United States: DOJ's Recent Enforcement Policy Changes Further Incentivize Effective Corporate Compliance Programs

Key Points:

  • The DOJ recently highlighted the benefits of robust corporate compliance programs and its interest in incentivizing such programs as the common thread running throughout its recent enforcement policy changes, including the False Claims Act (FCA) credit policy announced on May 6, 2019, and the criminal enforcement reforms announced on April 30, 2019.
  • Company compliance programs play a significant role in DOJ enforcement, not only in determining the nature and extent of the credits that companies can earn, but also in determining whether a civil or criminal enforcement action will proceed at all.
  • In the FCA context, the DOJ considers the nature and effectiveness of a company’s compliance program in evaluating whether the FCA applies.
  • Similar changes in the Antitrust Division’s enforcement policy may be coming.
  • Companies should assess their existing programs against the DOJ’s updated guidance for such programs and industry best practices to ensure that they are positioned to receive the maximum credits and benefits made available by the new policies.

On May 20, 2019, Principal Deputy Associate Attorney General Claire McCusker Murray addressed the annual Compliance Week Conference regarding the new enforcement policies previously announced by the DOJ, including the Foreign Corrupt Practices Act (FCPA) Corporate Enforcement Policy adopted in November 2017 and updated in March 2019, the FCA credit policy announced by Assistant Attorney General Joseph Hunt on May 6, 2019, and the updated guidelines on how prosecutors should evaluate a company’s compliance program in the context of an investigation of potential criminal misconduct announced by Assistant Attorney General Brian Benczkowski on April 30, 2019. Murray discussed the benefits of effective compliance programs and the significant role that such programs play in understanding and implementing each new DOJ enforcement policy.

Why DOJ Incentivizes Corporate Compliance Programs

In her remarks, Murray posed and answered the question of “why the Department is in the business of promoting compliance programs.” She noted that compliance programs and officers are the first line of defense against corporate misconduct “because they work every day to prevent corporate misconduct from happening in the first place.” Even when compliance personnel are not able to prevent wrongdoing from occurring, “you and your compliance programs make it possible to detect misconduct early, take prompt remedial action, determine whether a voluntary disclosure is appropriate and ultimately move forward with the benefit of lessons learned.” Murray also characterized effective corporate compliance as a “major investment” that “pays important dividends.” She noted that “[c]ompanies with smart compliance programs are more investible and less risky, they make better partners for commercial ventures and they last longer, creating more jobs along the way.” Finally, by encouraging or reflecting a culture of compliance and fair dealing, they help create a level playing field, and “business is at its best when there is a level playing field.”

How DOJ Incentivizes Corporate Compliance Programs

Murray discussed several recent DOJ enforcement credit policies and explained the role played by corporate compliance programs in those policies. Murray noted that implementation of an effective ethics and compliance program “is necessary to receive the maximum benefit” under the DOJ’s FCPA Corporate Enforcement Policy. The maximum benefit is available only to FCPA defendants who voluntarily disclose misconduct, cooperate with the Department’s investigation and take remedial measures, including implementing or improving an effective compliance program.

The same is true of the DOJ’s recently announced FCA cooperation policy, which “takes a page from” the FCPA Corporate Enforcement Policy. Like that policy, the FCA cooperation policy provides credits for companies that voluntarily disclose misconduct, cooperate in ongoing investigations or undertake remedial measures such as implementing or improving compliance programs. Murray indicated that compliance programs and personnel “are at the forefront of all these things; [they] allow the company to detect misconduct early, to conduct the internal investigation, to take corrective action, to determine if a disclosure to the government is appropriate and, if so, to cooperate with the government’s investigation.” For this reason, “we want to provide the incentive for you to do this important work.”

Murray identified two important incentives that bear upon a company’s compliance program. The first is the reduction in damages and penalties that can result from self-disclosure, cooperation and remediation. Murray explained that depending on the facts and circumstances, when the company voluntarily (a) discloses FCA violations, “including all individuals substantially involved in or responsible for the misconduct,” (b) takes appropriate remedial action and (c) provides maximum cooperation, the policy permits a substantial “discount” of damages and penalties “down to the government’s single damages, plus lost interest, costs of investigation and, in a qui tam case, the share going to the whistleblower.”

The second incentive is focused on the compliance program that exists at the time of the violation. Murray stated that the DOJ will take into account the nature and effectiveness of that program in evaluating whether the alleged violation was committed “knowingly” and “therefore whether the False Claims Act is an appropriate remedy in the first instance.” In other words, an effective compliance program can potentially give a company two bites at the FCA credit apple: the first, in the form of negating the scienter requirement for FCA liability and thereby eliminating the prospect of FCA damages and penalties altogether; and the second, in the form of reducing or eliminating penalties and the damages multiplier through enabling or facilitating voluntary disclosure, full cooperation and effective remediation, including root cause analysis and corrective action.

Murray’s remarks suggest that effective compliance programs and personnel not only relate to these incentives, but are “central” to enabling companies to capitalize on both of them. For example, she noted that “even if the government has already initiated an investigation . . . a company may receive credit for making a voluntary self-disclosure of other misconduct outside the scope of the government’s existing investigation that is unknown to the government.” An effective compliance program substantially increases the odds that a company will be able to detect and disclose additional misconduct, increasing the likelihood that the company will receive credit for voluntary self-disclosure. An effective compliance program would also provide for root cause analysis, appropriate disciplinary measures and corrective action to prevent reoccurrences of the misconduct, thereby making it more likely that the company will receive credit for effective remediation. Finally, an effective compliance program evidences a lack of reckless disregard or deliberate ignorance, and thereby allows the company to assert that disclosure was not required by law and that the company is therefore entitled to the credit for voluntary disclosure.

How DOJ Decides Which Corporate Compliance Programs Are Worthy of Credit

Murray acknowledged that in order for the DOJ’s incentives to work, the DOJ must be able to distinguish an effective compliance program from an ineffective one, and the industry must have confidence in the DOJ’s ability and willingness to do so. “Having expertise in compliance on both sides of the table advances [DOJ’s] mission of pursuing justice.” Accordingly, the DOJ’s Criminal Division has begun a hiring initiative to recruit prosecutors with in-house compliance experience and implemented a “robust” training program “that not only addresses compliance programs generally, but also industry-specific compliance issues, so that healthcare prosecutors can develop expertise in healthcare industry compliance, financial-crime prosecutors can develop expertise in banking industry compliance and so on.” Murray stated that DOJ Civil Division attorneys would be participating in these training sessions and that the DOJ would also consider hiring lawyers with in-house compliance experience. In addition, the Criminal Division recently updated its guidance for assessing the effectiveness of corporate compliance programs, and DOJ civil attorneys will use that guidance in evaluating the effectiveness of such programs for purposes of implementing the FCA credit policy.

How Corporate Compliance Programs Can Be a Double-Edged Sword

Murray pointed out that an ineffective compliance program could potentially be as harmful for a company’s enforcement posture as an effective program could be helpful. Not only will a “fig-leaf” program not garner the company any credit under the DOJ’s policies, but the DOJ will look at evidence that a company disregarded or circumvented its compliance program as evidence that the company acted “knowingly” for FCA purposes. Murray cited the example of a company that ignored fraud complaints conveyed through its compliance program, fired its compliance officer and went after the individuals who had expressed their concerns about the company’s potential fraud. “These are not best practices” and constituted “highly relevant evidence” that the company “recklessly disregarded the law in violation of the [FCA],” i.e., acted knowingly. The same would be true of other compliance systems that a company circumvents or fails to adhere to. By contrast, “a robust compliance program that the company does follow and that identifies potential problems that are timely addressed by the company could demonstrate good faith and lack of scienter or otherwise be a strong mitigating factor in the government’s assessment of liability.”

How Compliance Programs Can Help Companies Deal with Subregulatory Guidance

Murray provided useful advice to company compliance personnel faced with agency guidance documents—“agency rules that come in the form of ‘Dear Colleague’ letters, ‘Frequently Asked Questions,’ bulletins and other informal guidance that exists on websites, manuals and everywhere in between.” Because agencies “can be tempted to use [such] subregulatory guidance as a short-cut when they should be undertaking notice-and-comment rulemaking instead,” the Brand Memo and subsequently the Justice Manual limit the ways in which such guidance can be used to establish violations of law in both civil and criminal enforcement proceedings. Murray explained that “when faced with new agency guidance, the best first step for compliance personnel is to determine the extent to which the guidance mirrors the requirements of the underlying statutes and/or regulations in light of binding judicial precedent.” “[Y]ou’ll want to ensure that your business practices are consistent with the portion of the guidance that mirrors binding law.” She explained that the “key is to distinguish between . . . the part that mirrors what the law requires and everything else.”

According to Murray, “everything else” could include language suggesting obligations that go beyond what the law requires, language that represents the agency’s interpretation of an ambiguous statute or regulation or language recommending best practices. For agency language interpreting ambiguities or recommending best practices, “you make a good-faith risk calculation—really, a business decision, informed by a legal assessment—about whether to follow an agency’s subregulatory guidance, which may be persuasive, or whether to take another lawful approach that differs from the guidance.” Murray tempered this advice, however, by pointing to the Supreme Court’s decision in Auer, which requires courts to defer to agency interpretations of their own ambiguous regulations, and the possibility that the Court will revisit Auer deference this term in Kisor v. Wilkie. “Unless and until the Supreme Court charts a new course with respect to Auer deference in Kisor v. Wilkie this term, an important part of [a company’s] good-faith risk calculation will be informed by [its] legal team’s analysis of whether the guidance at issue is likely to be accorded [Auer] deference.”

Potential Enforcement Policy Changes for Antitrust Defendants

As a self-proclaimed “teaser” at the end of her remarks, Murray predicted that the DOJ’s Antitrust Division would soon move away from “its previous refrain that leniency is the only potential reward for companies with an effective and robust compliance program.” Instead, referring to recent statements by Assistant Attorney General for the Antitrust Division Makan Delrahim, Murray stated that the Antitrust Division would “do more to reward and incentivize good corporate citizenship” by formally recognizing that “even a good corporate citizen with a comprehensive compliance program may nevertheless find itself implicated in a cartel investigation.” Accordingly, instead of just crediting extraordinary prospective commitment to corporate compliance, the Antitrust Division may soon be in a position to “credit robust compliance programs at the charging stage, even when efforts to deter and detect misconduct were not fully successful in [a] particular instance.”

Conclusion

As we stated in our alert regarding the DOJ’s FCA credit policy, the enforcement credits provided by the DOJ are not guarantees, and its guidance for evaluating the effectiveness of corporate compliance programs are not free from subjectivity and ambiguity. If the purpose of the DOJ’s credits is to incentivize companies to implement effective compliance programs and to disclose conduct that they are not legally compelled to disclose, then the DOJ must fully and liberally apply the credits and guidance that its new policies describe. Murray’s remarks at the Compliance Week Conference suggest that the DOJ recognizes this, and that it intends to work with the industry to make its incentives and credits work in practice. Individual companies, therefore, appear to have much to gain by examining their compliance programs to ensure that they are in line with the DOJ’s evaluation guidance and industry best practices.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Akin Gump Strauss Hauer & Feld LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Akin Gump Strauss Hauer & Feld LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions