The Criminal Division of the US Department of Justice (DoJ) announced last month important revisions to its Corporate Enforcement Policy.[1] Since the ultimate goal of the DoJ is to deter and prevent criminal conduct, the rationale behind the recent revisions is to further incentivize companies to detect and prevent misconduct in their own operations and cooperate with the authorities when they identify any criminal wrongdoing. The changes to the Corporate Enforcement Policy (CEP) offer significant and concrete incentives for companies to self-disclose misconduct and cooperate with investigations. This revised CEP applies to all corporate criminal matters handled by the Criminal Division of the DoJ, including all FCPA cases.
Previously, CEP provided that if a company voluntarily self-discloses, fully cooperates, and timely and adequately remediates, there is a presumption that it will not be prosecuted absent certain aggravating circumstances. Such aggravating circumstances include: involvement by executive management of the company in the misconduct; a significant profit to the company from the wrong doing; egregiousness or pervasiveness of the misconduct within the company; or criminal recidivism.
The revised CEP incentivizes self-disclosure and cooperation even if the aggravating circumstances are present. Prosecutors may now determine that a declination of prosecution may be appropriate, if the company may show that it meets each of the following criteria:-
- The voluntary self-disclosure was made immediately upon the company becoming aware of the of the allegation of misconduct;
- At the time of the misconduct and the disclosure, the company had an effective compliance program and system of internal accounting controls that enabled the identification of the misconduct; and
- The company provided extraordinary cooperation with the Department’s investigation and undertook extraordinary remediation.
The new approach emphasizes even more robust compliance on the front-end (meaning effectively functioning compliance programs and internal controls) and remediation on the back-end, if a crime nonetheless occurs. For corporations, this clearly indicates how a well-functioning and rightly implemented compliance program with effective misconduct detection tools best positions companies not only to identify misconduct, but also to make decision with respect to timely disclosure. For chief compliance officers and general counsels of corporations, the revised CEP would help to make the case internally for investment in strong compliance programs and importance of voluntary self-disclosure.
[1] Assistant Attorney General Kenneth A. Polite, Jr. Delivers Remarks on Revisions to theCriminal Division’s Corporate Enforcement Policy: https://www.justice.gov/opa/speech/assistant-attorney-general-kenneth-polite-jr-delivers-remarks-georgetown-university-law
Previously, CEP provided that if a company voluntarily self-discloses, fully cooperates, and timely and adequately remediates, there is a presumption that it will not be prosecuted absent certain aggravating circumstances. Such aggravating circumstances include: involvement by executive management of the company in the misconduct; a significant profit to the company from the wrong doing; egregiousness or pervasiveness of the misconduct within the company; or criminal recidivism.
The revised CEP incentivizes self-disclosure and cooperation even if the aggravating circumstances are present. Prosecutors may now determine that a declination of prosecution may be appropriate, if the company may show that it meets each of the following criteria:-
- The voluntary self-disclosure was made immediately upon the company becoming aware of the of the allegation of misconduct;
- At the time of the misconduct and the disclosure, the company had an effective compliance program and system of internal accounting controls that enabled the identification of the misconduct; and
- The company provided extraordinary cooperation with the Department’s investigation and undertook extraordinary remediation.
The new approach emphasizes even more robust compliance on the front-end (meaning effectively functioning compliance programs and internal controls) and remediation on the back-end, if a crime nonetheless occurs. For corporations, this clearly indicates how a well-functioning and rightly implemented compliance program with effective misconduct detection tools best positions companies not only to identify misconduct, but also to make decision with respect to timely disclosure. For chief compliance officers and general counsels of corporations, the revised CEP would help to make the case internally for investment in strong compliance programs and importance of voluntary self-disclosure.
[1] Assistant Attorney General Kenneth A. Polite, Jr. Delivers Remarks on Revisions to theCriminal Division’s Corporate Enforcement Policy: https://www.justice.gov/opa/speech/assistant-attorney-general-kenneth-polite-jr-delivers-remarks-georgetown-university-law
