January 24, 2023

White Collar: DOJ Revises Criminal Division’s Corporate Enforcement Policy

In a recent speech, Assistant AG Kenneth Polite announced important changes to the DOJ’s Corporate Enforcement Policy (CEP). The changes are designed to provide increased incentives for corporate self-reporting & cooperation with the DOJ by companies that have identified that have identified wrongdoing. The updated policy provides a path that may enable even companies with “aggravating circumstances” to avoid prosecution through a combination of “robust compliance” efforts to prevent misconduct and “even more robust cooperation and remediation on the back-end, if a crime occurs.”

In the past, the CEP applied only to FCPA prosecutions, but it now applies to all DOJ criminal proceedings. In order to appreciate the potential significance of the CEP policy changes, you need to know that “aggravating circumstances” is DOJ-speak for things like involvement by senior executives in the misconduct, significant profits to the company resulting from it, the pervasiveness of misconduct within the company and the company’s prior history of criminal misconduct.

In other words, the DOJ is telling companies that would’ve been hammered under the old policy that they’ve a chance for meaningful leniency if they go all-in when it comes to cooperating with the government. This WilmerHale memo discusses the changes and notes that under the revised CEP:

– Companies that voluntarily self-disclose misconduct will be eligible for declinations, even where aggravating circumstances that may ordinarily warrant a criminal prosecution are present, provided specific conditions are met.

– Companies that do not voluntarily self-disclose, but engage in extraordinary cooperation and remediation, will be eligible for a fine reduction of up to 50% from the low end of the U.S. Sentencing Guidelines (“Guidelines”) range. However, there will be no presumption of entitlement to such a reduction, and the most substantial reductions will be reserved for only the “most extraordinary levels” of cooperation and remediation. Recidivists will be eligible for a similar reduction, but generally not from the low end of the Guidelines range.

– For companies that voluntarily self-disclose misconduct, fully cooperate with an investigation, and timely and appropriately remediate, but do not receive a declination under the Corporate Enforcement Policy, DOJ will recommend a reduction in the company’s fine of 50% to 75% from the low end of the Guidelines range, provided the company is not a criminal recidivist. Recidivists will be eligible for a similar reduction, but generally not from the low end of the range.

The WilmerHale memo also provides some key takeaways for companies & directors concerning the change in the DOJ’s policy. One of these is that because the favorable consequences of being awarded extraordinary cooperation & remediation credit are so significant, corporate leaders will be incentivized to “take the most cooperative posture possible with DOJ amidst any investigation and to implement and test remediation steps early in the investigation.” I’m not a criminal lawyer, but I think that means that the always popular practice of throwing corporate officers under the bus when potential wrongdoing is discovered has a good chance to become a recognized Olympic sport.

John Jenkins