On March 3, 2023, Assistant Attorney General Kenneth Polite (“AAG”), speaking at the ABA’s 38th Annual National Institute on White Collar Crime in Miami, announced a number of notable updates to Department of Justice (“DOJ”) policy on the collection of data from personal devices and ephemeral messaging platforms, compensation-related incentives and clawbacks, and the selection of corporate monitors.1 These updates address areas that continue to pose investigatory and cooperation challenges for companies and corporate counsel alike and expand on Deputy Attorney General (“DAG”) Lisa Monaco’s September 2022 announcement of multi-prong policy updates affecting federal criminal prosecutions of corporations and individuals.2 Companies are encouraged to take a proactive approach to addressing these issues that have been a recurring focus of successive DOJ announcements.
See attached PDF for a mark-up of the latest March 2023 DOJ Guidance on the Evaluation of Corporate Compliance Programs against the earlier version (June 2020).
DOJ’s Increased Expectations on Ephemeral Messaging and Access to Employee Devices
Following on from DAG Monaco’s September 2022 announcements, the AAG today announced significant updates to DOJ’s Evaluation of Corporate Compliance Programs (“ECCP”; last updated in June 2020) on the use of personal devices as well as various communications platforms and messaging applications, including those offering ephemeral messaging.3 As the AAG acknowledged, and corporations have experienced in real-time, the use of these services for work communications has quickly become ubiquitous. A related loss of control over corporate communication systems is already having a considerable effect on the management of corporate compliance programs and investigations for in-house and external counsel alike.
To address these growing challenges, the AAG announced forthcoming revisions to the ECCP, including:
- DOJ will consider how policies governing third-party messaging applications are appropriately tailored to a company’s risk profile and business needs while still ensuring that relevant electronic communications can be preserved and accessed. Beyond policy statements, DOJ will also consider how related requirements are communicated to employees and whether they are enforced consistently.
- Companies cooperating with DOJ should be prepared to answer related questions on their available electronic communication channels, “bring your own device”/BYOD programs, and related information deletion and preservation policies.
- Where a company does not produce communications from third-party messaging applications, prosecutors are directed to ask questions on the company’s level of access (or lack thereof), the location of related information on company devices or servers, and applicable privacy and other local law.
The AAG noted that prosecutors will no longer take an inability to access this information “at face value.” The ability to answer, or a lack of answers, on this topic may affect the assessment of a company’s cooperation efforts, with companies told to treat this issue as top of mind when a crisis hits.
A New Pilot Program Focused on Compensation-Based Incentives and Clawbacks
As also promised in DAG Monaco’s September 2022 updates, DOJ has now provided more detailed guidance on rewards for companies employing financial incentive and deterrence mechanisms as part of their suite of compliance controls. The AAG announced updates to the ECCP and a new pilot program to implement related measures in criminal resolutions, reiterating the message that individual accountability must be linked to concrete financial consequences or real “skin in the game” for individual executives and employees.
First, in evaluating a company’s compliance program, prosecutors are directed to closely consider compensation structures and consequence management under forthcoming revisions to the ECCP and look at how compensation carrots and sticks tangibly feed into a company’s program.
Secondly, the new pilot program will include a requirement that a company have in place compensation-related criteria within its compliance program as part of any criminal resolution. As to clawbacks specifically, fully cooperating and remediating companies will be eligible for fine reductions if they can demonstrate that they have a clawback policy in place and make good faith efforts to use it. As to calculating fine reductions under the new pilot program:
- Related reductions will be any amount of compensation recouped during the resolution term.
- Acknowledging difficulties companies face in seeking to claw back, and if good faith efforts are unsuccessful by the time the resolution, prosecutors have discretion to award a fine reduction of up to 25 percent off of the compensation they sought to claw back.
- Attempts to use clawbacks may be expected toward not only wrongdoers but also supervisors who knew of or were willfully blind to related misconduct.
While this is welcome new guidance, this area will continue to pose challenges for companies to navigate in practice. While executive bonus and incentive structures linked to compliance are more straightforward, clawback of payments already made to non-executive employees poses a complex set of considerations as to employee indemnity obligations, local labor law protections, and weighing litigation prospects outside of the US for multinational companies. The signpost to what DOJ will constitute as “good faith” attempts also remains unclear, including whether this requires threatening or actually commencing litigation against former employees in local courts. This will be a key area of interest for companies going forward, with the pilot program in effect for three years, allowing DOJ to gather data and assess its effectiveness and to aid other components and offices in considering their approaches to this issue.
Revised Monitor Selection Guidance for the Criminal Division Focusing on Transparency and Diversity
Finally, DOJ has issued a revised memorandum on the selection of monitors in Criminal Division matters, building off the earlier version released by former Assistant Attorney General Brian Benczkowski.4 This new memorandum is closely aligned to DOJ’s promise of increased transparency in the appointment of monitors, providing further details on how a monitor is selected and clarifying conflict of interest obligations from serving as a monitor or part of a monitor team. In this latest announcement, the AAG drew particular attention to the importance of the proposal and final selection of a monitor candidate aligning with the department’s commitment to diversity, equity, and inclusion.
In announcing this latest round of updates to DOJ policy, the AAG urged fellow prosecutors, counsel, and in-house compliance teams to solve problems that they see, noting that the department will not shy away from taking on difficult topics such as ephemeral messaging platforms, clawbacks, and diversity in monitorship candidates. In light of these evolving updates, companies should prioritize critically evaluating their programs and adapting them to meet DOJ’s latest messages on compensation- and communication-related controls. These are without doubt challenging topics for in-house teams to take to their internal stakeholders and company leadership and will require internal coordination with multi-disciplinary teams from HR, employment counsel, information security, and technology. Companies that prioritize addressing these topics internally with a risk-based and defensible plan in place will be at a considerable advantage in the event that an investigation or issue arises.
1 See a copy of the AAG’s remarks delivered on March 3, 2023, here: Assistant Attorney General Kenneth A. Polite, Jr. Delivers Keynote at the ABA’s 38th Annual National Institute on White Collar Crime | OPA | Department of Justice.
2 See our earlier Legal Update here: US DOJ Announces Major Policy Updates on Individual Accountability, Recidivism, Monitorships, and Corporate Culture | Perspectives & Events | Mayer Brown.
3 The latest version of the ECCP is available here: https://www.justice.gov/criminal-fraud/page/file/937501/download.
4 A copy of the new policy for United States Attorneys’ Offices Monitor Selection for Corporate Criminal Enforcement is available here: https://www.justice.gov/media/1276696/dl?inline=. The policy shall apply to all United States Attorney’s Offices and is effective as of March 1, 2023.