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April 11, 2019 Practice Points

DOJ Highlights New Guidance on Corporate-Compliance Monitors among 2018 Achievements

The Benczkowski Memo clarifies that a corporate monitor should be viewed as the exception rather than the rule.

By Eileen H. Rumfelt

In early March 2019, Assistant Attorney General Brian Benczkowski delivered remarks at the 33rd Annual ABA National Institute on White Collar Crime Conference. In a speech that focused on cooperation and transparency among prosecutors and white-collar defense attorneys, Benczkowski spoke about the importance of ensuring that the Department of Justice’s policies “provide the right message and the right mix of incentives.” Benczkowski highlighted his October 2018 revision of the Criminal Division’s guidance on corporate-compliance monitors as one effort by the division to revise and hone that message. Benczkowski explained

[w]e sought to update the preexisting monitorship policy to provide more guidance about the factors that will prompt the appointment of a monitor in the first place, including how to weigh the benefits and costs of a potential monitorship, and to clarify details about the selection process and scope of monitorships.

The October 11, 2018, Benczkowski Memo supplements a 2008 guidance memorandum issued by then-Acting Deputy Attorney General Craig S. Morford (the “Morford Memo”). With respect to whether a corporate monitor should be appointed, the Morford Memo had provided broad instruction that prosecutors should consider both (a) the benefits of a monitor for the corporation and the public and (b) the cost and impact of a monitor to a corporation. The Benczkowski Memo updates this broad directive by providing specific guideposts for making that determination. The Benczkowski Memo instructs that in considering the potential benefits of a monitor the following factors should be considered:

  1. whether the misconduct at issue involved the manipulation of corporate books and records or exploitation of an inadequate compliance program/internal controls;
  2. whether the misconduct pervaded the entire organization or was sanctioned by senior management;
  3. whether the corporation has since bolstered and improved its compliance program and internal controls; and
  4. whether improvements to the corporate-compliance program and internal controls have already demonstrated that they prevent similar misconduct in the future.

The Benczkowski Memo also clarifies that demonstrable changes in corporate culture and leadership from the compliance environment in which the misconduct occurred may be sufficient to protect against future misconduct. A consideration of the number and scope of changes made to the company’s compliance program, in the context of its unique challenges, clientele, and industry should inform whether a monitor is necessary. Additionally, in weighing costs against the benefits of a monitor, the Criminal Division should ensure that any proposed monitorship is tailored in scope to avoid unnecessary monetary cost and burden on the company’s operations.

In short, the Benczkowski Memo asserts that

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. Where a corporation’s compliance program and controls are demonstrated to be effective and appropriately resourced at the time of resolution, a monitor will likely not be necessary.

The Benczkowski Memo clarifies that a corporate monitor should be viewed as the exception rather than the rule. But it also highlights the importance of robust corporate-compliance programs, ongoing efforts to improve internal controls, and rapid efforts to remediate compliance issues. In Benczkowski’s recent words at the March ABA conference: “[W]hen companies are incentivized to avert at the front end—through effective internal controls and compliance programs—the very violations that we would have to prosecute at the back end, that inures to the benefit of both government and industry.”

Eileen H. Rumfelt is with Miller & Martin, PLLC in Atlanta, Georgia.

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