Following the Biden Administration’s corporate criminal enforcement strategy, presented about a year ago, and further to the establishment of Corporate Crime Advisory Group within the U.S. Department of Justice (the “DOJ”), Deputy Attorney General Lisa Monaco issued a memorandum on additional revisions to corporate criminal enforcement policies (the “2022 Monaco Memo”).[1] The 2022 Monaco Memo introduces several substantial changes to the corporate criminal enforcement of the DOJ that may affect the ways companies structure and review their compliance policies. Among certain other aspects, the 2022 Monaco Memo focuses primarily on providing guidance on (1) individual accountability and (2) corporate accountability, as well as adds new factors to (3) evaluation of compliance programs.
(1) Guidance on Individual Accountability
The DOJ restated its commitment to hold accountable the individuals who commit and profit from corporate crime. To reinforce this priority, the2022 Monaco Memo encourages corporations to disclose all non-privileged facts about individual misconduct and emphasizes that such disclosure should be made timely and without any unnecessary delay. Any delayed disclosure may prevent corporations from receiving full cooperation credit. DOJ prosecutors are encouraged to specifically assess timely cooperation and whether a company promptly notified prosecutors of relevant information once that was discovered, or if it instead delayed the disclosure, thus inhibiting the investigation. In the latter case, any cooperation credit may be reduced or even eliminated.
(2) Guidance on Corporate Accountability
Past Misconduct - the new guidance emphasizes that when determining how best to resolve an investigation of corporate criminal activity, prosecutors should take into account the existing record of past misconduct. This particularly relates to situations where prior misconduct involved the same personnel or management or prior instances of misconduct shared the same root causes. Importantly, in the context of prior misconduct committed by an acquired entity, DOJ prosecutors will need to evaluate whether such entity has been integrated into an effective, well-designed compliance program at the acquiring corporation and whether the root cause of the prior misconduct has been properly addressed. Self-Disclosure – DOJ is further encouraging voluntary disclosure of misconduct through benefits to corporations, such as resolution under more favorable terms. For instance, if there are no aggravating factors, DOJ will not seek a guilty plea when a company has voluntarily self-disclosed and timely implemented appropriate remediation measures. In addition, an independent compliance monitor would not be required, if a cooperating corporation voluntarily discloses misconduct and at the time of resolution is able to demonstrate that it has implemented and tested an effective compliance program.
(3) Evaluation of Compliance Programs
It has been well established that evaluation of compliance program serves as a factor in determining the appropriate terms for a corporate resolution. Among the many factors that prosecutors should consider, the 2022 Monaco Memo identifies a new parameter - compensation structures that promote compliance. Prosecutors will be required to examine whether compensation system in place is able to incentivize compliant conduct and instill proper compliance culture and, conversely, deter misconduct through imposition of financial penalties, including through the use of claw back measures. Thus, compensation structures are being reviewed for their ability to both punish for misconduct and reward for compliant behavior.
Many Israeli companies, by virtue of conducting their business in the US, or being listed on stock exchanges in the US, or having another jurisdictional nexus to the US, should be aware of these developments in the enforcement landscape and it may be timely to review and evaluate the existing compliance programs and their effective implementation in light of the updated guidance provided the 2022 Monaco Memo.
[1] https://www.justice.gov/opa/speech/file/
1535301/download
(1) Guidance on Individual Accountability
The DOJ restated its commitment to hold accountable the individuals who commit and profit from corporate crime. To reinforce this priority, the2022 Monaco Memo encourages corporations to disclose all non-privileged facts about individual misconduct and emphasizes that such disclosure should be made timely and without any unnecessary delay. Any delayed disclosure may prevent corporations from receiving full cooperation credit. DOJ prosecutors are encouraged to specifically assess timely cooperation and whether a company promptly notified prosecutors of relevant information once that was discovered, or if it instead delayed the disclosure, thus inhibiting the investigation. In the latter case, any cooperation credit may be reduced or even eliminated.
(2) Guidance on Corporate Accountability
Past Misconduct - the new guidance emphasizes that when determining how best to resolve an investigation of corporate criminal activity, prosecutors should take into account the existing record of past misconduct. This particularly relates to situations where prior misconduct involved the same personnel or management or prior instances of misconduct shared the same root causes. Importantly, in the context of prior misconduct committed by an acquired entity, DOJ prosecutors will need to evaluate whether such entity has been integrated into an effective, well-designed compliance program at the acquiring corporation and whether the root cause of the prior misconduct has been properly addressed. Self-Disclosure – DOJ is further encouraging voluntary disclosure of misconduct through benefits to corporations, such as resolution under more favorable terms. For instance, if there are no aggravating factors, DOJ will not seek a guilty plea when a company has voluntarily self-disclosed and timely implemented appropriate remediation measures. In addition, an independent compliance monitor would not be required, if a cooperating corporation voluntarily discloses misconduct and at the time of resolution is able to demonstrate that it has implemented and tested an effective compliance program.
(3) Evaluation of Compliance Programs
It has been well established that evaluation of compliance program serves as a factor in determining the appropriate terms for a corporate resolution. Among the many factors that prosecutors should consider, the 2022 Monaco Memo identifies a new parameter - compensation structures that promote compliance. Prosecutors will be required to examine whether compensation system in place is able to incentivize compliant conduct and instill proper compliance culture and, conversely, deter misconduct through imposition of financial penalties, including through the use of claw back measures. Thus, compensation structures are being reviewed for their ability to both punish for misconduct and reward for compliant behavior.
Many Israeli companies, by virtue of conducting their business in the US, or being listed on stock exchanges in the US, or having another jurisdictional nexus to the US, should be aware of these developments in the enforcement landscape and it may be timely to review and evaluate the existing compliance programs and their effective implementation in light of the updated guidance provided the 2022 Monaco Memo.
[1] https://www.justice.gov/opa/speech/file/
1535301/download
