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DOJ ‘Raises Stakes’ for Companies to Confess White-Collar Crime

Sept. 16, 2022, 12:41 PM

White-collar defense attorneys see both promise and peril in the Justice Department’s new corporate crime enforcement playbook, which dangles incentives for self-reporting misconduct while giving prosecutors ample leeway.

The new policy, as laid out in a memo by Deputy Attorney General Lisa Monaco Thursday, aims to speed up indictments against executives by promising their companies won’t face a guilty plea or compliance monitor if they rapidly and voluntarily turn over information.

The policy, DOJ’s first substantive revisions to white-collar criminal investigations of the Biden administration, could help address a major impediment to business cooperation: losing control of the process, say corporate defense attorneys. Yet under Monaco’s memo, corporations that step forward are also exposed to new forms of risk that may undercut the department’s objective.

“The DOJ has effectively raised the stakes for companies facing a potential government investigation, by making decisions about whether or when to voluntarily self-disclose potential misconduct even more consequential,” said Henry Van Dyck, a former DOJ fraud section supervisor.

“On the other hand, by giving prosecutors more tools and discretion to scrutinize the timeliness and extent of cooperation credit, it is less clear that the DOJ has met its goal of giving companies enough predictability to change the calculus,” added Van Dyck, now a partner at Faegre Drinker.

Pros and Cons

One section of the memo applauded by corporate lawyers instructs prosecutors how to evaluate a company’s history of misconduct in determining an appropriate resolution to a new investigation. It suggests giving less weight to crimes committed at least 10 years earlier and that aren’t relevant to the ongoing matter.

The provision could ease concerns that developed when Monaco first announced last October that recidivists would have their “full range” of prior violations taken into account.

But elsewhere in the guidelines, attorneys took issue with new language that potentially leaves too much room for interpretation. Monaco directs all DOJ criminal prosecuting components, including the 94 US attorneys’ offices, to review or draft from scratch their individual policies on corporate self-disclosure. She asked each component to include expectations on timing, types of information that must be handed over, and benefits businesses will receive for meeting those standards.

Although Monaco details “core principles” to which all policies must conform, there’s potential for variation and confusion, particularly for companies that operate nationwide and could be subject to multiple conflicting policies, said Alison Anderson, a former manager at DOJ’s fraud section.

“I do think this is going to encourage more companies to self disclose if—and this is a big if—all these policies that are coming out of the components make clear that they avoid a plea agreement and they get a large reduction in fines,” said Anderson, now a partner at Boies Schiller Flexner. “If these policies coming out are all over the place, companies are going to be reluctant to take advantage of them.”

Another open question is whether the preexisting Foreign Corrupt Practices Act enforcement policy that protects self-disclosing companies from prosecution or criminal resolution—called a declination—will apply in all other components’ policies.

Monaco’s memo only stipulated that self-disclosure wouldn’t lead to a guilty plea, without specifying if a non-prosecution agreement or deferred-prosecution agreement could still be on the table, noted Tarek Helou, a partner at Wilson Sonsini. DOJ won’t get more self-disclosures if components’ policies aren’t harmonized on declinations, said Helou, a former assistant chief of the fraud section’s FCPA unit.

To Report Or Not

Monaco’s desire for speed in charging individuals, which she cited in an accompanying speech Thursday as key to successful prosecutions, may hinge on how the department applies the policy’s principles in actual corporate resolutions.

Promising more cooperation credit to encourage corporations to volunteer information leaves “uncertainty on how much credit those companies will actually receive,” said Leo Tsao, a partner at Paul Hastings and veteran DOJ prosecutor.

Tsao said DOJ will need to establish “a track record that companies cooperating under the new guidance actually receive materially more favorable resolutions.”

Quicker results may depend on corporate lawyers having a good relationship with their DOJ counterparts.

"`You can trust us. Voluntarily self disclose everything. It’s going to be fine.’ Those depend on faith in your partners on the government’s side,” said Nathaniel Mendell, a Morrison Foerster partner who as an acting US attorney in Boston was a member of Monaco’s advisory group that informed her corporate policies.

At a minimum, the policy’s skeptics are still confident it will drive conversations between lawyers and their clients, who otherwise may miss their chance to timely self-disclose.

“In light of today’s guidance,” said Dykema partner Jason Ross, “outside counsel who are advising companies after misconduct occurs will be pressing for an immediate answer: ‘are we going to report or not?’”

To contact the reporter on this story: Ben Penn in Washington at bpenn@bloomberglaw.com

To contact the editors responsible for this story: Seth Stern at sstern@bloomberglaw.com; Keith Perine at kperine@bloomberglaw.com