On January 17, 2023, Assistant Attorney General Kenneth Polite (“AAG”) announced revisions to the U.S. Department of Justice’s (DOJ) Criminal Division’s Corporate Enforcement Policy (“CEP”).1 The AAG’s announcement, focusing on enhanced benefits for voluntary disclosure and corporate cooperation, marks the first major revisions to the CEP since 2017 and expands upon Deputy Attorney General (“DAG”) Lisa Monaco’s most recent policy announcements on corporate criminal enforcement from September 2022.2 These updates will come as salutary news to companies and corporate counsel alike, providing for a number of new concrete incentives under the U.S. Sentencing Guidelines for cooperating companies and individuals.
Three Key CEP Revisions
The AAG announced three substantial developments to the CEP relating to companies’ efforts to self-disclose, companies’ efforts to cooperate with the government, and the associated reduction in the U.S. Sentencing Guidelines fine range as a result of self-disclosure and cooperation. The new incentives are broken down into three main categories, depending on a particular company’s posture in a matter proceeding before DOJ:
A) Companies With Aggravating Circumstances Who, Ordinarily, Would Not Qualify For A Declination
First, DOJ provides a new pathway to declination for companies in certain circumstances even where aggravating circumstances are present. Under the previous version of the CEP, when a company voluntarily self-disclosed potential misconduct, fully cooperated, and timely and appropriately remediated problems uncovered by an investigation, there was be a presumption in favor of declination absent aggravating factors going to the seriousness and nature of the offense and offender(s), including, e.g., involvement of executive management, outsized profits from wrongdoing, egregiousness and pervasiveness of misconduct, or criminal recidivism. Under the revised policy, a company may still qualify for a declination even where such aggravating factors are present, provided it can demonstrate to DOJ’s satisfaction that it has met three newly articulated, ratcheted up factors:
- Immediate Voluntary Self-Disclosure: The voluntary self-disclosure must be made immediately upon the company becoming aware of the allegation of misconduct. This contrasts with the type of voluntary self-disclosure that qualifies a company without aggravating circumstances for a declination—i.e., disclosure that was made reasonably promptly after discovery of potential misconduct and before imminent risk of discovery by the government.
- Effective Compliance Program & Internal Controls: The company must have an effective compliance program and system of internal accounting controls that enabled the identification of the misconduct and led to the voluntary self-disclosure both at the time of the misconduct and the disclosure. Companies without aggravating circumstances need only show that they have remediated problems uncovered during the investigation (including by establishing an effective compliance program) by the time of resolution.
- Extraordinary Cooperation: Companies with aggravating factors must provide “extraordinary cooperation” and take “extraordinary measures” before, during and after a Criminal Division investigation in order to earn a potential declination in these circumstances. In his announcement, the AAG described the newly articulated standard of “extraordinary cooperation” as conduct exhibiting “immediacy, consistency, degree, and impact” and going “above and beyond the criteria for full cooperation.” The AAG analogized that level of corporate cooperation to more familiar forms of extraordinary cooperation from individuals, including:
- immediate cooperation and consistent truth-telling;
- allowing prosecutors to obtain evidence they would not otherwise have access to by, for example, promptly obtaining and imaging their electronic devices, or having recorded conversations; and
- providing cooperation that produces results, like testifying at trial or providing information that leads to additional convictions.
B) Companies Who Voluntarily Self-Disclose, Fully Cooperate And Timely And Appropriately Remediate, But Where A Criminal Resolution Is Still Warranted
Second, for companies that voluntarily self-disclose, fully cooperate and timely and appropriately remediate, but for which a criminal resolution is still warranted, the following revisions to policy incentives will now apply:
- Reduction in Fine: DOJ will now accord, or recommend to a sentencing court, at least 50% and up to 75% off of the low end of the applicable U.S. Sentencing Guidelines fine range. For recidivists, prosecutors will have discretion to determine the starting point within the range set forth by the Sentencing Guidelines. Previously, the policy had allowed for a potential maximum 50% reduction off the Guidelines range.
- No Requirement of Guilty Plea: In these circumstances, the government will not generally require a corporate guilty plea, absent multiple or particularly egregious aggravating circumstances. This will also apply to recidivists, with the revised policy making clear that recidivism alone will not invariably lead to a plea.
C) Companies That Do Not Voluntarily Self-Disclose But Fully Cooperate And Timely And Appropriately Remediate
Finally, in cases where a company fails to voluntarily self-disclose but can later demonstrate full cooperation and timely and appropriate remediation, DOJ will now recommend up to a 50% reduction off of the low end of the applicable U.S. Sentencing Guidelines fine range (up from a maximum 25% reduction under the prior policy). For recidivist companies, the AAG noted this reduction will still apply, but it is less likely that the reduction available will be at the lower end of the range. In all cases, prosecutors retain discretion to determine the starting point in range based on the company’s circumstances.
In closing, the AAG emphasized that “every company starts at zero” and must earn cooperation credit, and that these updates are expected to allow prosecutors to draw more nuanced and accurate distinctions between the quality of various companies’ cooperation and remediation efforts. In light of these evolving revisions to the CEP, and expanding upon earlier DOJ policy updates in 2022, companies should continue to prioritize the maintenance and testing of robust compliance programs and internal controls that will stand up to regulatory scrutiny, and will provide for early detection that will enable early self-disclosure should internal controls fall short.
1 See a copy of the AAG’s remarks delivered on January 17, 2023, here: Assistant Attorney General Kenneth A. Polite, Jr. Delivers Remarks on Revisions to the Criminal Division’s Corporate Enforcement Policy | OPA | Department of Justice.
2 See our earlier update here: US DOJ Announces Major Policy Updates on Individual Accountability, Recidivism, Monitorships, and Corporate Culture.