White Collar Crime and Corporate Compliance
The Department of Justice’s (DOJ) Criminal Division recently announced new guidance intended to guide DOJ prosecutors in evaluating compliance programs in the context of investigations of business entities. Specifically, the new guidance is meant to assist prosecutors in making informed decisions as to whether, and to what extent, a company’s compliance program should be considered in making charging decisions. This detailed guidance document addresses a broad range of considerations, from the design of compliance programs to implementation to application.
This new guidance, entitled “Evaluation of Corporate Compliance Programs,” clearly emphasizes the importance of effective compliance in the context of the department’s consideration of corporate culpability, while reaffirming that DOJ does not use any rigid formula when assessing the effectiveness of such programs. The guidance acknowledges that compliance programs must be evaluated in the specific context of the relevant criminal investigation, requiring an individualized determination in each case. Nevertheless, this new guidance confirms that three fundamental issues are relevant to the analysis in any case:
(1) The program’s design—The guidance urges prosecutors to evaluate whether the target company’s compliance program is appropriately designed to include clearly articulated policies, appropriate procedures for reporting, and adequate training and auditing mechanisms;
(2) The program’s implementation—Prosecutors are further instructed to evaluate whether a company’s program is “implemented, reviewed, and revised … in an effective manner.” This is to be determined by how well management has clearly articulated and staffed the program, and whether appropriate disciplinary processes are in place and are enforced; and
(3) The program’s effectiveness—The guidance acknowledges that the existence of misconduct does not, by itself, mean that a compliance program did not work, and encourages prosecutors to consider how the misconduct was detected and what remedial actions, if any, have been taken in response to the discovery of the problem.
This new DOJ guidance should serve as a reminder to corporate officers and directors of the importance that DOJ places on compliance efforts when evaluating whether to charge, not charge, or otherwise agree to a deferred prosecution agreement or non-prosecution agreement. Companies of all types and sizes are well-advised to take compliance seriously. Good compliance is not only good business, it is a good way to avoid potential criminal liability.
Compliance programs should be designed to meet the needs of a company’s specific risks and should be modified over time in order to keep up with changes to the business’s operating realities and evolving risks. These fundamentals are not new, but DOJ’s latest guidance makes clear that they are more important than ever and will be closely reviewed by prosecutors as a significant factor when evaluating a company’s fate when misconduct does occur.