This week, in a podcast series sponsored by Affiliated Monitors, Inc. (AMI), I visit with Eric Feldman, Senior Vice President of AMI. We look at the Department of Justice (DOJ) Evaluation of Corporate Compliance Programs, (the “2019 Guidance”), which was released in April 2019. Over the next five podcasts we will explore what the 2019 Guidance changes are from the Evaluation of Corporate Compliance Program (2017 Guidance), released in February 2017, the structure and emphasis of the 2019 Guidance and what it means for the compliance practitioner going forward. In Episode 1, we begin with some of Feldman’s observations on the 2019 Guidance.
The 2019 Guidance cites to the DOJ’s Justice Manual (formerly US Attorney’s Manual) up front in the factors that prosecutors should consider when conducting an investigation of a corporation, determining whether to bring charges, and negotiating plea or other agreements. The 2019 Guidance has much more explicit linkage, particularly on whether to bring charges.
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”; at the time of the offense and at the time of a charging decision. This provides a window for remediation for a company that finds itself under a Foreign Corrupt Practices Act (FCPA) investigation.
The 2019 Guidance cites to Benczkowski Memo, released in October 2018, when it noted, at the time of the resolution, “whether the corporation has made significant investments in, and improvements to its corporate compliance program and internal controls systems” and “whether remedial improvements to the compliance program and internal controls have been tested to demonstrate that they would prevent or detect similar misconduct in the future” to determine whether a monitor is appropriate. Some of the key changes here include the requirement to make improvements to the program (not just pre-existing program); we also see the first mention of two key concepts – internal controls systems and internal controls testing linked to preventing similar misconduct in the future.
The 2019 Guidance asks three fundamental questions prosecutor should ask; all other questions are divided into these categories: (1) “Is the corporation’s compliance program well designed”; (2) “Is the program being applied earnestly and in good faith?” In other words, is the program being implemented effectively? Is it real? and (3) “Does the corporation’s compliance program work” in practice?
Feldman expanded on these three basic questions, noting in the first question, the query is “whether it’s well designed and there is no a rigid formula.” The DOJ makes this emphasis several times throughout the 2019 Guidance, when it states, it “is not intended to be a checklist, it is not intended that organizations of every size in every industry.” Feldman noted this “is music to my ears on how we evaluate programs.” Moreover, it should be music to the ears of every Chief Compliance Officer (CCO). Your compliance program must be customized.
Feldman believes this is a tacit recognition on the part of DOJ that “prosecutors need to look at very individual circumstances to make a determination of “what makes a good compliance program. For example, one of the things that they say in this 2019 Guidance is that the organizational placement, authority, and reporting chain of a corporate ethics and compliance officer is going to be different in a larger organization with resources. In a smaller organization that duty might be a collateral duty or an organization where you might have to contract out that position and the DOJ recognizes that reality.” All of this is what Feldman termed a “great equalizer, understanding that companies of all sizes can still meet the best practices standard.”
Join us tomorrow when begin a deep dive into the 2019 Guidance in considering the first question, “Is the program well designed?”
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