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Credit For Compliance: The DOJ Gets Specific

By Jeffrey M. Kaplan

Since 1991 –- even prior to the Sentencing Guidelines going into effect -– Justice Department officials have said corporate charging decisions should be based in part on how effective a corporation’s compliance program was at the time of the offense in question. This has been formal policy since 1999 (in what was then called the Holder Memo, which subsequently went through various other iterations.) 

However, the Department’s practices with respect to publicly identifying actual cases where companies received such credit has long been a source of real frustration for compliance officers.

As detailed in a report I co-authored with Ronald Berenbeim last year for the Conference Board (Ethics and Compliance Enforcement Decisions -– the Information Gap), there were many cases where Justice publicly gave credit for compliance programs developed after the corporate defendant violated the law but almost none for programs developed prior to the offense  — what our report called “pre-existing” programs. 

Our report also noted: “Absent proof that meaningful [compliance] program incentives have in fact been provided in enforcement proceedings involving the pre-existing program category, companies might come to believe that the government values such programs only as a post-violation remedy — which would undercut the key [compliance] program-related deterrence policy goals of federal prosecution and sentencing policy.” 

Indeed, the concern here was based not only what appeared to be the manifest illogic of the then-current approach, but also on the results of a survey we conducted of compliance officers and other compliance professionals, ninety-five percent of whom said more information about “credit” given to companies by the government in enforcement contexts would help them promote and implement their programs.

But recently -– and at long last — the Justice Department has begun to change course.

First, at a conference held by the Ethics and Compliance Officer Association in September, a top ranking federal prosecutor, Greg Andres, announced that the Department had heard the concerns of compliance practitioners on this issue and would begin to provide more information about compliance program credit in enforcement decisions. 

Second, two recent FCPA-related enforcement actions show that the Department is indeed now identifying cases in the “pre-existing” program category identified as critical by the Conference Board report.

Specifically, in August the Department stated in the Universal Leaf sentencing memo (at page 4, footnote 2) that it was giving a company credit for its “pre-existing compliance program.” And earlier this month in a case involving Noble Corporation, the Department listed the company’s pre-existing compliance program as part of the reason the government entered into a non-prosecution agreement (page 1).

This is a very welcome development for compliance officers and Justice should be commended for taking this step. It is also a useful occasion for companies to consider how confident they are that their respective programs could pass muster if ever scrutinized by the government.

Jeffrey M. Kaplan, a partner in the Princeton, New Jersey office of Kaplan & Walker LLP, has practiced in the compliance law field since the early 1990’s. He can be contacted here.

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