September 22, 2022

US DOJ Announces Major Policy Updates on Individual Accountability, Recidivism, Monitorships, and Corporate Culture


On Thursday, September 15, 2022, Deputy Attorney General (DAG) Lisa Monaco announced a multi-prong clarification and amplification of her October 2021 policy pronouncements (October DOJ Memorandum) that will have wide-ranging impacts on federal criminal prosecutions of corporations and individuals.


Last October, DAG Monaco announced broad shifts in Department of Justice (“DOJ” or “Department”) white collar enforcement priorities and policies, including on issues of individual accountability, corporate recidivism, and corporate monitors and how the Department would approach companies operating under a criminal deferred or non-prosecution agreement. She also announced the formation of a Corporate Crime Advisory Group (CAAG) to seek input from a broad range of viewpoints, including from a white collar defense bar group led by one of this Legal Update’s authors.

Six Topics

DAG Monaco’s announcement last week and the accompanying memorandum (September DOJ Memorandum) address six key topics:

1. Individual accountability: Speed is of the essence. The September DOJ Memorandum reiterates individual accountability as the Department’s “first priority.” As DAG Monaco noted in her related announcement, in individual prosecutions, “speed is of the essence.” To receive full cooperation credit, the Department expects companies to identify and share relevant non-privileged facts about individual misconduct swiftly and without delay. Prosecutors, in turn, will aim to complete investigations into individuals, and seek any related criminal charges, prior to or simultaneously with any related corporate resolution. Related updates are intended to “push prosecutors and corporate counsel alike to feel they are ‘on the clock’ to expedite investigations, particularly as to culpable individuals.”

2. Recidivism: DOJ provides welcome clarity, but uncertainty remains. The Department’s commitment to consider a company’s global criminal, civil, and regulatory record when deciding on an appropriate resolution quickly became one of the most discussed aspects of the October 2021 policy updates. In responding to feedback, the latest guidance provides welcome clarity on a number of related points:

  • The DOJ will place the greatest weight on prior US criminal resolutions, according comparatively less weight to domestic civil and regulatory matters and any foreign matters.
  • Dated conduct—referred to as criminal resolutions more than 10 years old and civil or regulatory matters over five years old—will generally be accorded less weight.
  • The nature of the misconduct and surrounding circumstances will be considered to help contextualize prior misconduct, including, e.g., comparing the history of corporations in highly regulated industries with others that are similarly situated.
  • Acquisitions of troubled companies will not impact the recidivism assessment for a buyer with an otherwise-proven track record of compliance in cases where there is prompt post-acquisition compliance remediation and integration.
  • Multiple, successive non-prosecution or deferred prosecution agreements for the same company are disfavored. Going forward, the DOJ will generally require high-level scrutiny and pre-approval in connection with resolutions involving recidivists.

While the above points offered some clarity, areas of uncertainty remain. For example, it remains to be seen how the Department’s broader recidivism assessments will operate in practice, particularly in highly regulated industries such as banking and healthcare, discussed in further detail below.

3. Voluntary Self-Disclosure, Cooperation, and Remediation: A department-wide policy mandate. Noting the success of existing voluntary self-disclosure programs, the September DOJ Memorandum now directs every Department component that prosecutes corporate crime to adopt a formal, documented policy addressing the benefits of voluntary self-disclosure. The DOJ will also standardize certain incentives across all its components, including a presumption that the DOJ will not seek a guilty plea in cases where a company has voluntarily self-disclosed, cooperated, and remediated misconduct (absent aggravating circumstances) and a presumption that a monitor will not be required where a company can demonstrate it has in place an effective compliance program. Additional metrics relevant to prosecutors’ evaluation of a corporation’s compliance program and culture are discussed below (relating to compensation and personal devices/messaging platforms).

4. Monitorships: Greater transparency in monitor selection. The September DOJ Memorandum sets out a new list of 10 non-exhaustive factors for prosecutors to consider when evaluating whether to impose a monitor. These include many of the expected considerations around disclosure—assurance of compliance program testing and effectiveness, involvement of senior employees, pervasiveness of the misconduct, and whether there was participation of, or failures by, compliance personnel. As DAG Monaco noted in her announcement, prosecutors are also directed to ensure that the scope of every monitorship is appropriately tailored to the compliance issues of each resolving company and in meeting the Department’s “obligations to stay involved and monitor the monitor.”

5. Corporate Culture: Carrots and sticks to shape behavior. Companies are encouraged to use a mix of compensation-related incentives and deterrence to back up their commitment to a strong culture of compliance. On the deterrence side, the DOJ made clear that it will look favorably on compensation programs that impose clear financial penalties for misconduct, including through clawback provisions, the escrowing of compensation, and other financial accountability-linked measures. The September DOJ Memorandum directs prosecutors to evaluate how a company has approached related matters after learning of misconduct. DAG Monaco promised further guidance by the end of this year on rewards for corporations that employ financial deterrence mechanisms.

6. Personal Devices and Third-Party Messaging Platforms: Watch for upcoming policy updates. Finally, DAG Monaco addressed the ongoing challenges posed by employee use of personal devices and ephemeral messaging platforms, directing the Criminal Division to further study related best practices and to incorporate the findings into updates to the next edition of its Evaluation of Corporate Compliance Programs (last updated in June 2020). In the interim, prosecutors are directed to consider what policies and procedures a company has in place to ensure that business-related electronic data and communications are properly preserved.

Three Noteworthy Topics

Of the six topics above, the three most substantial developments building on earlier DOJ announcements are those relating to the recidivism analysis, mandated voluntary self-disclosure policy across Department components, and an expectation of concrete financial penalties for employee misconduct.

Recidivism Analysis

While this latest guidance provides welcome additional detail on recidivism analysis, areas of uncertainty remain as to how it will be applied in practice to corporate resolutions and how companies will factor it into their voluntary disclosure considerations. As noted in our earlier Legal Update, the intent behind this policy change is clear: to create parity between the way the DOJ treats individual and corporate criminal histories. However, given the multi-factorial nature of any corporate resolution, the ability to make consistent and apt comparisons across subject matters such as Foreign Corrupt Practices Act (FCPA), environmental, Bank Secrecy Act, or securities fraud-related misconduct, as called for in the guidance, is likely to pose challenges for prosecutors and defense counsel alike. In this respect, the indication that companies in highly regulated industries will be viewed in comparison to their peers is significant, particularly for companies in the financial and healthcare industries, where there are relatively few large-scale participants without some kind of corporate compliance resolution over the past decade.

The concluding paragraphs of the September DOJ Memorandum address the DOJ’s continued commitment to transparency in corporate enforcement. A corporation’s history of misconduct is included as an item that the DOJ should include, “to the greatest extent possible,” in its statement of relevant considerations for entering into a resolution agreement. Corporate and defense counsel will no doubt continue to monitor resolutions for additional insights as the recidivism analysis is applied in practice.

Consistent Approach to Self-Disclosure

The announcement of a consistent approach across DOJ components with respect to voluntary self-disclosure, cooperation, and remediation is also particularly noteworthy. DOJ components that currently lack a voluntary disclosure policy can be expected to publish new, or adopt existing, policies consistent with current examples in the Antitrust Division, Criminal Division (for FCPA violations), and National Security Division (for export control and sanctions violations). Each component may provide separate guidance on what may constitute aggravating circumstances while adhering to the core principle that, absent the presence of aggravating matters, the Department will not seek a guilty plea where a company has voluntarily self-disclosed and met cooperation and remediation expectations. Relatedly, the Department has also indicated it will update the Justice Manual to ensure greater consistency across components for what will constitute full and effective cooperation. These updates will provide welcome consistency across the different Department components on critical decision points for companies undertaking internal investigations and facing associated disclosure questions.

Concrete Financial Penalties for Employee Misconduct

Finally, the direction that prosecutors should assess whether a company has actually imposed financial penalties on wrongdoers via clawback or similar mechanisms will also be notable for company counsel. DOJ guidance has previously referred to the use of incentives and disincentives as part of a corporate compliance program, but this is the first time an expectation of financial penalties on employees has been expressly discussed at this level of detail. Clawbacks must be designed carefully to avoid enforcement challenges and accounting problems. Depending on the circumstances, they may also prove difficult to execute, particularly in the context of internal investigation findings where an individual employee does not admit wrongdoing or related evidence of misconduct is something less than definitive. Other relevant considerations include the interplay with employee indemnity obligations and local labor law protections outside of the US for multinational companies. While clawback mechanisms are very common in executive compensation packages for larger companies, these updates raise the option of including these mechanisms in employment agreements with a broader range of both current and former non-executive employees and how best to draft them to be effective in practice.

Next Steps for Companies

In announcing this latest round of updates to DOJ policy, DAG Monaco noted that the Department is providing general counsel and chief compliance officers with the necessary tools to make the business case for responsible corporate behavior. With further updates foreshadowed, including new Department policies and further updates to DOJ’s Guidance on the Evaluation of Corporate Compliance Programs, companies should continue to review their compliance programs proactively and critically to ensure they consider these latest messages on DOJ expectations.

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