Deputy Attorney General Lisa O. Monaco’s recent remarks at the American Bar Association’s White Collar Crime National Institute generated much commentary. Her presentation addressed what corporations and their legal counsel can expect from the Department of Justice moving forward and introduced three big action items for the DOJ’s enforcement efforts.
First, corporations under investigation that are seeking leniency must disclose all employees and non-privileged information to the government. In Monaco’s view, the DOJ is better suited to determine the role of each player involved, rather than trusting the good-faith disclosures of those being investigated.
Second, a company’s prior regulatory history will factor in future DOJ charging decisions. This is not a new concept altogether, but the scope would appear to be broader now; Monaco’s comments suggests that all prior, DOJ-wide criminal, civil, and regulatory events be considered. A company’s prior tax, securities, or environmental infractions—civil or criminal—will now be taken into account in determining outcomes in a Foreign Corrupt Practices Act or other DOJ investigations. Misconduct in one area will impact the outcome of an unrelated investigation. Businesses are advised to consider the impact of civil and regulatory resolutions today on unrelated future criminal investigations.
Third, Monaco gave new life to independent monitors by rescinding prior informal guidance disfavoring their use. Third-party monitors will now serve as DOJ’s surrogates and business executives must foot the bill for DOJ’s hand-picked watchdogs. Companies looking to avoid criminal sanctions will suffer not only restitution and fines, often subject to multipliers, but also expensive and intrusive monitors.
On a positive note, monitors were mentioned in the context of deferred prosecution and non-prosecution agreements (DPAs/NPAs)—helpful outcomes for any accused entity.
Reading Between the Lines, Probable Impact, To-Do’s
We anticipate the enforcement landscape will change based on the approaches outlined by the deputy attorney general. In response, corporations should consider the following items to better manage risks.
1. Invest in Compliance, Remove Bad Actors
DOJ’s warning is clear: Failure to hold individuals accountable or to invest in robust compliance will trigger harsh consequences. Companies in high-risk industries or subject to prior DOJ enforcement actions should consider conducting internal investigations to identify responsible individuals and implementing robust, effective compliance programs.
For corporations that have already implemented a culture of compliance, Monaco’s remarks might occasion some refinement or tweaking of existing programs and processes; however, corporations that have not made good-faith efforts to improve compliance could be squarely in the government’s crosshairs.
The necessary changes are as much cultural as operational, and corporate leaders need to take seriously the extent to which the new enforcement approach examines a corporation’s culture of compliance and how that culture is expressed.
2. Prosecution of Individuals Will Increase
Monaco’s remarks made clear that the criminal prosecution of individuals within businesses who commit criminal acts or reap the rewards of the acts remains a high priority.
3. DOJ Will Rely Heavily on Data Analytics
What data shows about trends of behavior should be a significant concern for companies, whether under investigation or not, because data can be manipulated in unforeseen ways, analytical methodologies can be flawed, and wrong conclusions can be drawn. Businesses operating in high-risk industries need to know what their own data shows and how it might be mined by DOJ.
4. Experienced Guidance is Key
Outside counsel is a cost center for businesses, but the direction DOJ is heading makes obtaining advice and counsel from experienced former prosecutors a wise investment, akin to the investments corporations make in cybersecurity or marketing. Among the risks faced by corporations, those presented by regulatory noncompliance can be costly, both in terms of the balance sheet as well as reputation.
Additional Areas of Concern
Monaco’s far-reaching remarks touched on a range of issues, some operationally driven and others merely signaling a departmental change in posture. Among the latter, she exhorted DOJ line prosecutors to invest resources in cases that could be lost at trial, suggesting a courageous new approach at DOJ.
Of note, she reminded prosecutors of the minimum required to “commence a case” under the Principles of Federal Prosecution (PFP). Monaco’s encouragement to “be bold” and not deterred by the “fear of losing” may be more aimed at corporations than her DOJ colleagues, because AUSAs are already cognizant of the minimum charging/evidentiary requirements and don’t want to lose.
While Monaco’s remarks concerning “edge cases” likely won’t occasion a lot of concern, the DOJ’s stated intention to embed FBI agents within its Fraud Section (and potentially other investigative sections) should be a concern. While seemingly efficient, housing prosecutors and agents together could pressure agents and AUSAs to prematurely produce indictments and civil complaints. AUSAs generally act as independent evaluators of the strength and credibility of evidence and the methods used to gather evidence.
Despite good intentions, without those checks—and when AUSAs and agents see themselves as collaborators—there is an added risk of regulatory overreach.
This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.
Steven E. Holtshouser is a partner with Husch Blackwell LLP in St. Louis, Mo., and focuses on and white collar defense and internal investigations, as well as intellectual property litigation. He previously served as an assistant U.S. attorney and supervisor for 28 years.
Robert L. Peabody is an attorney with Husch Blackwell in Boston, and focuses on white collar defense and internal investigations and previously served as a state and federal prosecutor for 15 years.