since April 2016, the DOJ has self-identified 18 corporate matters as being resolved pursuant to / or consistent with its corporate enforcement policies encouraging voluntary disclosure. However, just 2 of the 18 instances (approximately 10%) have involved an FCPA prosecution of an individual.
Miller continued:
“Another way that we have continued to promote and incentivize commitment to compliance is through our approach to corporate compensation programs.
The Department expects companies to use compensation systems to align their executives’ financial interests with the company’s overall interest in good corporate citizenship. So, when Department prosecutors evaluate the strength of a compliance program, a key consideration will be whether the company’s compensation system effectively incentivizes good behavior and deters wrongdoing.
And to raise the stakes, the Deputy Attorney General directed the Criminal Division to adopt a two-part pilot program to shift the burden of corporate misconduct away from uninvolved shareholders and onto those directly responsible.
First, every corporate resolution involving the Criminal Division now includes a requirement that the resolving company develop and implement compliance-promoting criteria within its compensation and bonus systems. And second, companies that withhold or seek to claw back compensation from corporate wrongdoers can obtain a reduction of financial penalties by the amount of the clawback. In the Department’s recent FCPA resolution with Albemarle, for example, the company received a fine reduction for bonuses it withheld from culpable executives.
Corporate leaders and board members have a responsibility to take note. Existing clawback capabilities should be regularly deployed; a paper policy not acted upon is really no better than having no policy at all. Companies should review compensation policies, clawback provisions, and employment contracts to ensure they are fit for purpose – and that review needs to take place long before a company discovers misconduct, so it’s well positioned to get the best result for its shareholders.
Now, I don’t have to tell this international audience that employment laws vary from country to country, or that legal regimes in some jurisdictions don’t permit clawbacks. Our prosecutors recognize that and will not hold companies to an unattainable standard. But wherever they’re located, companies must think creatively about how to structure incentive compensation to promote compliance in a lawful manner. It’s the best way to protect shareholders; it’s the right thing to do; and it will stand companies in good stead if the Department of Justice comes knocking on your door.”
