The United States Department of Justice (DOJ) has issued a new policy concerning the imposition and selection of corporate monitors in DOJ Criminal Division matters, highlighting that “the imposition of a monitor will not be necessary in many corporate criminal resolutions” and that “the scope of any monitorship should be appropriately tailored to address the specific issues and concerns that created the need for the monitor.” Companies facing, or considering risks related to, DOJ investigations should take note of the Department’s new guidance and be prepared to use it proactively both in resolving Criminal Division matters and in evaluating their own compliance programs and remediation efforts.
Brian A. Benczkowski, the Assistant Attorney General (AAG) for the DOJ’s Criminal Division, announced the new policy -- memorialized in a policy memorandum (Benczkowski Memorandum) -- during recent remarks at the New York University School of Law Program on Corporate Compliance and Enforcement Conference on Achieving Effective Compliance. The Benczkowski Memorandum, which applies to any deferred prosecution, non-prosecution, or plea agreement “between the Criminal Division and a business organization which requires the retention of a monitor,” makes clear that, “[i]n general, the Criminal Division should favor the imposition of a monitor only where there is a demonstrated need for, and clear benefit to be derived from, a monitorship relative to the projected costs and burdens.”
Under the new policy, Criminal Division attorneys -- including prosecutors in the high-traffic Fraud and Money Laundering and Asset Recovery Sections -- are to consider the following nonexclusive factors when weighing whether to impose a corporate monitor:
- Both the potential monetary costs to the company and the proposed scope of the monitorship, which should be “appropriately tailored to avoid unnecessary burdens to the business’s operations”;
- If the conduct at issue took place under different leadership or in the context of a different compliance culture, “whether the changes in corporate culture and/or leadership are adequate to safeguard against a recurrence of misconduct”;
- Whether the conduct at issue involved books-and-records violations or exploited gaps in internal compliance or controls, or was pervasive, or was approved by corporate leadership; and
- The company’s compliance and remediation efforts, including “whether the corporation has made significant investments in, and improvements to, its corporate compliance program and internal control systems” and “whether remedial improvements to the compliance program and internal controls have been tested to demonstrate that they would prevent or detect similar misconduct in the future.”
The Benczkowski Memorandum adds that a company’s compliance and remediation efforts should not be considered by the Criminal Division in a vacuum. Indeed, “[i]n assessing the adequacy of a business organization’s remediation efforts and the effectiveness and resources of its compliance program, Criminal Division attorneys should consider the unique risks and compliance challenges the company faces, including the particular region(s) and industry in which the company operates and the nature of the company’s clientele.”
The new policy also addresses the monitor selection process, which, amongst other items, allows companies to “identify the monitor candidate that is the Company’s first choice to serve as the monitor.”
On the horizon
The new policy on corporate monitors provides another potential benefit for companies that are able to demonstrate the adequacy and effectiveness of their compliance programs and remediation in resolving criminal matters; indeed, these are already key factors for companies seeking to resolve enforcement actions with prosecutors in the US (and beyond). Of course, being able to vouch for their compliance and remediation efforts during the resolution process first requires companies to be able to gauge these efforts for themselves.
And, although the new policy may cause a decline in the number of corporate monitorships in criminal matters, it is worth noting AAG Benczkowski’s finding that “the overwhelming majority” of Fraud Section resolutions in recent years have not, in fact, involved a corporate monitor. Still, the new policy should provide some comfort and guidance to companies that fear becoming members of the (sizeable) monitor minority in resolving criminal matters with the DOJ; indeed, whether or not the policy is intended as a significant departure from prior guidance, it gives companies something to work with in trying to avoid the imposition of a monitor.
AAG Benczkowski also announced that the DOJ will not be replacing its first and former compliance counsel expert, Hui Chen, who held the position from 2015 to 2017. Noting that “[i]t makes little practical sense to outsource a separate review of the compliance program when considering the merits of a corporate matter,” AAG Benczkowski explained that the DOJ will instead focus on “a combination of diverse hiring and the development of targeted training programs” to ensure that DOJ prosecutors and supervisors “have a strong foundational understanding of what constitutes an effective approach to compliance.”
 “Criminal Division attorneys should also consider whether adequate remedial measures were taken to address problem behavior by employees, management, or third-party agents, including, where appropriate, the termination of business relationships and practices that contributed to the misconduct.”
The goal of the new guidance is to further refine the factors that go into the determination of whether a monitor is needed, as well as clarify and refine the monitor selection process.