On April 30, 2019, the Assistant Attorney General for the Department of Justice’s Criminal Division, Brian Benczkowski, announced the publication of an updated version of the Department’s Guidance Document on Evaluation of Corporate Compliance Programs (the “Revised Evaluation Guidance“). This is an update to the original version of the Department’s Evaluation of Corporate Compliance Programs (the “Original Evaluation Guidance“), which was issued in February 2017.
The changes implemented in the Revised Evaluation Guidance are made primarily to the structure and tone of the document, and to align the new version even more closely with the Department’s Justice Manual (formally known as the U.S. Attorneys’ Manual), the U.S. Sentencing Guidelines, and other Department policy. This re-issue does not, therefore, represent a significant modification in policy or approach by the Department to the assessment of corporate compliance programs. Instead, its primary functions are to reorganize the document thematically and to integrate some additional details and clarifications indicative of the Department’s latest thinking on this important subject.
Most importantly, the refresh serves as a timely reminder of the Justice Department’s evaluation priorities, and its continued focus on effective corporate compliance programs as the keystone to the prevention, detection and remediation of corporate wrongdoing.
1. Background to the Evaluation Guidance and its Revision
The Justice Department released its Original Evaluation Guidance in February 2017. Our client alert analyzing the Original Evaluation Guidance can be read here.
As Assistant Attorney General Benczkowski noted in his remarks announcing the publication of the Revised Evaluation Guidance on April 30, 2019, there are three significant decisions made by the Department in resolving a corporate criminal matter that will involve an analysis of the company’s compliance program by prosecutors:
- Charging Decision: “First, pursuant to the Justice Manual, prosecutors assess the adequacy and effectiveness of the corporation’s compliance program at the time of the offense, as well as at the time of a charging decision. This helps guide the prosecutors in determining whether they should decline to bring a case, or, if a resolution is appropriate, what that resolution should be.”
- Sentencing Decision: “Second, prosecutors assess a company’s compliance program at the time of the misconduct to determine the company’s culpability score under the U.S. Sentencing Guidelines, which determines the company’s ultimate fine range.”
- Imposition of Compliance Monitor: “Third, prosecutors look at the company’s compliance program at the time of the resolution to determine whether an independent compliance monitor is necessary to prevent the reoccurrence of misconduct, or whether the compliance program is sufficiently effective to permit the company to self-monitor.”
The Evaluation Guidance is intended to assist Department prosecutors in their appraisal of corporate compliance programs at each of these stages, as a supplement to the requirements set forth in the Justice Manual the U.S. Sentencing Guidelines and elsewhere.
The provision of such guidance to Department prosecutors has become particularly important since October 2018, when Assistant Attorney General Benczkowski indicated that the Department would no longer maintain a dedicated position of “compliance counsel” within the Department. The role of compliance counsel had been established in 2015. It was intended to provide the Department with an experienced and specialized expert to advise prosecutors on corporate compliance and to assess companies’ compliance programs during the corporate criminal resolution process. Currently, this role is performed by a broader range of Department prosecutors closely involved in the relevant enforcement actions. Accordingly, the Revised Evaluation Guidance becomes a key component of the Department’s training for prosecutors on expectations concerning corporate compliance.
The review and revision of the Evaluation Guidance is part of a broader Justice Department initiative, announced by Deputy Attorney General Rod Rosenstein shortly after he took office in 2017 to carefully review all Department policies and guidance and, where appropriate, integrate them into the Justice Manual.
2. Key Modifications to the Evaluation Guidance
Most significantly, the Revised Evaluation Guidance has been re-orientated around three “fundamental questions” concerning corporate compliance, which have been taken from the Justice Manual (§ 9-28.800):
- “Is the corporation’s compliance program well designed?”
- “Is the program being applied earnestly and in good faith?” In other words, is the program being implemented effectively?
- “Does the corporation’s compliance program work” in practice?
This new framework found in the Revised Evaluation Guidance creates a useful template for considering, in a systematic fashion, what were previously described in the Original Evaluation Guidance as 11 “important” program review topics and, within each, the “common questions” that are frequently relevant in program evaluations. These 11 topics from the Original Evaluation Guidance have been re-organized as follows:
Organization of Revised Evaluation Guidance
Original Evaluation Guidance: 11 Topics
|I. Is the Corporation’s Compliance Program Well Designed?|
|A. Risk Assessment||Topic 5|
|B. Policies and Procedures||Topic 4|
|C. Training and Communications||Topic 6|
|D. Confidential Reporting Structure and Investigation Process||Topic 7|
|E. Third Party Management||Topic 10|
|F. Mergers and Acquisitions||Topic 11|
|II. Is the Corporation’s Compliance Program Being Implemented Effectively?|
|A. Commitment by Senior and Middle Management||Topic 2|
|B. Autonomy and Resources||Topic 3|
|C. Incentives and Disciplinary Measures||Topic 8|
|III. Does the Corporation’s Compliance Program Work in Practice?|
|A. Continuous Improvement, Periodic Testing and Review||Topic 9|
|B. Investigation of Misconduct||Topic 7|
|C. Analysis and Remediation of Any Underlying Misconduct||Topic 1|
Through the reorganization of the Evaluation Guidance, the Department has also more closely aligned the latest document with the requirements of the Justice Manual and the U.S. Sentencing Guidelines. Each section of the Revised Evaluation Guidance now includes reference to, and key extracts from, the relevant sections of the U.S. Sentencing Guidelines, the Justice Manual, and various Department policies (such as the FCPA Corporate Enforcement Policy) that have been more recently codified into the Justice Manual.
The Revised Evaluation Guidance now also invokes the compliance sections of the Resource Guide to the U.S. Foreign Corrupt Practices Act, issued jointly in 2012 by the Department of Justice and the Securities and Exchange Commission, with its discussion of the “hallmarks” of an effective corporate compliance program.
This overall approach reflects a concerted effort by the Criminal Division to consolidate and unify the many memoranda and other guidance documents used by the Justice Department, which are relied upon by compliance departments and private practitioners to understand the expectations of the Department, its prosecutors, and their approach to corporate criminal enforcement.
Also, in a number of areas, the Revised Evaluation Guidance provides additional analysis and detail, with further indications of the Department’s developing thinking on corporate compliance. For instance, the Revised Evaluation Guidance explicitly recognizes the tension between a company’s commercial and business pressures and its obligations to comply with the law. Indeed, the Revised Evaluation Guidance asks whether company managers:
- “tolerated greater compliance risks in pursuit of new business or greater revenues?”
- “encouraged employees to act unethically to achieve a business objective, or impeded compliance personnel from effectively implementing their duties”; and
- have a genuine commitment to compliance and “persisted in that commitment in the face of competing interests or business objectives.”
Clearly, a company’s ability to balance these factors, and respond meaningfully in a way that is consistent with the Revised Evaluation Guidance, is a key indicator, according to the Department, of an effective compliance program in operation.
The Revised Evaluation Guidance represents the latest in a long line of publications, polices, and guidelines issued by the Department of Justice and various elements of its Criminal Division with respect to corporate compliance. In light of the many prior, and potentially overlapping, guidelines issued, the Department’s effort in reissuing the Evaluation Guidance to consolidate and cross-reference the various factors and considerations into a single document is a welcome one. Accordingly, the Revised Evaluation Guidance should meaningfully inform and empower companies facing enforcement actions (and those proactively looking to ensure they meet the Department’s expectations) with a relatively comprehensive primary reference source that enables them to understand the Department’s current thinking on best practices in corporate program design and implementation. To this end, it should be essential reading for all compliance and investigation professionals.
John P. Cunningham and Geoff Martin of Baker McKenzie’s Government Enforcement Practice Group authored this publication.