Loyola University Chicago School of Law, JD 2024
In an effort to deter corporate crime, the Justice Department (DOJ) has implemented a new policy aimed at giving chief compliance officers more authority. Chief Compliance Officers (CCOs) may now need to certify the integrity of their compliance programs and be personally liable if their programs do not “reasonably prevent and deter compliance issues.” According to Brian Michael, a former chief compliance officer (CCO), some industry professionals fear that such a policy would place compliance officers in a position to be personally liable for decisions that they have little say over. There is also worry that implementing such a policy would place CCOs in direct conflict with senior executives. However, Kenneth Polite, assistant attorney general in charge of the DOJ’s criminal division, insists that the new policy will place CCOs in a better position to ensure the integrity of their compliance programs. Polite hopes to force corporations to invest in compliance now rather than pay later.
The Biden Administration’s crackdown on corporate crime.
Late last year, Attorney General Merrick Garland announced that the DOJ would be renewing its focus on corporate crime by increasing its budget and placing more tools in the hands of DOJ prosecutors. This move by the DOJ follows President Biden’s promise to go after white-collar crime.
The DOJ will have the opportunity to employ one of its most novel tools against corporate crime in its plea agreement with the multinational company, Glencore. Glencore is an Anglo-Swiss multinational commodity and trading and mining company. The mining company operates in markets across the globe. Glencore recently settled bribery and corruption charges in the U.S., U.K., and Brazil at an expected cost of $1.2 billion dollars. Glencore is expected to admit to violating the Foreign Corrupt Practices Act by designing a multinational scheme to bribe foreign officials.
The new policy
Over the past decade, the DOJ has announced several damages awards as large, if not larger than, the current plea deal with Glencore, including $1.4 billion from Reckitt Benckiser, $2.3 billion from Pfizer, and $3 billion from false claims act cases in 2019 alone. Although a settlement agreement of this size is not unheard of, the details of the plea deal are drawing the attention of the nation’s CCOs.
Former compliance officer and current AAG Polite first unveiled this policy in a plea agreement with Glencore, which requires Glencore to modify and improve its safety program. The DOJ will require Glencore’s compliance officer to personally certify that its compliance program is “reasonably designed to prevent and detect compliance issues.”
In its agreement with the DOJ, Glencore agreed to have two independent compliance monitors create a compliance program that addresses and protects against current and future compliance liabilities. These independent compliance monitors would have to personally certify the integrity of Glencore’s compliance program. This is a huge step away from the norm, because corporate compliance officers are not usually held personally liable for the conduct of executives. Should the company’s compliance program be found to not reasonably prevent and deter compliance issues, Glencore’s compliance monitors may be held personally liable.
The originality of the DOJ plan means that no one really knows how exactly this will all take shape. Beyond the legal implications, CCOs are also worried that such a policy will put them at odds with senior executives. The implication of being personally liable for a corporation’s conduct may force some CCOs to take firmer stances against senior executives.
At a Compliance Week event earlier this year, AAG Polite described this new approach to corporate compliance as a means to elevate the stature of compliance officers in corporate America. AAG Polite, being a former CCO, explained that the DOJ’s new policy does not seek to punish compliance officers but to empower them. Polite asserts that there are too many compliance officers that have too little say over what their companies do. According to Polite, corporations view compliance programs as sectors that generate no revenue and serve to draw money away from the bottom line. Polite believes that by requiring compliance officers to sign off on the compliance program, they will be in a better position to demand more resources and shape the program into an effective program. Polite maintains that policies like the one described above will incentivize corporations to change their attitudes towards compliance. Polite said, “invest in compliance now or pay later.”
AAG Polite’s newest policy adds a powerful tool to the DOJ’s tool chest. However, whether the policy will go on to aid the fulfillment of President Biden’s promise to crack down on white-collar crime is still yet to be seen. Although AAG Polite envisions the new policy being a step first towards a change in how corporations view compliance, only the corporations operating at the highest levels of fraud will likely be subject to the policy. Companies not fearing a DOJ investigation will likely not see an incentive to upset the status quo and their corporate hierarchy by giving compliance officers a larger role.
The argument could also be made that the new policy resulted in the DOJ not cracking down on Glencore as hard as it could have. Glencore likely avoided additional damage awards by agreeing to an independent monitor. The intangible value of having a stronger compliance program at Glencore may not translate into the sort of “crackdown” a larger damages award would have.
Ultimately, one thing is clear, the DOJ will have to take special care in how it chooses to enforce the policy. A strict enforcement approach may deter compliance officers from putting themselves at risk of being personally liable for their corporation’s compliance program.