DOJ Adds More Incentives To Corporate Enforcement Policy

In a January 17, 2023, speech at Georgetown University Law Center, Assistant Attorney General Kenneth Polite, Jr., for the DOJ’s Criminal Division, announced revisions of DOJ’s Corporate Enforcement Policy (“Policy”) to offer greater leniency to companies willing to (1) report their own misconduct to the government and (2) offer “extraordinary cooperation” once an investigation begins.

Old Policy. The previous iteration of the Policy provided that the DOJ would decline to prosecute cases in which a company voluntarily self-discloses, fully cooperates, and appropriately remediates unlawful conduct. If the DOJ determined after a voluntary self-disclosure that criminal resolution was warranted, the DOJ policy would offer 50% off of the low end of the applicable Sentencing Guideline range. But all of these incentives were subject to an important qualifier: if the DOJ uncovered “aggravating circumstances,” such as involvement by executive management, a significant profit to the company from wrongdoing, egregiousness of the conduct, or criminal recidivism, the company would not qualify and the DOJ would prosecute.

Increased Eligibility for Declinations. Assistant Attorney General Polite announced that the DOJ is revising this aspect of the Policy in order to encourage companies to come forward when an “aggravating factor” is in dispute. Under the new policy, prosecutors have the discretion to decline to prosecute even when an “aggravating factor” is present if the company can establish each of the following three factors: 1) the voluntary disclosure was made immediately upon the company becoming aware of the alleged misconduct; 2) the company had an effective compliance program and internal accounting controls in place at the time of the misconduct and the disclosure; and 3) the company provided “extraordinary cooperation” with the DOJ and undertook “extraordinary remediation.” AAG Polite added that the policy was “directed squarely at companies that take compliance and good corporate citizenship seriously,” in contrast with those who offer only half-measures of cooperation and remediation to avoid prosecution.

Opportunities for Fine Reductions and Avoiding Felony Convictions. DOJ is revising its approach even with respect to companies it chooses to prosecute. If a company voluntarily discloses, fully cooperates, and timely remediates, the DOJ will now recommend a sentence with at least 50% and up to 75% off the low end of the Sentencing Guidelines fine range, except in the case of criminal recidivism. This is a much larger reduction from the previous maximum of 50% (the current starting point). Additionally, the government will not require corporate guilty pleas absent “multiple or particularly egregious aggravating circumstances.”

Availability of Sentencing Reductions for Companies that Don’t Voluntarily Self-Disclose. Companies that do not voluntarily disclose may still receive a maximum of a 50% reduction off the low end of the fine range, but AAG Polite noted that the 50% will “not be the new norm.” It is instead reserved for companies who do not voluntarily disclose that “truly distinguish themselves and demonstrate extraordinary cooperation and remediation.”

Key Takeaways. The new policies emphasize the DOJ’s position that its mission is “not just to prosecute crime, but to deter and prevent criminal conduct.” They underscore a DOJ that seeks not only disclosure but willing and earnest cooperation and commitment to addressing misconduct by individual wrongdoers. Companies should also ensure they have robust compliance programs in place and have the ability to quickly and thoroughly redress criminal conduct once it is identified. The DOJ has made clear that it will offer significant benefits to companies that take their disclosure and remediation obligations seriously. But companies must carefully consider their eligibility for the leniency offered by the government. Particularly where aggravating factors exist, companies must quickly decide whether to voluntarily disclose misconduct and cooperate with the government, given the stringent requirements to achieve declinations and fine reductions, and the countervailing costs of the ensuing investigation and civil and regulatory actions that might follow.

If you have any questions about the information in this alert, please contact Jonathan Feld, Mark Chutkow, Kevin Connor, Joanne Zimolzak, Tim Caprez, Sean Griffin, or your Dykema relationship attorney.