On January 17, 2023, Assistant Attorney General (AAG) Kenneth A. Polite, Jr. delivered remarks to an audience at the Georgetown University Law Center, announcing changes to the Criminal Division’s Corporate Enforcement Policy (CEP). These changes to the CEP follow the September 15, 2022 direction from U.S. Deputy Attorney General Lisa Monaco, which we previously covered, for each Department of Justice (DOJ) Department to publish policies around voluntary self-disclosure, and to clarify the benefits of self-reporting. Although the Criminal Division already has such a policy, AAG Polite noted that the DAG’s direction was an opportunity to take stock of the existing policy and strengthen it.
The changes to the CEP, framed as introducing “significant and concrete incentives to self-disclose misconduct” and incentives for companies that do not self-disclose to go above and beyond to cooperate with the Criminal Division, further reflect the AAG’s previous acknowledgment that the Criminal Division cannot fully identify and address individual culpability for corporate crime without companies’ robust self-disclosure and cooperation.
Existing policy provides that there is a presumption of a declination where, absent aggravating circumstances, a company has voluntarily self-disclosed and timely remediated misconduct. The revised CEP expands the circumstances under which companies can benefit from self-disclosure and/or cooperation to include:
- Where a company voluntarily self-discloses misconduct, but there are aggravating circumstances present such that a criminal resolution like a DPA, NPA, or guilty plea would otherwise be warranted; and
- Where a company does not voluntarily self-disclose, but otherwise fully cooperates and remediates the misconduct.
Voluntary Self-Disclosure in Cases with Aggravating Circumstances
The revised CEP introduces a new policy that even where aggravating circumstances are present such that there is no presumption of declination, prosecutors may nonetheless determine that a declination is appropriate if the company can demonstrate that it has met each of the following three requirements:
- The voluntary self-disclosure was made immediately upon the company becoming aware of the allegation of misconduct;
- At the time of the misconduct and the disclosure, the company had an effective compliance program and system of internal accounting controls that enabled the identification of the misconduct and led to the company’s voluntary self-disclosure; and
- The company provided extraordinary cooperationwith the Department’s investigation and undertook extraordinary remediation.
The most notable of these is the concept of “extraordinary cooperation,” which is distinct from the “full cooperation” still required for companies to be eligible for other CEP benefits. The AAG outlined that to be eligible for extraordinary cooperation credit, “companies must go above and beyond the criteria for full cooperation… and not just… gold standard cooperation” and that the difference between full and extraordinary was “more in degree than kind.”
In cases where a company makes a voluntary disclosure, fully cooperated, and timely remediated, but the Department nevertheless requires a criminal resolution, the CEP provides a baseline reduction of at least 50% (and up to 75%), of the U.S. Sentencing Guidelines fine range, except in the case of a criminal recidivist. This change increases the maximum possible reduction under the prior CEP—which had been 50%–and introduces a floor to a potential penalty reduction of “at least 50%.”
The AAG also noted that the government will not generally require a corporate guilty plea, even for criminal recidivists, absent multiple or particularly egregious aggravating circumstances. And the government will generally not require a corporate monitor where the company has demonstrated an effective compliance program and remediated the root cause of the misconduct.
No Self-Disclosure, but Full Cooperation and Remediation
The new CEP also increases the possible penalty reduction available to a company that does not self-disclose but fully cooperates and makes timely and appropriate remediation. In these circumstances, the Criminal Division now will recommend up to a 50% reduction off the low end of the Guidelines fine range, which is twice the maximum reduction available under the prior iteration of the CEP.
The AAG noted that in all such cases, prosecutors will have the discretion to determine the specific percentage reduction and starting point in the range based on the particular facts and circumstances. In the case of a corporate recidivist, for example, the reduction will likely not be off the low end of the range. He also underscored that regardless of the circumstances, every company starts with zero credit, must earn every percentage reduction, and that the 50% reduction will “not be the new norm.”
And to help provide clarity to companies, or their counsel, facing disclosure decisions, the revised CEP outlines the factors and criteria the government will use to assess whether a company has made a “voluntary self-disclosure,” achieved “full cooperation,” and/or “timely and appropriate remediation” pursuant to the policy.
This revised CEP is an effort to highlight the benefits of self-reporting misconduct, perhaps because the existing policy is not driving the level of self-disclosure that the Criminal Division anticipates there should or could be. The revisions are more an evolution than a revolution and do little to clarify some of the key concerns companies face with these issues. As a result, the self-reporting decision remains an extraordinarily complex one, requiring an assessment of the reputational and financial consequences of a lengthy DOJ investigation, as well as the likely end result.
Still, in announcing these revisions, the AAG took the opportunity to tout the recent successes of the Criminal Division’s Fraud Section, including securing convictions of over 250 individuals, entering into seven corporate criminal resolutions, and two announced declinations (suggesting there have been other, nonpublic declinations) In addition, the Money Laundering and Asset Recovery Section convicted more than two dozen individuals, and secured two corporate guilty pleas, one of which included the forfeiture of $2 billion. This recent track record and the warning that “there will be more in 2023” should not be taken lightly.
This warning and the changes to the CEP, married with the Department’s intensifying focus on corporate compliance, internal policing, and individual wrongdoing, emphasize that companies must constantly evaluate and refine their compliance programs, implement enhancements consistent with the Department’s expectations, and carefully analyze whether to take the proactive steps to self-report identified misconduct.
 As to what constitutes aggravating circumstances, the AAG provides a non-exhaustive list, including “involvement by the company’s executive management in the misconduct; a significant profit to the company from the wrongdoing; egregiousness or pervasiveness of the misconduct within the company; or criminal recidivism.”