Tag: DAG Lisa Monaco

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DOJ Whistleblower Pilot Program: Transforming the Compliance Landscape

In a world where corporate integrity and accountability are more crucial than ever, the Department of Justice (DOJ) ‘s Whistleblower Pilot Program announcement marks a pivotal moment for compliance professionals. This initiative promises to reshape how we approach whistleblowing, corporate misconduct, and organizational culture. Let’s dive into the details and implications of this program, focusing on how it impacts compliance officers, whistleblowers, and corporate governance.

Deputy Attorney General Lisa Monaco said of the Whistleblower Pilot Program, “With this program, we’re doubling down on a proven strategy to ferret out criminal activity that might otherwise go unreported. Law enforcement has long offered rewards to coax tipsters to report crimes — from the “Wanted” posters of the Old West to the reforms in Dodd-Frank that created whistleblower programs at the SEC and the CFTC.” However, she cautioned, “those programs — by their very nature — are limited in scope. They only cover misconduct within those agencies’ jurisdictions. The same is true for similar programs run by the IRS and FinCEN. And qui tam actions, which offer whistleblowing incentives, are available only for fraud against the government.” The DOJ “corporate enforcement program is rooted in using carrots and sticks. Today’s announcement builds on our other efforts to incentivize reporting of corporate misconduct to the government.” Part of those carrots is to reward those “under these disclosure programs — both our corporate voluntary self-disclosure programs and the whistleblower initiative we’re announcing today — you have to tell us something we didn’t already know. With few exceptions, you must be first in the door.”

The Whistleblower Pilot Program incentivizes individuals to report corporate misconduct directly to the authorities. It offers financial rewards similar to existing programs at agencies like the Securities and Exchange Commission (SEC). Under the Whistleblower Pilot Program, whistleblowers are now eligible for a financial award. The award may be up to 30% of the first $100 million in net proceeds forfeited and up to 5% of any net proceeds forfeited between $100 million and $500 million. This framework encourages individuals to come forward with information about corporate wrongdoing, particularly in areas such as the Foreign Extortion Prevention Act (FEPA) and the Foreign Corrupt Practices Act (FCPA).

From the whistleblower’s perspective, the Whistleblower Pilot Program provides a powerful incentive to report misconduct. The promise of financial rewards and legal protections can motivate individuals who might otherwise fear retaliation or lack confidence in their employer’s internal reporting mechanisms. The program is designed to cover various types of corporate crime, ensuring that potential whistleblowers have a direct channel to report wrongdoing, even when internal channels might fail.

For compliance officers, the Whistleblower Pilot Program introduces new dynamics into the compliance landscape. On the one hand, it underscores the importance of robust internal compliance programs that can effectively handle whistleblower reports. On the other hand, it creates potential challenges, as employees might need help to bypass internal reporting mechanisms in favor of direct reporting to the DOJ, mainly when financial incentives are involved. The Whistleblower Pilot Program raises an interesting dilemma for compliance officers and corporate management: How do you maintain a solid internal reporting culture when employees have a lucrative alternative in external reporting?

The answer lies in strengthening internal reporting mechanisms and fostering a culture of trust and transparency. Companies must ensure that their whistleblower hotlines and reporting channels are accessible, confidential, and effective. Employees should feel confident that their reports will be taken seriously and addressed promptly without fear of retaliation. It also reiterates that investing in anti-retaliation training and policies is crucial. Employees must know that the organization values their input and that speaking up will have no negative consequences. Training managers and supervisors to handle reports sensitively and ensuring that whistleblowers receive feedback on the status of their reports can reinforce this trust.

With the potential for whistleblowers to report externally, companies must act quickly and decisively when handling internal reports. The Whistleblower Pilot Program highlights the need for efficient triage and investigation processes to swiftly assess and address misconduct allegations. This requires clear protocols and collaboration among compliance, legal, and HR departments to ensure timely resolutions.

The Whistleblower Pilot Program also addresses the tension between whistleblower reports and voluntary self-disclosure by companies. The DOJ has adjusted its policies to allow companies to receive credit for voluntary self-disclosure, even if a whistleblower has already reported the matter to the authorities. However, this requires that companies disclose the misconduct within 120 days of the internal report. This adjustment emphasizes the importance of timely action and reinforces the value of self-reporting as part of an effective compliance program.

The recent SEC whistleblower award case is a cautionary tale for companies navigating this new landscape. In this case, a whistleblower who reported misconduct internally was ignored, leading them to report the issue to the SEC. The company eventually self-disclosed but lacked cooperation, highlighting the risks of inadequate internal handling of whistleblower reports. This scenario underscores the need for companies to take internal reports seriously and proactively investigate and address issues before they escalate externally.

The Whistleblower Pilot Program reinforces organizations’ need for a robust speak-up culture. Compliance officers play a crucial role in fostering this culture by promoting open communication, ensuring that employees understand the importance of reporting misconduct, and providing them with the tools and support they need to do so safely.

Compliance officers must also engage senior management and the board of directors to ensure alignment on the importance of a strong compliance culture. This includes advocating for the necessary resources and support to maintain effective reporting mechanisms and demonstrating the value of proactive compliance efforts in mitigating risks and enhancing corporate reputation.

Compliance officers must continuously assess and improve their programs in this evolving landscape. This includes staying informed about regulatory developments, analyzing whistleblower reports to identify trends and areas for improvement, and adapting strategies to address emerging risks and challenges. The Whistleblower Pilot Program marks a significant step in promoting corporate accountability and transparency. It presents challenges and opportunities for compliance professionals to strengthen internal programs and foster a culture of integrity. By prioritizing trust, transparency, and effective reporting mechanisms, companies can successfully navigate this new era, ensuring they are well-prepared to address misconduct and protect their reputations. As compliance officers, embracing these changes and championing a culture of accountability will be key to thriving in this dynamic environment.

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Argentieri at ABA White Collar Conference: Compliance Programs, Part 2

There were recently two significant speeches by Department of Justice (DOJ) officials at the American Bar Association National Institute on White Collar Crime. The first was by Deputy Attorney General Lisa Monaco. The second was by Acting Assistant Attorney General Nicole Argentieri. They both had important remarks for the compliance professional. I have taken a deep dive into both speeches and what indicates compliance programs, compliance professionals, DOJ expectations, and Foreign Corrupt Practices Act (FCPA) enforcement going forward. We have previously considered the Monaco speech and began exploring the speech by Nicole Argentieri. Today, we conclude with remarks by Argentieri regarding how the DOJ will put these policies into practice and what they mean for compliance professionals and programs going forward.

Robust Compliance

The DOJ has either concluded or is in the middle of an FCPA industry sweep through oil and energy trading companies. In addition to Gunvor, there have been enforcement actions involving Vitol Trading, Glencore, and Freepoint. Argentieri noted that as a part of their resolutions with the DOJ, “each of these trading companies was required to make critical enhancements to their compliance programs to prevent future violations of the FCPA. Companies that take forward-leaning steps on compliance will be better positioned to certify that they have met their compliance obligations at the end of the term of their agreements, as is now required in corporate resolutions with the Criminal Division. These prosecutions also help set the tone for the energy trading industry as a whole — they show that a robust compliance function is critical.”

Corporate Culture

It all begins with corporate culture. The DOJ will assess the corporate culture and a company’s prior misconduct in determining the appropriate form of resolution and the financial penalty. This is where culture becomes critical, particularly for the recidivist, because, as Argentieri noted, “we will not hesitate to require substantial penalties — including, where appropriate, guilty pleas — for companies that show themselves to be repeat offenders.”

Coupling that statement with the superior resolution obtained by ABB and Albemarle shows that the DOJ is serious about corporate culture. The bottom line is that a company can move to a culture of compliance if senior management is committed to the effort. One need only consider the superior result obtained by the first three-time recidivist ABB. Culture is critical, and you must demonstrate that you have assessed and worked to improve your corporate culture.

Clawbacks and Holdbacks

One of the key initiatives brought forward under DAG Monaco’s tenure has been around incentives and consequences. However, under DAG Monaco’s tenure, incentives and consequence management were further refined in the 2023 Evaluation of Corporate Compliance Programs (2023 ECCP). It was also enshrined in the DOJ Compensation Incentives and Clawbacks Pilot Program (Pilot Program), which has two components: (1) incentivization of compliance and (2) disincentives through clawbacks and holdbacks.

Argentieri pointed to the SAP resolution as a key example of how clawbacks and holdbacks can benefit a company. She noted, “Even before its criminal resolution, SAP had adjusted its compensation incentives to align with compliance objectives and reduce corruption risk.” She said, “SAP also took advantage of the second part of the Pilot Program, which allows companies to reduce their fines when they withhold compensation from culpable employees.” The DOJ “reduced SAP’s criminal penalty by over $100,000 for compensation that the company withheld from certain employees.”

However, the pilot program requires a real effort from the company regarding clawbacks and holdbacks. SAP “went to great lengths to defend this corporate decision, including through litigation.’ Argentieri believes that “These actions sent a clear message to other SAP employees—and employees of companies everywhere—that misconduct will have individual financial consequences. This is another example of the company’s remediation that supported our decision to award a 40% fine reduction.”

Before SAP, Albemarle was “the first company to receive a fine reduction under the Pilot Program in an FCPA resolution last year.” While Gunvor did not engage in clawbacks or holdbacks, Argentieri applauded their efforts in incentivizing compensation, relating that “Gunvor had already updated and evaluated its compensation policy better to incentivize compliance with the law and corporate policies.”

Argentieri concluded this section by stating, “All of these policies should send a simple, but strong, message: being a good corporate citizen is not just the right thing to do. It is good business. Those who step up will be able to unlock the benefits afforded by our policies. And those who do not will face stiff punishments. And for companies making the tough decision of whether to disclose, take note — we now have more ways than ever to discover misconduct.”

The Bottom Line

DAG Monaco’s speeches and Nicole Argentieri’s provided significant information for the compliance professional. Both are the DOJ expectations for a best practices compliance program and what a company needs to do if they find themselves under an FCPA investigation. DAG Monaco made four key points: (1) the DOJ will invest the most significant resources in the most serious cases, hold individuals accountable, and pursue tough penalties for repeat offenders absent a significant culture shift and remediation. (2) The Voluntary Self-Disclosure Program is a key component of enforcement and incentives. (3) The DOJ whistleblower bounty program should lead to new referrals to the DOJ. (4) Compliance professionals should be ready to address new, disruptive technologies, such as the rise of AI, through their corporate enforcement programs.

Argentieri emphasized details in compliance programs. It all starts with corporate culture, but companies must strive towards robust compliance programs, including effective internal controls, incentives for employees to work ethically and in compliance, and significant consequences for failure to do so: vigorous internal reporting, triage, and investigative protocols. Compliance professionals and compliance programs have never been more important for companies.

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DAG Monaco at ABA White Collar Conference: Self-Disclosure, Wanted Posters and AI

There were recently two significant speeches by Department of Justice (DOJ) officials at the American Bar Association National Institute on White Collar Crime. The first was by Deputy Attorney General Lisa Monaco. The second was by Acting Assistant Attorney General Nicole Argentieri. They both had important remarks for the compliance professional. Over the next few blog posts, I will look at both speeches and what they might indicate for compliance and enforcing the Foreign Corrupt Practices Act. Today is the speech by DAG Lisa Monaco.

Self-Disclosure Initiatives

Monaco emphasized the importance of timely self-disclosure for companies to receive benefits under the Corporate Enforcement Policy. This tracks speeches made by DOJ officials over the past 18 months and the most significant enforcement actions over the past 15 months, ABB, Albemarle, SAP, and Gunvor. Monaco restated the incentives in place, “ I want to be clear: no matter how good a company’s cooperation, a resolution will always be more favorable with voluntary self-disclosure. We’ve structured our Voluntary Self Disclosure (VSD) programs to encourage companies to take responsibility for misconduct within their organizations. And we’ve conditioned benefits on the company’s willingness to step up and own up—requiring it to disgorge profits, upgrade compliance systems, and cooperate in investigations of culpable employees.”

Monaco also pointed to two separate US Attorney’s Offices, which have initiated their own self-disclosure programs. She stated, “At least two U.S. Attorney’s Offices — led by the Southern District of New York and recently the Northern District of California — are piloting initiatives that are, in essence, voluntary self-disclosure programs for individuals. Both offer non-prosecution agreements to certain categories of at-fault individuals who self-disclose wrongdoing and cooperate against other, more culpable targets. We look forward to evaluating the results of these pilots and determining what’s to come later this year.”

 DOJ Whistleblower Program-Modern Day Wanted Posters

The next area is a new DOJ whistleblower initiative. The money line from her talk was, “Going back to the days of “Wanted” posters across the Old West, law enforcement has long offered rewards to coax tipsters out of the woodwork.” She added, “Today, we’re announcing a program to update how DOJ uses monetary rewards to strengthen our corporate enforcement efforts.” How will the DOJ incentivize this program? The short answer is money.

The DOJ has recognized that paying bounties is a surefire method to attract whistleblowers. She pointed to the examples of Dodd-Frank whistleblower programs at the SEC and the CFTC. She said, “Those agencies have received thousands of tips, paid out many hundreds of millions of dollars, and disgorged billions in ill-gotten gains from corporate bad actors.” There are other similar programs at different agencies and departments, such as the IRS and FinCen, as well as through qui tam actions. “These programs have proven indispensable — but they resemble a patchwork quilt that doesn’t cover the whole bed. They don’t address the full range of corporate and financial misconduct that the Department prosecutes.”

The DOJ will offer payments under four parameters:

  • Only after all victims have been properly compensated;
  • Only to those who submit truthful information not already known to the government;
  • Only to those not involved in the criminal activity itself and
  • Only in cases without an existing financial disclosure incentive — including qui tam or another federal whistleblower program.

Monaco also offered the types of areas the DOJ wants to focus its whistleblower initiative around:

  • Criminal abuses of the U.S. financial system;
  • Foreign corruption cases outside the jurisdiction of the SEC, including FCPA violations by non-issuers and violations of the recently enacted Foreign Extortion Prevention Act,
  • Domestic corruption cases, especially involving illegal corporate payments to government officials.

The DOJ will engage in a 90-day “Policy Sprint” to develop and implement a pilot program, with a formal start date later this year. But the premise should be simple: ” If an individual helps DOJ discover significant corporate or financial misconduct—otherwise unknown to us—then the individual could qualify to receive a portion of the resulting forfeiture.”

Monaco ended with a message for whistleblowers and corporations: “With these announcements, our message to whistleblowers is clear: the Department of Justice wants to hear from you. And to those considering voluntary self-disclosure, our message is equally clear: knock on our door before we knock on yours. “

Justice AI

Recognizing that “all new technologies are a double-edged sword—but AI may be the sharpest blade yet,” Monaco announced that the DOJ would seek sentencing enhancements to increase penalties for criminals whose conduct uses or includes AI. She stated, “Where AI is deliberately misused to make a white-collar crime significantly more serious, our prosecutors will seek stiffer sentences—for individual and corporate defendants alike.”

She went on to add that “compliance officers should take note. When our prosecutors assess a company’s compliance program — as they do in all corporate resolutions — they consider how well the program mitigates its most significant risks. And for a growing number of businesses, that now includes the risk of misusing AI.” To assist compliance professionals with this new area of responsibility, she said that “assessment of disruptive technology risks — including risks associated with AI — into its guidance on Evaluation of Corporate Compliance Programs.”

Cliff Notes

For those old enough to know what Cliff Notes were, Monaco ended with the following:

First, we’re continuing to execute our core strategy: invest the most significant resources in the most serious cases, hold individuals accountable, and pursue tough penalties for repeat offenders.

Second, we’re using carrots and sticks to encourage companies to step up, own up, and report misconduct to the government. With a first-in-the-door strategy, we’re making it clear that neither companies nor individuals can afford to sit on evidence of wrongdoing.

Third, we’re designing our whistleblower rewards program as part of our broader effort to fill gaps and innovate in this space. Stay tuned.

And finally, we’re applying DOJ tools to new, disruptive technologies — like addressing the rise of AI through our existing sentencing guidelines and corporate enforcement programs.

Join me tomorrow as I look at Nicole Argentieri’s speech.

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2 Gurus Talk Compliance

2 Gurus Talk Compliance – Episode 24 — The Self-Disclosure Edition

What happens when two top compliance commentators get together? They talk about compliance, of course. Join Tom Fox and Kristy Grant-Hart in 2 Gurus Talk Compliance as they discuss the latest compliance issues in this week’s episode! In this episode, Tom and Kristy take on a wide variety of compliance-related topics.

The Department of Justice (DOJ) is launching a paid whistleblower initiative, specifically targeting cases of criminal exploitation of the U.S. financial system that slip through the cracks of existing agency schemes. This move has elicited various perspectives, notably from compliance experts Tom Fox and Kristy Grant-Hart. Fox, drawing on his extensive experience in compliance, identifies the program as a vital development, filling a gap in whistleblower compensation efforts. He anticipates that it will compel compliance officers to foster a culture of reporting and enhance efficiency in managing investigations. On the other hand, Kristy, a renowned compliance specialist, also views the initiative positively but expresses concerns about the increased pressure on organizations to ensure compliance.

Despite this, both experts agree that the program is a step in the right direction towards promoting transparency, accountability, and ethical corporate behavior.

Highlights Include:

1. DAG Monaco Speech (DOJ Release)

2. Nicole M. Argentieri Speech (DOJ Release)

3. CTA struck down (WSJ)

4. Leadership Lessons from Robert Oppenheimer (WSJ)

5. State governments move to regulate AI (NYU)

6. The Percentage Of Corporate DOJ And SEC FCPA Enforcement Actions That Result From A Voluntary Disclosure (FCPA Professor)

7. Husband Who Eavesdropped on Wife’s Work Calls Pleads Guilty to Insider Trading (WSJ)

8. SEC Adopts Climate Disclosure Rule (Radical Compliance)

9. Is It Ever OK to Have an 8 a.m. Meeting? (WSJ)

10. The Florida Man Games (NYTimes)

Resources:

Kristy Grant-Hart on LinkedIn

Spark Consulting

Tom

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Compliance Into the Weeds

Compliance into The Weeds: Monaco on DOJ Whistleblower Initiative and AI

The award-winning Compliance into the Weeds is the only weekly podcast that takes a deep dive into a compliance-related topic, literally going into the weeds to more fully explore a subject. Looking for some hard-hitting insights on compliance? Look no further than Compliance into the Weeds! In this episode, Tom and Matt take a deep dive into a recent speech by Deputy Attorney General Lisa Monaco on the DOJ’s creation of a whistleblower program and compliance oversight of AI.

The Department of Justice Whistleblower Awards Program is a recent development that has prompted considerable discussion due to its possible implications and the potential range of awards. The program, which is designed to protect whistleblowers, raises a number of complex issues, particularly for compliance officers. According to Tom, the program is aligned with those from other regulatory bodies, like the SEC, and is not necessarily groundbreaking. He points out potential limitations in the range of awards and questions the efficiency of the review process.

Matt views the program as a significant, yet familiar, development for compliance officers. He highlights that the program seems to follow an existing trend, rather than pioneering a new approach and points out the need for further clarification on the eligibility criteria and the procedure for issuing awards. Both Fox and Kelly, from their extensive experience in the field, emphasize the program’s potential benefits for whistleblowers seeking protection but concur that there are still many details to be clarified.

Key Highlights:

  • Navigating DOJ Whistleblower Program: Award Dynamics
  • Navigating Compliance in DOJ’s Whistleblower Program
  • Enhancing Criminal Penalties for AI-based Crimes
  • Enforcement Challenges in AI Technology Governance

Resources:

Matt on Radical Compliance

Tom 

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10 For 10

10 For 10: Top Compliance Stories For The Week Ending March 9, 2024

Welcome to 10 For 10, the podcast that brings you the week’s Top 10 compliance stories in one podcast each week. Tom Fox, the Voice of Compliance, brings to you, the compliance professional, the compliance stories you need to be aware of to end your busy week. Sit back, and in 10 minutes, hear about the stories every compliance professional should be aware of from the prior week.

Every Saturday, 10 For 10 highlights the most important news, insights, and analysis for the compliance professional, all curated by the Voice of Compliance, Tom Fox. Get your weekly filling of compliance stories with 10 for 10, a podcast produced by the Compliance Podcast Network.

  1. The DOJ announces a whistleblower program.  (WSJ)
  2. More from DAG Monaco. Changes to ECCP regarding AI. (Compliance Week)
  3. The NYT asks for Boeing whistleblowers. (NYT)
  4. Forced labor and Porsches.  (WSJ)
  5. The SEC approves weakened climate change rules. (NYT)
  6. Bribery acquittal in London. (F T)
  7. The CTA ruled it unconstitutional. (NYT)
  8. Senator Menendez, a co-defendant, pleads guilty. (CNBC)
  9. Ethisphere announces the World’s Most Ethical Company Awards. (Press Release)
  10. Gunvor is to pay $661 million for FCPA violations. (WSJ)

For more information on the Ethico ROI Calculator and a free White Paper on the ROI of Compliance, click here.

You can check out the Daily Compliance News for four curated compliance and ethics-related stories each day here.

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Daily Compliance News

Daily Compliance News: March 8, 2024 – The DOJ Whistleblower Day Edition

Welcome to the Daily Compliance News. Each day, Tom Fox, the Voice of Compliance, brings you compliance-related stories to start your day. Sit back, enjoy a cup of morning coffee and listen to the Daily Compliance News.

All from the Compliance Podcast Network. Each day, we consider four stories from the business world: compliance, ethics, risk management, leadership, or general interest for the compliance professional.

In today’s edition of Daily Compliance News:

  • The DOJ announces a whistleblower program.  (WSJ)
  • More from DAG Monaco. Changes to ECCP regarding AI. (Compliance Week)
  • The NYT asks for Boeing whistleblowers. (NYT)
  • SEC prepares to be sued for pro- and con-climate reporting rules. (FT)

For more information on the Ethico ROI Calculator and a free White Paper on the ROI of Compliance, click here.

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New DOJ M&A Safe Harbor Policy

We continue our review of DOJ initiatives from 2023 and what they may portend for the compliance professional in 2024 and beyond. In October 2023, Deputy Attorney General Lisa Monaco announced a new policy regarding M&A. It is a Mergers & Acquisitions Safe Harbor policy that encourages companies to self-disclose criminal misconduct discovered by an acquiring company during the acquisition of a target company. Under the policy, the acquiring party will receive a presumption of criminal declination if it promptly and voluntarily discloses criminal misconduct, cooperates with any ensuing investigation, and engages in appropriate remediation, restitution and disgorgement.

The Safe Harbor policy is a clear continuation of the DOJ’s push for corporate voluntary self-disclosure. Monaco outlined efforts by DOJ to increase the benefits to companies that voluntary disclose corporate misconduct rather than those companies that decide not to disclose misconduct. The key for the acquirer company to  obtain the “carrot” DOJ is dangling and poses questions as to the “stick” the DOJ might wield if a self-disclosure does not achieve safe harbor, or more broadly, if an acquirer fails to identify criminal misconduct in the acquisition process, either pre or post-closing. This new Mergers & Acquisitions Safe Harbor Policy clearly demonstrates the DOJ’s interest is to avoid discouraging companies with strong compliance programs from acquiring companies with ineffective compliance programs and/or a history of misconduct.  To the contrary, DOJ is seeking to incentivize an acquiring company to timely disclose misconduct uncovered during the M&A process.

The Key Policy Takeaways are as follows:

  • The acquiring company must disclose criminal misconduct within six months of the transaction closing date.
  • The acquiring company has one year from the closing date to fully remediate the misconduct, including remediation, restitution and disgorgement, where appropriate.
  • Both deadlines are subject to reasonableness and may be extended by prosecutors due to deal complexity and other factors.
  • Misconduct that threatens national security or involves ongoing imminent harm must be immediately disclosed.
  • Misconduct disclosed under the policy will not factor into present or future recidivist analysis for the acquiring company.
  • The acquiring company’s eligibility for a criminal declination will not be impacted by the presence of aggravating factors at the acquired company.
  • The target company can also qualify for self-disclosure benefits, potentially including a declination, if there are no aggravating factors at the target company.
  • The policy does not impact civil merger enforcement.
  • The policy does not apply to misconduct that is otherwise required to be disclosed, already public or otherwise known to the DOJ.

Under this new Mergers & Acquisitions Safe Harbor, which applies across the Department of Justice, companies that promptly and voluntarily disclose criminal misconduct with the Safe Harbor period, and then cooperate with the resulting investigation, engage in timely and appropriate remediation and pay applicable restitution and disgorgement, will receive a presumption of a declination. Once again, the key deadlines are as follows:

  • Companies must disclose misconduct discovered (whether pre-or post-acquisition) at the acquired entity within six (6) months from the date of closing.
  • Companies will then have one year from the date of closing to fully remediate the misconduct.

The 6 month and one-year deadlines are subject to modification depending on the specific circumstances and complexity of the transaction.  The acquired company can also qualify under the Mergers & Acquisition Safe Harbor Policy for voluntary self-disclosure benefits.  Interestingly, DOJ clarified that any misconduct disclosed under the Safe Harbor Policy will not implicate or be counted in any future potential recidivist analysis.

As with most new DOJ policy initiatives, these concepts have been around for some time. As far back as 2008, the DOJ in Opinion Release 08-02 laid out safe harbor concepts in mergers and acquisitions. This Opinion Release was followed by the FCPA Resource Guide, 1st edition, released in 2012 which brought these concepts forward. However, many defense counsel decried the lack of certainty in both of these initiatives. Now under this new Mergers & Acquisition Safe Harbor Policy, the benefits are laid out in black and white.

The DOJ has made clear that under this new Mergers & Acquisition Safe Harbor Policy organizations that do not perform effective due diligence or self-disclose misconduct at an acquired entity will be subject to full successor liability. DOJ’s objective is clear — they do not want to penalize companies with strong compliance programs from acquiring companies with weak compliance programs when they conduct proper due diligence and discover and self-disclose misconduct. With this new policy, the DOJ is encouraging companies to conduct robust pre-acquisition due diligence and post-acquisition integration. Compliance must have a prominent seat at the deal table if an acquiring company wishes to effectively de-risk a transaction.

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31 Days to More Effective Compliance Programs

31 Days to a More Effective Compliance Program: Day 6 – DOJ M&A Safe Harbor

In October 2023, Deputy Attorney General Lisa Monaco announced a new policy regarding M&A. It is a Mergers & Acquisitions Safe Harbor policy that encourages companies to self-disclose criminal misconduct discovered by an acquiring company during the acquisition of a target company. Under the policy, the acquiring party will receive a presumption of criminal declination if it promptly and voluntarily discloses criminal misconduct, cooperates with any ensuing investigation, and engages in appropriate remediation, restitution, and disgorgement.

Under this new Mergers & Acquisitions Safe Harbor, which applies across the Department of Justice, companies that promptly and voluntarily disclose criminal misconduct during the Safe Harbor period and then cooperate with the resulting investigation, engage in timely and appropriate remediation, and pay applicable restitution and disgorgement will receive a presumption of a declination. Once again, the key deadlines are as follows:

  • Companies must disclose misconduct discovered (whether pre-or post-acquisition) at the acquired entity within six (6) months from the date of closing.
  • Companies will then have one year from the date of closing to fully remediate the misconduct.

The 6 month and one-year deadlines are subject to modification depending on the specific circumstances and complexity of the transaction. The acquired company can also qualify under the Mergers & Acquisitions Safe Harbor Policy for voluntary self-disclosure benefits. Interestingly, the DOJ clarified that any misconduct disclosed under the Safe Harbor Policy will not implicate or be counted in any future potential recidivist analysis.

Three key takeaways:

1. The DOJ Mergers & Acquisitions Safe Harbor policy encourages companies to self-disclose criminal misconduct discovered by an acquiring company during the acquisition of a target company.

2. The DOJ is seeking to incentivize an acquiring company to timely disclose misconduct uncovered during the M&A process.

3. The DOJ has made it clear that under this new Mergers & Acquisitions Safe Harbor Policy, organizations that do not perform effective due diligence or self-disclose misconduct at an acquired entity will be subject to full successor liability.

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31 Days to More Effective Compliance Programs

One Month to a More Effective Compliance Program Through Culture: Day 4 – Assessing and Aligning your Corporate Values

One of the concepts enshrined in the Monaco Memo is that the Department of Justice (DOJ) will assess corporate culture for any company that may find itself under investigation for Foreign Corrupt Practices Act (FCPA) violations. This enshrinement is not exactly new as Deputy Attorney General (DAG) Lisa Monaco announced this new DOJ focus in October 2021 in her speech. The parameters of how the DOJ will assess culture are still being worked out but Chief Compliance Officers (CCOs) and compliance professionals need to consider this issue in the context of their own compliance programs and corporate culture in case the DOJ ever comes knocking. Over the next several blog posts, I will be exploring how a corporate compliance function can assess, monitor, and improve your corporate culture.

We begin with assessing your corporate values and then aligning them within your organization. In a recent Harvard Business Review (HBR) article, entitled What Does Your Company Really Stand For?, authors Paul Ingram and Yoonjin Choi explored these and other issues. The authors believe that corporate values are more critical than ever. I have adapted their work for the compliance professional.

The authors developed a five-step approach for values alignment.

1.     Identify the values within your employee base and create a values structure.

2.     Identify key priorities from strategy to determine what is the most important thing the organization can do to achieve its strategy.

3.     Wed values that serve both the organization and its employees.

4.     Begin the assessment process.

5.     Generate a final list of organizational values.

From the compliance perspective, the protocol. Recognizing that values are but one part of an overall corporate culture, gives you a mechanism to think through how to begin an overall assessment of your organization. Values do make up a portion of an overall culture. Through the engagement advocated herein, you can not only get a good reading on such key values as trust and respect but, more importantly, learn how to incorporate them as overall assets into your corporate culture.

Three key takeaways:

1. The Monaco Memo enshrined the concept that the DOJ will assess culture.

2. What does your company stand for?

3. When properly aligned, values can be a powerful part of corporate culture.

Check the free webinar on the new tool, The Culture Audit with Tom Fox and Sam Silverstein on Tuesday, November 20, 12 CT. For more information and registration, click here.