Why Corporate Compliance Evaluation is a Lynchpin in the Eyes of U.S. Department of Justice (DOJ)
In June 2020, the U.S. Department of Justice Criminal Division (DOJ) issued a Guidance Document
for Federal prosecutors to guide them on how to assess the effectiveness of an organization’s compliance program. The Guidance states the following:
“The “Principles of Federal Prosecution of Business Organizations” in the Justice Manual describe specific factors that prosecutors should consider in conducting an investigation of a corporation, determining whether to bring charges, and negotiating plea or other agreements. [JM 9-28.300] These factors include “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” and the corporation’s remedial efforts “to implement an adequate and effective corporate compliance program or to improve an existing one.” [JM 9-28.300 (citing JM 9-28.800 and JM 9-28.1000)]
…Because a corporate compliance program must be evaluated in the specific context of a criminal investigation, the Criminal Division does not use any rigid formula to assess the effectiveness of corporate compliance programs. We recognize that each company's risk profile and solutions to reduce its risks warrant particularized evaluation. Accordingly, we make a reasonable, individualized determination in each case that considers various factors including, but not limited to, the company’s size, industry, geographic footprint, regulatory landscape, and other factors, both internal and external to the company’s operations, that might impact its compliance program. There are, however, common questions that we may ask in the course of making an individualized determination. As the Justice Manual notes, there are three “fundamental questions” a prosecutor should ask:
- “Is the corporation’s compliance program well designed?”
- “Is the program being applied earnestly and in good faith?” In other words, is the program adequately resourced and empowered to function effectively?
- “Does the corporation’s compliance program work” in practice?"[U.S. Department of Justice Criminal Division Evaluation of Corporate Compliance Programs (Updated June 2020), Pgs. 1-2]
– As a former federal prosecutor, I believe the DOJ Guidance is highlighting the importance of regularly evaluating your compliance program. That is, one of the best ways to proactively protect your Company from in-depth government scrutiny is through a compliance program that is deemed effective by the government.
WHO SHOULD CONDUCT COMPLIANCE PROGRAM EVALUATIONS?
Companies conducting their own evaluations will be unwittingly placing themselves at risk. This is because when you are making your representations to a government prosecutor, the prosecutor will be going through the 2020 DOJ Guidelines and asking you “prove” certain elements. This proof could be in the form of providing documentation or even questioning employees. If your “proof” falls short of any previous material statement you have made to the prosecutor(s), it will not matter if the statement was written or verbal, you expose yourself to the risk of making a false statement to an agent or agency of the federal government in connection with a federal matter and being potentially criminally charged under 18 USC §1001. (See Otto Kerner blog here.
The most effective way of evaluating your corporate compliance program is through a qualified third party. A third party can speak with greater authority about your program to a federal prosecutor than a member of your company or even your corporate counsel. Again, as a former federal prosecutor and former IRS agent who has been doing compliance work for decades, I can assure you that the government will be impressed if your company has been counseled by qualified third party compliance professionals who have worked with your compliance team and consistently supported them by identifying compliance weaknesses and providing best practice compliance recommendations.
Stone, McGuire and Siegel Compliance Evaluations
Our firm, consisting of former federal prosecutors and IRS civil and criminal investigators, will use their training, experience and expertise to work with your employees to improve your compliance protocols by evaluating the Company’s analysis, procedures, and outcomes. Our regular interaction and evaluation will enable us to act on your behalf, if the need ever rises…and what a better witness for you than a former respected federal prosecutor and/or investigator.