New DOJ Policies Signal Substantial Expansion of Enforcement Scrutiny, Law Firms Say

The new Department of Justice enforcement and disclosure policies (see 2110280051) could substantially increase scrutiny on corporate trade violators, law firms said, especially those with a history of misconduct. The policies, announced last week by Deputy Attorney General Lisa Monaco, revealed the Biden administration’s “extensive agenda that is designed to be tough” on corporations, Wiley Rein said, and may foreshadow more changes. “As she made clear,” the firm said Oct. 29, “the Biden DOJ is serious about revamping corporate enforcement and this is just the first wave of reform.”

Monaco outlined a series of changes to how the agency will approach cooperation credit, prior violations and corporate monitors, all of which are important for companies under investigation for sanctions, export control and foreign bribery violations. In a change to DOJ’s prior misconduct policies, the agency will look more broadly at a company’s history of violations, regardless of whether they’re similar to the misconduct at issue.

Monaco said this shift will help the government better assess a company’s “overall commitment to compliance,” but law firms said this change may hold companies to unfair standards. “While the goal of the policy may be laudable under certain circumstances, a company generally should not be held responsible for the misconduct of legally separate entities where they act under different authority -- parents, affiliates, and subsidiaries,” Wiley Rein said. The firm also said “learning from and improving compliance vulnerabilities should diminish the weight of prior conduct,” calling the new policy “troubling.”

The new approach could “sweep broadly,” partly because Monaco didn’t specify how far back the agency will go to review a company’s history of misconduct, Gibson Dunn said Oct. 29. But Monaco cited the agency's reviewing a company’s antitrust, tax and sanctions violations that all occurred within a few years of each other, which the firm said may suggest “a focus on more recent violations.” Regardless, the new policy unquestionably “broadened the scope of past misconduct that prosecutors may take into account,” Mayer Brown said Oct. 29.

In another change, DOJ rescinded a guidance that suggested corporate monitors are rare or the “exception” under a settlement agreement. Companies should now be aware the agency “can freely use this tool when it has limited or questionable trust that a company” will follow through on its compliance commitments, Wiley Rein said, such as if the business has a history of misconduct.

This could signal the Biden administration is preparing to “loosen prior guardrails” around monitorships, Gibson Dunn said, especially when compared with the previous administration. During Donald Trump's administration, Mayer Brown said, DOJ imposed only five monitors for violations of the Foreign Corrupt Practices Act. Monaco’s comments “suggest that the Trump-era practice of limiting monitorships is over,” Mayer Brown said. “In practice, that new guidance will likely spark a substantial increase in monitorships.”

A third change shifted and expanded requirements companies must meet to receive cooperation credit during a DOJ investigation. But Riley Wein stressed that the expanded requirements don’t guarantee corporation credit -- it only makes businesses eligible for credit, which could dissuade companies from cooperating.

“Setting such broad and ill-defined standards may disincentivize or delay cooperation as companies assess the benefits of revealing information relevant to defenses or try to meet the standard,” the firm said. “In turn, this has the potential for reducing or delaying the information reaching DOJ, which is the opposite goal of the policy change.” DOJ didn’t comment.

Compliance in the coming months may be “more important than ever,” Reed Smith said Oct. 29, especially as more enforcement policy changes are coming. “These bold policy shifts are just the tip of the iceberg,” Wiley Rein said. The firm expects the DOJ’s new Corporate Crime Advisory Group -- which has a “broad mandate” -- to submit more policy revisions and bolster the agency’s “rigorous” enforcement.

“Companies need to not only establish effective compliance programs but routinely review and update them,” Wiley Rein said. “As an added incentive, implementing a program and documenting improvements will also serve a company well should it find itself under investigation.”