New DOJ Policy Purports to Prevent Piling-On of Penalties

July 9, 2018By Anne K. Walsh & Rachael E. Hunt

Rather than rolling out the red carpet, DOJ has been highlighting with little fanfare a policy that could prove to be a powerful negotiating tool for companies in the government’s crosshairs. First announced by Deputy Attorney General Rod Rosenstein here, and later reinforced by Acting Associate Attorney General Jesse Panuccio here, DOJ seeks to bring all relevant government actors together when resolving multiple investigations involving the same misconduct. DOJ’s new policy “encourages coordination among Department components and other enforcement agencies when imposing multiple penalties for the same conduct.” Given that a single incident can subject a company to federal, state, and administrative penalties, DOJ’s policy could help provide requisite certainty to regulated industry.

The DOJ policy invokes the familiar football term “piling on,” a situation when multiple players continue to jump onto an existing pile of players who have already tackled an opponent, and thus ending the play. DOJ’s policy discourages “piling on” by instructing various law enforcement entities to appropriately coordinate in imposing penalties on a company, to avoid the “risk of repeated punishments that may exceed what is necessary to rectify the harm and deter future violations.” The new policy also requires DOJ to consider the impact on innocent stakeholders (e.g., employees, customers, and investors) who seek to resolve problems, and to assess “whether devoting resources to additional enforcement against an old scheme is more valuable than fighting a new one.”

The new policy, which has been incorporated into the U.S. Attorneys’ Manual here, has four key features:

  1. Criminal enforcement authority cannot be used to persuade a company to pay a larger settlement in a civil case, such as under the False Claims Act. Such misuse of power would undoubtedly constitute an ethical violation, but the new policy reinforces this principle for aggressive prosecutors.
  1. DOJ components must coordinate with each other to achieve an overall equitable result. This includes crediting and apportioning financial penalties, fines, and forfeitures.
  1. Coordination also is expected among federal, state, local and foreign enforcement authorities.
  1. Last, the policy identifies factors for determining when multiple penalties would be warranted. Relevant factors include the egregiousness of the wrongdoing; statutory mandates regarding penalties; the risk of delay in finalizing a resolution; and the adequacy and timeliness of a company’s disclosures and cooperation with the Department.

Importantly, both DAG Rosenstein and Acting AAG Panuccio highlighted a key benefit of increased coordination by government stakeholders: identifying culpable individuals and holding them accountable. This mantra has been repeated numerous times, most recently in the 2015 Yates memorandum, also available in the USAM.

While DOJ’s new policy seems promising, a practical limitation exists: although DOJ seeks coordination among multiple agencies and regulators, the policy is only binding on DOJ. Although DOJ handles enforcement actions on behalf of many federal government agencies, including FDA, it does not speak for all federal agencies (e.g., SEC). Foreign regulators and state and local enforcement agencies must buy into DOJ policy for true effectiveness.

Categories: Enforcement