Loyola University Chicago School of Law, JD 2024
In an action meant to incentive companies to self-report their wrongdoings, the Justice Department (DOJ), has announced big changes to its Corporate Enforcement Policy (CEP). The Department of Justice has long been fighting against corporate criminality in its pursuit to maintain the integrity of the financial market. On January 17, Assistant Attorney General Kenneth A. Polite, Jr., announced revisions to the Criminal Division’s Corporate Enforcement Policy. Some of the revisions include up to a 75 percent reduction in fines for companies that voluntarily report their wrongdoings and fully cooperate with investigations and up to a 50 percent reduction for companies that fully cooperate with investigations even if they do not voluntarily disclose the crime. These incentives further soften the aggressive stance that the Biden administration originally took against Corporate America in 2021.
Background of the CEP
The Criminal Division of the DOJ has been urging companies to self-report their violations and fully cooperate with government investigations for years. In 2016, DOJ’s Criminal Division introduced the Foreign Corrupt Practices Act (FCPA) Pilot Program, offering more concrete and transparent guidance as to how a company could earn fine reductions and other incentives through self-disclosure, cooperation, and remediation. In 2017, the FCPA Corporate Enforcement Policy was introduced, replacing the FCPA Pilot Program and became part of the DOJ’s policy manual. The policy created a “presumption that [a] company will receive a declination” when it voluntarily self-discloses, fully cooperates, and timely and appropriately remediates misconduct, absent aggravating circumstances. However, there was some indication that the FCPA Corporate Enforcement Policy might not be having its intended effect, with fewer declinations being issued under the policy than expected. The DOJ has continued to revisit the policy since then, and the AAG announced big changes to the policy on January 17, 2023.
The new revisions
The Department of Justice’s (DOJ) existing policy outlines a set of guidelines for companies to follow in order to receive a declination of prosecution. This includes voluntary self-disclosure, full cooperation, and timely and appropriate remediation of misconduct. However, this presumption of declination may be overcome if certain aggravating circumstances are present, such as involvement by executive management in misconduct, significant profit to the company, or criminal recidivism. Additionally, the policy offers the potential benefit of a presumption of declination to companies that uncover misconduct by subsidiaries or other entities during the M&A due diligence process and then self-report that misconduct to the Criminal Division. If a criminal resolution is warranted despite self-disclosure, the policy currently offers a 50 percent reduction off the low end of the applicable Sentencing Guidelines penalty range. This policy demonstrates the DOJ’s commitment to rewarding companies that take responsibility for misconduct and take steps to address it.
On January 17, 2023, Assistant Attorney General (AAG) Kenneth Polite, Jr. made major changes to the Corporate Enforcement Policy. Under the revised CEP, companies facing aggravating circumstances may still be eligible for a declination of prosecution if they can demonstrate that they made an immediate self-disclosure upon becoming aware of the misconduct, had an effective compliance program and system of internal accounting controls that enabled the identification of the misconduct and led to the self-disclosure, and provided extraordinary cooperation with the DOJ’s investigation and undertook extraordinary remediation. Companies who fall under this category but still need a criminal resolution will be recommended by the Criminal Division to the sentencing court at least 50 to 75 percent off of the low end of the U.S. Sentencing Guidelines fine range, which is an increase from the maximum 50 percent reduction from the previous policy. The CEP also provides incentives for companies that do not voluntarily self-disclose but still fully cooperate and timely and appropriately remediate by recommending up to a 50 percent reduction off the low end of the Sentencing Guidelines fine range. The policy applies to all Criminal Division corporate resolutions and gives prosecutors more discretion in determining the appropriate outcome for a company.
With more incentives becoming the new normal, it is clear that the DOJ is determined to fight against corporate crime but needs the help of corporations in order to properly combat and prevent it. The AAG ended his announcement by saying that he believes the revised policies will help the DOJ prosecute individual wrongdoers within the companies. Since the companies who follow the policy would be complying with DOJ investigations, it will be easier for the Criminal Division to find the root of the company’s misconduct. While these changes are giving corporations more reasons to voluntarily disclose, it is yet to be seen if this will work as the DOJ hopes or if a stricter model in place would be more likely to combat corporate misconduct.