New Deputy Attorney General Announces Policy Shifts in the Prosecution of Corporate Crime

In her Oct. 28, 2021 keynote address at the American Bar Association’s 36th National Institute on White Collar Crime, new Deputy Attorney General (DAG) Lisa Monaco announced several policy changes to the Department of Justice’s (DOJ’s) approach to prosecuting corporate crime as well as the formation of a Corporate Crime Advisory Group to make further recommendations.^[1] On the same day, her office issued a memorandum setting forth these changes in more detail.^[2]

Monaco previously served as the Homeland Security and Counterterrorism Advisor to President Barack Obama, from 2013 to 2017. Before that, she held a number of positions within the DOJ, including as counsel to Attorney General Janet Reno; a member of the Enron Task Force; FBI chief of staff under Director Robert Mueller; and assistant attorney general for national security.^[3]

In her remarks, Monaco commented on the “ebb and flow” of “the department’s enforcement activities in the white-collar space” and recalled the “active time for enforcement against corporate crime” early in her own career when executives at “WorldCom, Quest Communications, Adelphia, Tyco and Enron” were prosecuted. Monaco stated that “[a]ccountability starts with the individuals responsible for criminal conduct” and that the DOJ’s “first priority in corporate criminal matters [is] to prosecute the individuals who commit and profit from corporate malfeasance.” She emphasized that the department’s prosecutors should be “bold” and that “the fear of losing should not deter” them from bringing difficult cases so long as they “believe[] that a putative defendant’s conduct constitutes a federal offense, and that the admissible evidence will probably be sufficient to obtain and sustain a conviction.”^[4]

Monaco specified three changes to DOJ policy with respect to corporate prosecutions. First, the DOJ will require cooperating corporations to identify all individuals involved in wrongdoing, not just those that the corporation deems were substantially involved. Second, prosecutors will now consider all past misconduct in determining how best to resolve charges against corporations. And third, Monaco indicated that the DOJ intends to re-emphasize the use of independent corporate monitors where appropriate to prevent misconduct from recurring.

Providing Information on All Involved Individuals

First, Monaco announced that she has directed the department “to restore prior guidance making clear that to be eligible for any cooperation credit, companies must provide the department with all non-privileged information about individuals involved in or responsible for the misconduct at issue” in a criminal investigation.^[5] This change marks a return to Obama-era department policy as articulated by then-DAG Sally Yates in 2015, which required corporations seeking cooperation credit to “identify all individuals involved in or responsible for the misconduct at issue, regardless of their position, status or seniority.”^[6] In 2018, during the Trump administration, DAG Rod Rosenstein revised this policy to require corporations to disclose such information only for individuals who were “substantially involved in or responsible for the criminal conduct.”^[7]

Explaining this change, Monaco asserted that the department’s investigative teams are “often better situated than company counsel to determine the relevance and culpability of individuals involved in misconduct.” By contrast, allowing corporations to determine which individuals were “substantially involved” in misconduct has been “confusing in practice” and affords too much discretion to corporations.^[8] Monaco’s memorandum indicates that this requirement “includes individuals inside and outside of the company.”^[9]

Monaco clarified that seeking information about minor participants in wrongdoing does not mean that the DOJ will seek to “unfairly prosecute” them — prosecutors will continue to base charging decisions on “the facts, the law and the Principles of Federal Prosecution.”^[10]

Considering All Past Misconduct

Second, Monaco announced that she has directed prosecutors to consider “all prior [corporate] misconduct . . . when it comes to decisions about the proper resolution with a company, whether or not that misconduct is similar to the conduct at issue in a particular investigation.” Prosecutors will examine a company’s “full criminal, civil and regulatory record,” including “whether [the] company was prosecuted by another country or state, or whether [it] has a history of running afoul of regulators.”^[11]

Monaco explained that a company’s “record of misconduct speaks directly to [its] overall commitment to compliance programs and the appropriate culture to disincentivize criminal activity.”^[12] Although “[s]ome prior instances of misconduct may ultimately prove less significant” to a particular case, prosecutors will “start from the position that all prior misconduct is potentially relevant.”^[13]

Use of Corporate Monitorship

Third, Monaco rescinded prior DOJ guidance “[t]o the extent that [it] suggested that [corporate] monitorships are disfavored or are the exception,” reaffirming that the department may use monitors “whenever it is appropriate to do so in order to satisfy our prosecutors that a company is living up to its compliance and disclosure obligations” under deferred-prosecution and non-prosecution agreements. Monaco explained that corporate monitors are important tools “to encourage and verify” a corporation’s compliance with the terms of corporate criminal resolutions, particularly when a corporation’s past behavior calls into question its commitment to “change its corporate culture” and “self-police its activities.”^[14]

Monaco’s remarks about prior DOJ guidance likely refer to an October 2018 memorandum issued by then-Assistant Attorney General Brian A. Benczkowski. Monaco’s new memorandum explicitly states that the DOJ’s new monitorship policy “revises, supplements, and in part, supersedes” guidance issued in Part A of Benczkowski’s memorandum.^[15]

Benczkowski’s memorandum stated that “the imposition of a monitor will not be necessary in many corporate criminal resolutions.” It also set forth a number of factors prosecutors should consider in determining whether a monitor would be beneficial, including whether the misconduct involved manipulating corporate books and records or exploited inadequate compliance programs; whether the misconduct was pervasive; and the extent to which the company has invested in and tested its own compliance programs and internal controls. Moreover, Benczkowski’s memorandum counseled that monitorships should be “appropriately tailored to avoid unnecessary burdens to the business’s operations.” He also indicated that “the Criminal Division should favor the imposition of a monitor only where there is a demonstrated need for, and clear benefit to be derived from, a monitorship relative to the projected costs and burdens.”^[16]

Monaco’s newly announced approach clearly differs in tone from this previous guidance. For example, Monaco writes that the department should, “[i]n general, . . . favor the imposition of a monitor where there is a demonstrated need for, and clear benefit to be derived from, a monitorship,” omitting Benczkowski’s caveat that the monitorship’s benefits should be compared to the projected costs and burdens.^[17] Where Benczkowski wrote that “a monitor will likely not be necessary” for corporations whose compliance programs and controls are “demonstrated to be effective and appropriately resourced at the time of resolution,”^[18] Monaco’s memorandum states only that a monitor “may not be necessary” under similar circumstances, and emphasizes that a monitor likely will be necessary “[w]here a corporation’s compliance program and controls are untested, ineffective, inadequately resourced, or not fully implemented at the time of a resolution.”^[19]

However, how these changes play out in practice remains to be seen. The new memorandum omits many of the specific considerations set forth in Benczkowski’s previous guidance, but it does not explicitly contradict most of them. Prosecutors are still required to perform a cost-benefit analysis, considering “(1) the potential benefits that employing a monitor may have for the corporation and the public, and (2) the cost of a monitor and its impact on the operations of a corporation,” but the memorandum omits the more detailed factors listed in previous guidance. And while Monaco’s memorandum reiterates that monitorship “should be appropriately tailored to address the specific issues and concerns that created the need for the monitor,” it omits any reference to tailoring the monitorship to avoid unnecessary burdens to the business’s operations.^[20]

Corporate Crime Advisory Group

Finally, Monaco announced the formation of a Corporate Crime Advisory Group to study and make recommendations for future policy changes. This group “will have a broad mandate” to study issues like “monitorship selection,” corporate “recidivism” and compliance with conditions of non-prosecution and deferred-prosecution agreements, and how best to measure “a successful company’s cooperation.”^[21] The group will include “representatives from every part of the department involved in corporate criminal enforcement”^[22] and will solicit input from “the business community, academia, and the defense bar to make sure that any changes to Department policy take into account multiple perspectives.”^[23]

In particular, Monaco highlighted the DOJ’s interest in studying “how to account for companies who have a documented history of repeated corporate wrongdoing,” including “whether pretrial diversion—NPAs and DPAs—is appropriate for certain recidivist companies” or even “for any company who has benefited previously from” pretrial diversion. Monaco noted that between 10% and 20% of all “significant corporate criminal resolutions” are with companies who have entered into such resolutions with the department in the past, and stated that the DOJ will “have no tolerance for companies that take advantage of pretrial diversion by going on to continue to commit crimes, particularly if they then compound their wrongdoing by knowingly hiding it from the government.”^[24]

^[1] _{Deputy Attorney General Lisa O. Monaco Gives Keynote Address at ABA’s 36th National Institute on White Collar Crime, U.S. Dep’t of Justice (Oct. 28, 2021), https://www.justice.gov/opa/speech/deputy-attorney-general-lisa-o-monaco-gives-keynote-address-abas-36th-national-institute.}

^[2] _{Memorandum from Deputy Attorney General Lisa O. Monaco to Assistant Attorney General, Criminal Division et al., U.S. Dep’t of Justice, Corporate Crime Advisory Group and Initial Revisions to Corporate Criminal Enforcement Policies (Oct. 28, 2021), available at https://www.justice.gov/dag/page/file/1445106/download.}

^[3] _{Meet the Deputy Attorney General, U.S. Dep’t of Justice (Aug. 19, 2021), https://www.justice.gov/dag/staff-profile/meet-deputy-attorney-general.}

^[4] _{Monaco Address, supra n.1.}

^[5] _{Monaco Address, supra n.1.}

^[6] _{Memorandum from Deputy Attorney General Sally Quillian Yates to Assistant Attorney General, Antitrust Division et al., U.S. Dep’t of Justice, Individual Accountability for Corporate Wrongdoing (Sept. 9, 2015), available at https://www.justice.gov/archives/dag/file/769036/download.}

^[7] _{Deputy Attorney General Rod J. Rosenstein Delivers Remarks at the American Conference Institute’s 35th International Conference on the Foreign Corrupt Practices Act (Nov. 29, 2018), https://www.justice.gov/opa/speech/deputy-attorney-general-rod-j-rosenstein-delivers-remarks-american-conference-institute-0 (emphasis added).}

^[8] _{Monaco Address, supra n.1.}

^[9] _{Monaco Memo, supra n.2, at 3.}

^[10] _{Monaco Address, supra n.1.}

^[11] _{Monaco Address, supra n.1.}

^[12] _{Monaco Address, supra n.1.}

^[13] _{Monaco Memo, supra n.2, at 3.}

^[14] _{Monaco Address, supra n.1.}

^[15] _{Monaco Memo, supra n.2, at 4 n.3.}

^[16] _{Memorandum from Assistant Attorney General Brian A. Benczkowski to All Criminal Division Personnel, U.S. Dep’t of Justice, Selection of Monitors in Criminal Division Matters (Oct. 11, 2018), available at https://www.justice.gov/opa/speech/file/1100531/download.}

^[17] _{Monaco Memo, supra n.2, at 4.}

^[18] _{Benczkowski Memo, supra n.16, at 2 (emphasis added).}

^[19] _{Monaco Memo, supra n.2, at 4-5.}

^[20] _{Monaco Memo, supra n.2, at 4.}

^[21] _{Monaco Address, supra n.1.}

^[22] _Id.

^[23] _{Monaco Memo, supra n.2, at 2.}

^[24] _{Monaco Address, supra n.1.}