This previous post summarized Deputy Attorney General Lisa Monaco’s memo to DOJ personnel titled “Further Revisions to Corporate Criminal Enforcement Policies Following Discussions with Corporate Crime Advisory Group.”
This post provides analysis and commentary.
The memo – while technically an internal memo to DOJ personnel – is obviously much more than that as it (and previous iterations) was publicly released and serves as a de facto DOJ policy document.
In this regard, here we go again and it is difficult to take these DOJ memos with anything more than a grain of salt. As Monaco mentioned in her related speech “for at least a half-century … it has been the responsibility of my predecessors to set corporate criminal policy for the DOJ.”
Given that each new occupant of politically appointed positions at the DOJ tends to release a policy memo governing the (relatively speaking) brief snapshot of time they occupy the position, what does this say about DOJ policy? If the “at least half-century” of DOJ policy has been successful at achieving its objectives, why the need for new policy? Do the constant stream of new policies by each successive political appointee suggest that prior DOJ policies have been unsuccessful?
Regardless, as has long been said about DOJ policy (see here for the prior post):
“The government has the option of deciding whether or not to prosecute. For practitioners, however, the situation is intolerable. We must be able to advise our clients as to whether their conduct violates the law, not whether this year’s crop of administrators is likely to enforce a particular alleged violation. That would produce, in effect, a government of men and women rather than a government of law.”
The above quote was from 1982.
Forty years later, has anything really changed?
Relevant to the above quote, the “Monaco Memo” of course does not represent the law, but rather non-binding DOJ policy. Nevertheless, in reading the 15 page memo ask yourself: does anything in the memo have anything to do with the actual elements of the federal statutes that the DOJ criminal division enforces?
As mentioned above, the Monaco Memo is a lengthy 15 pages (even though it discusses just a few substantive topics). In this regard, it is a bit ironic that the DOJ/SEC FCPA Guidance states that the most effective compliance codes (and in effect that is what the DOJ policy memo represents) are “clear [and] concise.”
It is further ironic that the FCPA enforcement agencies often ding companies for having vague compliance policies and procedures (see here for example), even though the Monaco memo is peppered with vague terms and concepts such as: “relevant,” “too long,” “swiftly and without delay,” “timely,” “promptly,” “reasonable,” “diligently,” “well designed,” “adequately resourced,” “empowered to function effectively,” “working in practice,” “robust,” “adequate,” “likely,” “long-lasting,” “pervasive,” “facilitated,” “ignored,” “tolerated,” and “red flags” (to name just a few).
These terms mean little in the abstract.
Compliance lingo even made its way into the memo. Does “C-Suite” even have a definition?
Vagueness aside, let’s say you are compliance professional and your short term to-do-list is now to review your company’s (or your client’s) compliance policies and procedures to make sure they align with the latest iteration of DOJ policy.
However, you can’t really finish this task but will have to wait for more DOJ policy guidance.
For instance, while most of the Monaco Memo is a simple rehashing of issues contained in prior DOJ policy documents (and there are numerous references or citations to these prior DOJ policy documents in the Monaco Memo), one generally new area is “Compensation Structures That Promote Compliance.” But on this topic, you will have to wait as Monaco states: “I have asked the Criminal Division to develop further guidance by the end of the year on how to reward corporations that develop and apply compensation clawback policies.”
Another substantive portion of the Monaco Memo concerns “Use of Personal Devices and Third-Party Applications,” but here again compliance professionals will have to wait as Monaco states: “I have asked the Criminal Division to further study best corporate practices regarding use of personal devices and third-party messaging platforms and incorporate the product of that effort into the next edition of its Evaluation of Corporate Compliance Programs, so that the Department can address these issues thoughtfully and consistently.”
Did you catch that compliance professionals?
Another edition of the DOJ’s Evaluation of Corporate Compliance Programs seems to be in the works.
Call me old-fashioned, but I believe that the DOJ should have the burden to prove or establish every aspect of a corporate criminal prosecution (except of course where a federal statute explicitly contains an affirmative defense).
However, the Monaco Memo turns certain aspects of corporate criminal prosecution around and in certain instances places a burden on the company to establish various aspects relevant to the DOJ’s discretion. For instance, the Memo states: “companies seeking cooperation credit ultimately bear the burden of ensuring that documents are produced in a timely manner to prosecutors.”
Elsewhere, the Memo states:
“In some cases, data privacy laws, blocking statutes, or other restrictions imposed by foreign law may complicate the method of production of documents located overseas. In such cases, the cooperating corporation bears the burden of establishing the existence of any restriction on production and of identifying reasonable alternatives to provide the requested facts and evidence, and is expected to work diligently to identify all available legal bases to preserve, collect, and produce such documents, data, and other evidence expeditiously.”
Even more concerning is that if a company under criminal investigation seeks to assert a legitimate legal defense under relevant law, the DOJ will view this negatively. The Memo states:
“Department prosecutors should provide credit to corporations that find ways to navigate such issues of foreign law and produce such records. Conversely, where a corporation actively seeks to capitalize on data privacy laws and similar statutes to shield misconduct inappropriately from detection and investigation by U.S. law enforcement, an adverse inference as to the corporation’s cooperation may be applicable if such a corporation subsequently fails to produce foreign evidence.”
Similarly concerning is the following statement from the Monaco Memo.
“Corporations can help to deter criminal activity if they reward compliant behavior and penalize individuals who engage in misconduct. Compensation systems that clearly and effectively impose financial penalties for misconduct can incentivize compliant conduct, deter risky behavior, and instill a corporate culture in which employees follow the law and avoid legal “gray areas.”
Many criminal statutes applicable to business organizations are full of “gray areas.”
For instance, in the FCPA context a common theme in the rare instances of judicial scrutiny of FCPA enforcement is federal court judges finding various FCPA provisions vague or ambiguous (see here).
Faced with the task of interpreting a key FCPA provisions a federal court judge lamented “I have such trouble understanding” it (see here).
None other than former DOJ Fraud Section Chief Andrew Weissmann said of the FCPA (after he left the DOJ of course) that it is “very easy for the people at the DOJ and SEC to basically impose a tax for doing business” in certain countries.
And then there is former DOJ FCPA Unit Chief Charles Duross calling (after he left the DOJ of course) the FCPA’s accounting provisions “sneaky sh*t.” (See here).
Nevertheless, the DOJ wants companies to instill a corporate culture in which employees follow the law and avoid legal gray areas?
DOJ policy – enforcement officials continually insist – is to deter misconduct from occurring. However, does the following statement from the Monaco Memo deter misconduct?
“[A]bsent the presence of aggravating factors, the Department will not seek a guilty plea where a corporation has voluntarily self-disclosed, fully cooperated, and timely and appropriately remediated the criminal conduct.”
After all, a guilty plea is the most consequential option to resolve an alleged instance of corporate crime compared to the buffet of other options the DOJ has invented (non-prosecution agreements, deferred prosecution agreements, etc).
If the DOJ’s goal is to increase voluntary disclosures (which it has stated for years is its goal) is this goal advanced or defeated by a new DOJ policy of seeking compensation clawback that “enables penalties to be levied against current or former employees, executives, or directors whose direct or supervisory actions or omissions contributed to criminal conduct.”
After all, current executives and/or directors are often tasked with exercising the business judgment of whether to disclose.
One final observation regarding the Monaco Memo.
The final portion of the Memo addresses the DOJ’s “commitment to transparency in corporate criminal enforcement” and states that “transparency can also instill public confidence in the Department’s work.”
However, as highlighted in this recent post, the DOJ can’t even maintain a current (and thus accurate) FCPA website. That would be a good place to start in terms of transparency.
And then there is this final juicy piece in the Memo about the DOJ’s website: “Absent exceptional circumstances, corporate criminal resolution agreements will be published on the Department’s public website.” (Emphasis added).
In other words, this clearly seems to suggest that there are corporate criminal resolution agreements that are not public.
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