United States Deputy Attorney General Lisa Monaco has issued a new memorandum which elaborates on her prior October 2021 memorandum. The Department of Justice’s primary focus will continue to be enforcement against culpable individuals. The DOJ will determine how to treat corporations accused of wrongdoing based on the degree to which those corporations assist government investigations against individuals. The DOJ will also assess and consider the corporate culture and compliance programs in place before and after the alleged wrongdoing.
Shortly after becoming United States Deputy Attorney General in April 2021, Lisa Monaco released a preliminary memorandum in October, 2021 entitled “Corporate Crime Advisory Group and Initial Revisions to Corporate Criminal Enforcement Policies”, which amended the Principles of Federal Prosecution of Business Organizations contained in the Justice Manual (JM section 9-28.000 et seq.). Simultaneously, she established the Corporate Crime Advisory Group (CCAG) within the DOJ, whose stated goal was “to consider additional revisions and reforms that will strengthen our approach to corporate crime and equip our attorneys with the tools necessary to prosecute it when it occurs.”
As a result of discussion and analysis by the CCAG and outside experts, the DOJ has now issued a further memo explaining its priorities and plans (the September 15 Monaco Memorandum, whose contents were discussed by Monaco in a speech at NYU Law School on that same day).
Although the DOJ’s stated first priority is individual accountability, the new memo also includes an extensive discussion of corporate accountability. However, the DOJ’s approach to corporate culpability seems designed primarily to force corporate cooperation in assessing and achieving findings of individual liability. While it is not the most extreme position statement on individual accountability ever released by the 1, the Monaco Memorandum still goes far towards encouraging corporations to cooperate in the prosecution of their directors and officers by promptly turning over any information relevant to the potential prosecution of directors and officers.
By way of background, many administrations have seen fit to issue memoranda that shed light on their prosecutorial priorities and philosophies, such as the Holder memo issued in 1999, the Thompson Memo issued in 2003, the McNulty Memo in 2006 and the Filip Memo in 2008. In her speech, DAG Monaco harkened all the way back to 1975 when then Attorney General Edward Levi (in the wake of Watergate) announced a “greater emphasis” on “white collared crime”. This September Monaco Memorandum is most reminiscent of the 2015 memo from Deputy Attorney General Sally Yates (the “Yates Memorandum”), entitled “Individual Accountability for Corporate Wrongdoing,” cited on the second page of the current Monaco Memorandum.
In her speech at NYU Law School, DAG Monaco also announced that the Department is seeking $250 million for corporate crime initiatives next year.
The Department of Justice is serious about stepping up corporate crime enforcement, particularly against individuals. The Department’s approach potentially provides it with substantial leverage to convince corporations to promptly turn over all relevant information concerning directors and officers. While the Monaco Memorandum stops short of pushing for waiver of attorney-client privilege and discouraging corporate indemnification (as the Thompson Memorandum had done in 2003), the Department’s approach is likely to cause major rifts between corporations and their directors and officers. In this environment, solid Side A D&O insurance will be more important than ever, both within a traditional ABC coverage context and in stand-alone policies. With the government pushing harder for convictions and/or pleas, insureds and their brokers need to further scrutinize the conduct exclusions in their policies, as well as severability provisions including in relation to cooperation.
To minimize the likelihood of corporate wrongdoing and to improve the possibility of a positive outcome if a government investigation occurs, corporations would be well advised to shore up their internal compliance policies sooner than later. Taking a hard look at whistleblower policies, compensation structures and other aspects of corporate compliance, preferably with the assistance of the fresh eyes of experienced external experts, is something that can and should be done now and then reviewed again after the DOJ Criminal Division issues further guidance.
Then, when a company finds a potential issue, early consultation with counsel is advisable. Prompt consideration must be given to the question of whether to self-report issues to the government. with an eye towards maximizing cooperation credit if the situation turns out to be serious.
Willis Towers Watson hopes you found the general information provided in this publication informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, Willis Towers Watson offers insurance products through licensed entities, including Willis Towers Watson Northeast, Inc. (in the United States) and Willis Canada Inc. (in Canada).
1 In 2003, Deputy Attorney General Larry D. Thompson released the Thompson Memorandum, which strongly encouraged waivers of attorney-client privilege and sought to discourage corporations from advancing attorney’s fees to defend directors and officers. The anti-indemnification aspects of the Thompson Memorandum were found to be unconstitutional by a New York district court in United States v. Stern, 485 F.Supp. 2d 330 (S.D.N.Y. 2006).
