Not Content to Just Play the Hits, DOJ’s New Corporate Enforcement Policies Bring A Fresh Spin to Corporate Enforcement

March 10, 2023By John W.M. Claud & Douglas B. Farquhar

The annual ABA White Collar Crime Institute is a popular venue for prominent Department of Justice officials to make speeches announcing new policies.  This year, Deputy Attorney General Lisa Monaco took the stage, and her speech included many of the well-known past hits from the corporate compliance chart.  But she also mixed some of DOJ’s new tracks into her remarks that had her audience paying attention, even if they weren’t necessarily singing along.

Of course, the traditional corporate enforcement chart-toppers were all there for the DAG.  Prevent corporate wrongdoing before it happens.  Operate legitimate, bona fide, and well-resourced compliance programs.  Cooperate to earn credit when prosecutors make charging decisions.  Inspire a culture of compliance.  Classics, all.  But Ms. Monaco’s remarks on DOJ’s new material was worth listening to, as she hit on three topics that added some new deep cuts to the DOJ corporate enforcement catalogue.

First, Ms. Monaco focused on a DOJ policy change that came out in February:  all the Department’s litigation components will follow consistent voluntary self-disclosure corporate resolution principles.  That means that the Criminal Division, 94 U.S. Attorney’s Offices, and, importantly for readers of this blog, the Civil Division’s Consumer Protection Branch (CPB), will all consistently reward corporations that voluntarily disclose and remediate misconduct.  DOJ will not seek guilty pleas or prosecute companies in such cases, creating what Ms. Monaco said was national transparency and consistency.

Our firm has a great deal of experience in pleading with the Government not to prosecute clients that have discovered serious misconduct by employees (including management) and disclosed it to the Government voluntarily.  The way this usually evolves is that the Board of Directors or a new CEO or a Quality Unit head learns that there has been misconduct – occasionally involving fraud – that he, she, or they previously were not aware of.  They call us and ask us what to do.  We tell them that they need a thorough investigation into the misconduct and if there is other wrongdoing.  We might conduct numerous interviews, look at thousands of documents, and travel to whatever locations are necessary.  We prepare a report that we share with our client and make a recommendation to our client about whether to disclose the information to FDA.

If the facts and the law warrant, and with the client’s approval and participation, we then set up a meeting.  We pledge to cooperate with FDA, and we plead with FDA to recognize that we engaged in a thorough investigation and provided a full disclosure.  As appropriate, we ask that FDA give us credit and not take harsh enforcement action or refer the matter for criminal investigation, and potentially, prosecution.

Our colleague John Fleder has long advocated for a voluntary disclosure program at FDA.  He wrote about the lack of any assurance that FDA would appropriately credit disclosure in a 1999 FDLI article.  Many federal agencies do have policies that provide a safe harbor for voluntary disclosures, but FDA does not.

And, FDA still doesn’t.  But the Deputy AG’s speech was important for regulated industry because FDA doesn’t litigate its own cases.  It relies on the Department of Justice to do so, either in the form of CPB or in individual U.S. Attorney’s Offices around the country.  CPB enforces the FDCA, FTC Act, and Controlled Substances Act, and importantly for companies in this space, CPB’s voluntary disclosure policy not only exempts companies from guilty pleas, but also potentially from the imposition of corporate monitors.

Second, Ms. Monaco announced that DOJ would pursue financial claw backs to tie executive compensation to compliance.  Going forward, corporate resolutions with DOJ will include a requirement for corporations to link compliance to compensation systems.  The Department will reward corporations with reductions in criminal fines, credited to the amount of compensation the company is trying to claw back from culpable executives and employees.  Successful claw backs will be the company’s reward to keep.  The DAG also announced that DOJ will reward good-faith but unsuccessful claw back attempts.

Finally, we learned that DOJ is pouring resources into the offices that factor heavily in the corporate compliance work there.  Offices getting more funding include the National Security Division and the Banking Integrity Unit within the Criminal Division’s Money Laundering and Asset Recovery Section.  And again, relating to food, drug, and device matters—and the potentially related issues of data privacy and cybersecurity that we have recently blogged on in prior posts—CPB is bringing on several new enforcement lawyers in another large-scale expansion for that office.

The current leadership at Justice has been rigorously evolving its strategies to address corporate crime.  DOJ isn’t just playing the same old hits these days, and compliance departments will need to learn to love the new material.

Categories: Enforcement