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The Art of Dispute: Key case law and recent developments in dispute resolution
Our newsletter provides practical advice and a concise analysis of key case law and recent developments in dispute resolution.
United States | Publication | November 1, 2021
The United States Department of Justice (DOJ) has made it clear: fighting corporate crime is one of the administration’s top priorities. This week, as part of DOJ’s coordinated roll-out of a suite of new corporate-related policies, deputy attorney general Lisa Monaco issued a memorandum (the “Memorandum”) that significantly revises DOJ corporate criminal enforcement policies and practices. Among other things, the Memorandum instructs U.S. Attorney’s offices and coordinate DOJ litigating divisions to: (1) consider a corporation’s criminal history of misconduct when making charging decisions and resolutions, including domestic or foreign civil or criminal actions against any entities within the corporate family; (2) hold individuals accountable for corporate misconduct and not credit cooperation for the corporation unless it has identified all responsible individuals; and (3) increase the use of corporate monitors where there is a demonstrated need for them, particularly when a company’s compliance program is not fully tested or implemented. To assist with this priority, the memo also creates a Corporate Crime Advisory group within DOJ to further review and revise the current approach to prosecuting corporate crime.
The memorandum follows recent public messaging from senior DOJ officials who indicated that prosecution strategies for corporate wrongdoing were on the horizon. For example, on October 5, 2021, principal associate deputy attorney general John Carlin announced “surging resources for corporate enforcement,” including a new squad of FBI agents that will be embedded in the department’s Criminal Fraud section. The SEC, too, appeared to be in lockstep with the initiative, announcing just days later that it was pivoting back towards requiring defendants to admit wrongdoing in appropriate circumstances.
This week, in the run-up to the Memorandum’s release, Monaco gave the keynote address to the ABA’s White Collar Crime conference in Miami, Florida, where she announced that new policy changes would be aimed at strengthening the federal response to white-collar crime. Monaco was not the only senior official who was present to comment. The day before Monaco’s appearance, the director of enforcement at the Security and Exchange Commission, Gurbir Grewal, and the principal deputy assistant attorney general, DOJ Criminal Division, Nicholas McQuaid, both emphasized the importance of prosecuting individuals in corporate cases. McQuaid highlighted the establishment of the new FBI squad in the Criminal Fraud Section and explained that holding individuals responsible was a critical component of corporate accountability. Grewal described the necessity of restoring public trust and that this would include a renewed focus on gatekeeper accountability, including looking at auditors, audit firms, lawyers, and underwriters. Lastly, Bryan M. Boynton, DOJ’s Civil Division acting assistant attorney general, also emphasized that companies must identify individual wrongdoers to receive cooperation credit.
What does all this mean for the business community? Companies need to be aware of this DOJ policy shift and scrutinize internally their policies and procedures to minimize any exposure they might have. In particular, companies should be aware of the following:
While portions of the memorandum are a restatement of prior guidance—particularly the reintroduction of the 2015 “Yates Memorandum,” which sought to prioritize the prosecution of individuals in corporate misconduct investigations—these initiatives also signal a much wider re-commitment to corporate enforcement. For example, this is the first time that DOJ has created a Corporate Crime Advisory group—and its mandate is broad, with the goal of updating the department’s approach to corporate criminal enforcement. The group will have an expansive mandate to consider various topics that are central to the goal of updating DOJ’s approach to corporate criminal enforcement. These items will include investing in new technologies to assist in prosecutions and reconsidering the factors bearing on the determination of whether a corporate case should be resolved through a deferred prosecution agreement, non-prosecution agreement, or plea agreement.
A second salient feature of the Memorandum is the renewed consideration of a corporation’s history of prior misconduct. While such history has been a factor in the past, this consideration is much broader, ensuring that second-time or repeat offenders should anticipate harsher penalties. Relevant considerations will include not just violations of criminal laws, but civil and regulatory violations as well. Moreover, DOJ will now look at all corporate misconduct, including even misconduct by the smallest subsidiary or affiliate of the company.
The uptick in corporate enforcement that was predicted at the beginning of the new administration is here. Not only does the memorandum and the DOJ’s related statements signal that enhanced enforcement actions are coming, but the SEC’s coordinated announcements on the same issues further suggest that the government is seeking to present a united front against corporate enforcement that will increase the identification and prosecution of corporate wrongdoing.Publication
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