The Justice Department will allow more companies that voluntarily report misconduct and cooperate on remedial actions to avoid pleading guilty as part of a new bid to crack down on corporate crime.
The department also will shift the focus to prosecuting executives by encouraging companies to claw back compensation from executives and employees responsible for wrongdoing.
Deputy Attorney General
“The policies we’re announcing today make clear that we won’t accept business as usual,” Monaco said. “With a combination of carrots and sticks -- with a mix of incentives and deterrence -- we’re giving general counsels and chief compliance officers the tools they need to make a business case for responsible corporate behavior.”
Under one change in particular, the department won’t give equal weight to all previous misconduct when considering punishments. For example, criminal resolutions older than 10 years or civil or regulatory cases more than five years old will “generally be accorded less weight,” Monaco said.
Monaco said the most significant prior criminal misconduct must occur in the US and involve the same personnel or management. Prosecutors will also look at whether past misconduct involved the same “root cause” as new matters.
Increasing incentives for companies to deploy executive compensation clawbacks is expected to shift “the burden of corporate penalties away from shareholders -- who usually play no role in misconduct -- to those directly responsible,” the department said. Further guidance on the policy change is expected by year’s end.
Allowing more companies to avoid charges if they self-report misconduct, absent aggravating circumstances, is meant to “incentivize investment in effective compliance programs that spot misconduct and to reward responsible companies that step up and own up through voluntary self-disclosure to DOJ,” according to the statement.
The department aims to build on successful cases earlier this year in which it scored guilty pleas over corporate misconduct from
The changes came from an advisory group that considered several major policy issues, including whether companies should resolve wrongdoing through so-called deferred prosecution agreements or guilty pleas, and the process of selecting compliance monitors.
Other actions announced include:
- first-ever guidance as to when independent monitors are warranted, how to select them transparently and how to tailor and oversee their work;
- putting prosecutors and companies “on the clock” to define what cooperation with government entails and deciding whether to prosecute;
- and avoiding multiple, successive non-prosecution agreements or deferred prosecution agreements, requiring additional ones to be approved at the deputy attorney general’s office.
“The signal should be clear that a criminal resolution cannot be treated as the cost of doing business,” the department said.
The steps expand on a broad framework for cracking down on corporate crime that Monaco unveiled last October. Some white-collar lawyers have criticized that agenda as ambiguous and discouraging cooperation with investigators. It included charging more senior executives with crimes; reviewing a company’s full range of prior misconduct; and imposing expensive third-party monitors with greater frequency.
Among corporate compliance officers’ top complaints about the Justice Department is that it doesn’t “understand what is actually possible in the real world -- that the job has people pulled in a hundred different directions,” said
Monaco has warned companies they need to come forward and self report any issues to authorities. The lack of self-reporting was a factor in the decision to seek guilty pleas from Glencore and the Allianz unit, she previously said.
The department has already been ramping up its requirement that independent compliance monitors police companies to ensure they’ve cleaned up misconduct after a plea deal.
The department’s new guidance on how to determine the need for monitors will be accompanied by instructions to prosecutors on how to “monitor the monitor” by verifying they stay “on task and on budget,” Monaco said. Recent monitorships have entailed expansive transportation costs and billable hours for large teams of lawyer, accountants, and consultants -- all footed by the company -- and complaints of monitors digging into corporate issues unrelated to their original mission.
The advisory group was comprised of Justice Department leaders working on criminal, civil, antitrust, environmental, tax, and national security, has been meeting since October and hearing input from outside attorneys, the business community, and academia.
(Updates with Monaco comments starting in the fourth paragraph.)
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