The Department of Justice has provided further guidance on what they will be looking for in assessing corporate compliance programs. The latest guidance focuses on three “fundamental questions” that the Government will 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?
In explaining what it means with such specific questions, the Department first acknowledges that such an evaluation can be conducted both at the time of the offense and later, at the time of the charging decision and resolution. Furthermore, the Department emphasizes that each corporation’s risk profile will be assessed individually and not by a rigid formula. Such an assessment will take into consideration such factors as size, industry, geographic footprint, regulatory landscape and “other factors, both internal and external to the company’s operations, that might impact its compliance program.” However, the Department does note that such an analysis by the Government should address the aforementioned three fundamental questions.
The latest guidance explains in detail the analyses and types of inquiry the Government will apply as it addresses each question. It is interesting to note how the Guidance stresses that the Government will want to understand why the corporation developed its program specifically and also whether the compliance program has evolved and been updated through the years. The Guidance even goes so far to reference the various types of risks (for example, high-risk transactional focus, industry sector considerations, market competiveness realities, etc.) as well as the procedures and training that a compliance program should address in its design.
The second question requires a probe by the Government specifically to assess whether it is merely a “paper program” or one “implemented, reviewed, and revised, as appropriate, in an effective manner.” The expected commitment by senior and middle management and the necessary autonomy and high- level recognition being given to the compliance officers will be an area of inquiry by the prosecutors. For example, the Government even goes so far to ask whether companies should consider publicizing disciplinary actions internally while also providing positive incentives for an employee’s improvement of a program or demonstration of ethical principles.
Finally, when evaluating whether the program did work at the time of the offense or at the time of the charging decision or resolution, the Government explains that it will consider such issues as whether the program has evolved over time and whether it conducted an adequate and honest root cause analysis.
In summary, the latest Guidelines provide a thorough and informative analysis of the Department’s expectations and overall thinking as it proceeds with an evaluation of corporate compliance programs. Such an effort by the Department to provide a “road map” should be seen as an opportunity for a company and its lawyers to insure the company is well prepared to operate in an intense regulatory environment.
Click here to read Terry Flynn’s earlier legal alert concerning compliance investigations tied to the COVID-19 pandemic.
This alert does not purport to be a substitute for advice of counsel on specific matters.
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