How to Navigate DOJ’s Update on Corporate Criminal Enforcement

The Justice Department’s changes to its corporate enforcement guidelines have significant implications for companies seeking cooperation credit in connection with an investigation.

The new guidelines maintain existing requirements that companies provide the DOJ with all non-privileged documents and other evidence, provide witnesses for questioning, and assist in the interpretation of complex business records.

However, the changes announced by Assistant Attorney General Lisa Monaco in her remarks and formal memorandum dated Sept. 15 require companies to “disclose key evidence more expeditiously,” particularly information proving individual culpability.

Monaco warned that “unreasonable or intentional delays” in providing such evidence “will result in the reduction or denial of the cooperation credit.” Therefore, the “first reaction” by companies that discover “hot documents or evidence” should be to alert prosecutors.

The message of these revised guidelines is clear: companies are expected to conduct a thorough investigation and provide information to the DOJ as soon as possible or risk losing credit to cooperate. However, the implications for organizations trying to meet these requirements are less clear. They are fraught with risks and must be navigated with great caution.

Interpretation of the new requirements

The updated disclosure requirements include two key factors – prioritizing evidence related to individual culpability and timeliness.

Monaco stated that the DOJ’s “first priority” is prosecuting individual wrongdoers, and their memo focuses on evidence “most relevant to assessing individual guilt.” Businesses must also prioritize the “timely” disclosure of “key evidence” that gives the DOJ the “ability to assess individual fault.”

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Significantly, however, there is no clear guidance as to what the DOJ will consider “timely” disclosure without “undue or intentional delay.”

Businesses must decide whether to disclose information immediately upon discovery to meet government expectations for timeliness, or defer disclosure until the facts and implications for the organization and individuals are better understood. With that in mind, they should consider whether a delay would go against the DOJ’s expectations, which are open to interpretation.

On the one hand, it appears that a minimal good faith delay may be acceptable, as the aim of the new disclosure requirements is to ensure that prosecutors have key evidence available in a timely manner for a successful individual lawsuit.

This would especially be the case before statutes of limitations expire, evidence disappears and memories fade. The DOJ memo states that prosecutors will investigate whether a company “delayed disclosure in a manner that impedes the government’s investigation.”

Additionally, the DOJ appears to be primarily concerned with delays that are “unreasonable or intentional” and preventing “[g]Amesmanship,” suggesting that if a company has a reasonable and good faith basis for delaying disclosure, and if the delay has not hampered government investigations, the company is less likely to risk losing cooperation credit.

On the other hand, Monaco’s comment that key evidence must be presented “quickly” and “promptly” suggests that any delay puts the company at risk. Monaco clarified that companies cannot delay disclosure to “mitigate harm or conduct their own investigations” and that a company’s “first response” to discovering significant evidence should be to notify prosecutors.

find a balance

Navigating these new requirements is difficult. A company must balance the risks and benefits of rapid disclosure against time to conduct a thorough investigation. Moving too slowly could cost valuable cooperation points. Going too fast could result in disclosures being made without a full understanding of the facts and their legal implications, creating additional risks for the company under investigation.

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Premature disclosure can also jeopardize a company’s internal investigation and ongoing remediation efforts. This may divert resources from quickly implementing the remedy to appropriately engage with the government on disclosure-related matters.

Investigations can involve complex facts that require interviews with numerous people at multiple levels of an organization. Analysis of large amounts of documents is required to understand and assess the impact of discovered information.

In these circumstances, there may be a reasonable and good faith basis for delaying disclosure. However, the DOJ understands that it will be critical of disclosure delays.

Therefore, companies would do well to conduct investigations and make disclosure decisions as quickly as possible while being thorough and accurate before making disclosures. The reasons for the delay in disclosure should be carefully considered and well documented to allow a fair assessment of timeliness when deciding on the cooperation credit issue.

In short, the DOJ’s new guidance has a clear message: Companies seeking cooperation credit must act quickly and disclose critical evidence, particularly evidence of individual fault.

However, the lack of clarity about how the DOJ will assess timeliness and the significant risks of early disclosures put companies in a difficult position when deciding what and when to disclose.

Organizations are more likely to be successful in addressing the new requirements if they identify the unique aspects and objectives of the internal investigation and consider the government’s goals in enacting these new requirements.

This should be balanced with the need to protect the company’s interests. Clear and trustworthy communication channels and agreements with prosecutors should also be established with regard to disclosure expectations.

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This will likely go a long way in helping the company meet the new requirements for obtaining full cooperation credits from the DOJ, while also taking appropriate steps to protect its interests.

This article does not necessarily represent the opinion of the Bureau of National Affairs, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

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Information about the author

Susanne Jaffe Bloom is a Partner at Winston & Strawn and Co-Chair of White Collar, Regulatory Defense & Investigations. As a former federal prosecutor, she represents companies, financial institutions and executives.

Jack Knight is a partner at Winston & Strawn and the Chair of Financial Services Litigation with a focus on white collar crime, internal investigations and enforcement.

Winston & Strawn collaborators Patrick Dorr, Annett Favettaand Elizabeth Ireland contributed to this article.

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