Day: November 1, 2021

Deputy Attorney General (DAG) Lisa O. Monaco gave a Keynote Address at ABA’s 36th National Institute on White Collar Crime last week (Monaco Speech). Her remarks were noted by many commentators, including on Compliance Into the Weeds where Matt Kelly and myself took a deep dive into her speech in a rare emergency podcast. Her remarks reframed a discussion about this Department of Justice’s (DOJ) priorities on white collar criminal enforcement, including under the Foreign Corrupt Practices (FCPA). Her remarks should be studied by every compliance professional as they portend a very large change in the way the DOJ and potentially other agencies enforce the FCPA. This has significant implications for every Chief Compliance Officer (CCO), compliance professional and corporate compliance programs.
The key changes announced in the Monaco Speech were as follows: (1) “today I am directing 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. To be clear, a company must identify all individuals involved in the misconduct, regardless of their position, status or seniority.” This portends a return to the strictures of the Yates Memo. (2) “The second change I am announcing today deals with the issue of a company’s prior misconduct and how that affects our decisions about the appropriate corporate resolution. (3) The final change I am announcing today deals with the use of corporate monitors.” This final change is a rejection of the strictures laid out in the Benczkowski Memo regarding the DOJ use of corporate monitorships.
Today, I am going to take up the first change, a reinstitution of the Yates Memo requirement that companies turn over information and evidence of any and all employees involved in the illegal conduct. In her speech, then DAG Sally Yates said the following, “Effective immediately, we have revised our policy guidance to require that if a company wants any credit for cooperation, any credit at all, it must identify all individuals involved in the wrongdoing, regardless of their position, status or seniority in the company and provide all relevant facts about their misconduct. It’s all or nothing. No more picking and choosing what gets disclosed. No more partial credit for cooperation that doesn’t include information about individuals.” This statement ties directly into the first point of the Yates Memo, which has the title “To be eligible for any cooperation credit, corporations must provide to the Department all relevant facts about the individuals involved in corporate misconduct.” The Trump Administration DOJ had relaxed this requirement to those ‘substantially involved”. Monaco said some of the reasons for the change included:

1. Such distinctions are confusing in practice and afford companies too much discretion in deciding who should and should not be disclosed to the government.
2. Such a limitation also ignores the fact that individuals with a peripheral involvement in misconduct may nonetheless have important information to provide to agents and prosecutors.
3. The department’s investigative team is often better situated than company counsel to determine the relevance and culpability of individuals involved in misconduct, even for individuals who may be deemed by a corporation to be less than substantially involved in misconduct.
4. To aid this assessment, cooperating companies will now be required to provide the government with all non-privileged information about individual wrongdoing.

What this means in practice is that an internal investigation must focus on individuals from the start of an investigation, regardless of whether the investigation begins civilly or criminally. Moreover, once a case is underway, the inquiry into individual misconduct can and should proceed in tandem with the broader corporate investigation. Delays in the corporate case will no longer suffice as a reason to delay pursuit of the individuals involved. For the CCO or compliance practitioner, this means the entire focus of your investigative protocol must now change. Previously an investigation was to determine how conduct that might have violated the FCPA occurred and then focus on how to remedy it. The first step a CCO or compliance practitioner would take when sufficient evidence was developed would be to fix the problem so that it did not occur going forward. If there were compliance program or internal control weaknesses, they would be immediately fixed so that neither the original perpetrators could continue the conduct but also so others could not take advantage of any such structural weakness.
The reinstitution of this requirement by DAG Monaco demonstrates that the DOJ expects you to bring them information about all individuals who can be prosecuted going forward. Monaco’s remarks also demonstrate the DOJ expects you to turn over your own employees. This means DOJ want companies to give up senior executives involved in illegal conduct. As Yates said back in 2015 “We’re not going to be accepting a company’s cooperation when they just offer up the vice president in charge of going to jail.” One of the difficulties around the FCPA requirement for a criminal prosecution or intent. How do you determine intent in a manner where senior executives may never have been involved directly in a transaction? Does this mean insufficient tone at the top will somehow morph into intent for a FCPA prosecution? It appears that the DOJ is either no longer comfortable in companies and their counsel making this decision or wants to take over this assessment.
In addition to these prongs, I found point three from Monaco very interesting. The DOJ has been criticized by commentators and even the bench for the turning over of the internal investigation process to companies and their hired law firms. This prong 3 may be a way for the DOJ to respond to these critiques. It should be the DOJ which makes the assessment of potential culpability and potential enforcement, not internal investigators. It bears reiterating Monaco on this point, “The department’s investigative team is often better situated than company counsel to determine the relevance and culpability of individuals involved in misconduct, even for individuals who may be deemed by a corporation to be less than substantially involved in misconduct.”
Whatever the reason for the change, the Biden Administration is rejecting the light touch of the prior administration as led by former DAG Rod Rosenstein and later Brian Benczkowski. It appears this could be the first step to try and beef up FCPA individual enforcement and drive home the message that this administration is serious about the fight against international corruption. There were other developments from the Monaco Speech that I will take up in subsequent blogs this week.
Where I end up this week in this series, I do not yet know. Every time I read the speech, I see new angles for exploration. However, I promise that next up I will look at the rejection of the Benczkowski Memo’s default position that no monitorship would be used in FCPA enforcement actions or settlements.