Corporate Culture Matters: Renewed Commitment to Compliance

Posted On Wednesday, November 10, 2021
By: Christin M. Roberts

Takeaways:

Relying on old and new guidance, the Department of Justice will consider the following when addressing misconduct by corporate entities:

  • Disclosure of ALL information about individuals involved in the misconduct
  • Consideration of ALL prior acts of misconduct
  • Use of Independent Monitors

Priorities and actions: While addressing attorneys at the American Bar Association’s White Collar Crime Institute recently, Deputy Attorney General Lisa Monaco laid out the Department’s “enforcement priorities” and three actions she believes will deter corporate crime. The Department’s enforcement priority must be to “enforce the criminal laws that govern corporations, executives, officers and others” Monaco said.  With those priorities in mind, Monaco outlined three actions the Department will take to “hold individuals and corporations accountable for their misconduct” when negotiating a resolution to an investigation:

  1. require companies to provide the Department with all information about individuals involved in the misconduct at issue;
  2. consider all prior acts of misconduct of individuals and companies when evaluating the proper form of resolution; and
  3. restore the guidance relating to the use of independent monitors when the Department feels it is appropriate to ensure compliance with a DPA or NPA.

Monaco’s three actions are intended to be bold, but they are not necessarily new actions. Rather, the actions represent a return to priorities that emphasize corporate and individual accountability. In 2015, then Deputy Attorney General Amy Yates circulated a memo (the “Yates Memo”) outlining certain requirements for companies hoping to receive consideration for cooperation. The Yates Memo directed companies to completely disclose all relevant facts about individual misconduct. This mandate was intended to stop the notion that companies could ‘pick and choose’ which facts to disclose. A 2018 Memo softened this requirement, and only required disclosure of those individuals “substantially involved” in the misconduct. Three years later, Monaco says “It is no longer sufficient for companies to limit disclosures to those they assess to be ‘substantially involved’ in the misconduct.’”

The Department has always looked at certain prior misconduct when considering corporate resolutions. Now, prosecutors will consider the full range of prior misconduct, whether related to the misconduct being actively investigated or not. This “broader view of companies’ historical misconduct will harmonize the way we treat corporate and individual criminal histories” Monaco explained.

Finally, Monaco’s effectively rescinded prior guidance that monitorships should be the exception and not the rule. When the corporate culture of a corporation is called into question, the Department will require independent monitors as a tool to encourage and verify compliance.

To read Monaco’s full speech, click on the following link: https://www.justice.gov/opa/speech/deputy-attorney-general-lisa-o-monaco-gives-keynote-address-abas-36th-national-institute

The SEC Will Require Admissions of Wrongdoing to Build Back Trust in America’s Institutions

Posted On Thursday, October 21, 2021
By: Christin M. Roberts

Takeaways:

The SEC’s Director of Enforcement plans to build back trust in America’s institutions “without fear or favor” by:

  • Tackling misconduct by “Crafting Appropriate Remedies”
  • Cracking down on egregious conduct by instituting officer and director bars in cases of scienter-based violations

Gurbir Grewal, the former Attorney General of New Jersey and current Director of Enforcement for the Securities and Exchange Commission, has big plans to build back trust in the SEC. In public comments at SEC Speaks 2021 in Washington D.C., Director Grewal did not shy away from calling out the repeated lapses by big business and the double standard used by regulators. While acknowledging that this decline in public trust is not attributed to a single cause, Director Grewal revealed the agency’s plan to build back trust in America’s institutions “without fear or favor.”

Among other enforcement actions, Director Grewal signaled that the agency will tackle misconduct by ‘Crafting Appropriate Remedies.’ This includes requiring admissions of wrongdoing in “cases where heightened accountability and acceptance of responsibility are in the public interest.” Director Grewal and the SEC believe these admissions of wrongdoing will make strides in restoring public trust in American institutions. Director Grewal spoke directly to lawyers, counselors, and gatekeepers with influence over market behavior to join him in modeling excellence in compliance efforts. To the SEC, this means, “firms need to think rigorously about how their specific business models and products interact with both emerging risks and enforcement priorities, and tailor their compliance practices and policies accordingly.”

These efforts to build back trust do not require admissions of wrongdoing in every case. Director Grewal acknowledged that this requirement is prophylactic, aimed at curbing misconduct that harms the public the most. In pursuit of building trust, the SEC will crack down on egregious conduct by instituting officer and director bars in cases of scienter-based violations. Finally, Director Grewal noted that conduct-based injunctions, such as prohibiting a defendant from engaging in such activities as stock trading and securities offerings are important remedies.

To read Director Grewal’s full statement at SEC Speaks 2021, follow the link: https://www.sec.gov/news/speech/grewal-sec-speaks-101321

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