On May 19, 2015, Assistant Attorney General Leslie Caldwell, the leader of the Department of Justice’s (“DOJ”) Criminal Division, gave a speech offering companies “best practices” guidance for corporate internal investigations.

Presently, the DOJ is guided by the nine factors outlined in Deputy Attorney General Mark Filip’s 2008 memo entitled “Principles of Federal Prosecution of Business Organizations.”  These are collectively known as the “Filip Factors.”   Factor 5 states that the charging decision depends in part on “the existence and effectiveness of the corporation’s pre-existing compliance program.”  U.S. Attorneys Manual (“USAM”) 9-28.300.  Caldwell emphasized that a company will get credit from the DOJ only if its compliance program is “effective.”

To develop an effective compliance program, Caldwell recommends that companies go beyond the traditional risk-based approach to compliance and examine all of their lines of business, including those not subject to regulation.  Competent internal investigations also comprise an important element of any compliance program.

The best practices Caldwell highlighted for compliance and investigations include:

  • Policies and procedures unique to a company’s risk areas, clearly written to ensure easy understanding by all employees
  • Clear communication of the company’s policies and procedures; DOJ will look at emails, memos, letters, and other recorded means of communicating its compliance policies and procedures to its personnel
  • Adequate resources and funding devoted to implementing investigatory goals and developing useful evidence against identified wrongdoers

To deter resistance to developing corporate compliance as an important arm of its business, Caldwell offered the example of Alstom S.A., the French power company, which pleaded guilty in December 2014 to violating the Foreign Corrupt Practices Act.  It also agreed to pay a penalty of over $722 million.

When the DOJ discovered wrongdoing by Alstom, it considered Alstom’s compliance program before deciding whether to prosecute.  Ultimately, it determined that Alstom’s compliance program was not effective and lacking in many respects, leading to the criminal charges.

A company does not have an obligation to disclose violations of the law to the government or to cooperate beyond lawful process when the DOJ is conducting an investigation.  However, if a company chooses to cooperate with an investigation, particularly at an early stage, it can receive significant credit when DOJ considers what action to take.

In offering cooperation, the DOJ values facts over corporate spin, and it wants to see relevant factual findings encompassing a full accounting of all the known facts under review as well as an unfettered identification of responsible individuals, regardless of who they are.

Caldwell also emphasized that DOJ would continue its policy promoting parallel proceedings, in which civil and criminal investigative authorities and regulators will continue to share information about targets.  Many targets have bemoaned this “piling on” practice, which can drain a company’s finances and resources.  Caldwell defended the practice, stating that different government agencies have different interests and goals.  While she promised to carefully consider the impact created by parallel investigations, she offered no specific safeguards against “piling on.”  As always, prevention is a company’s best medicine.

For further guidance, Caldwell also recommended thorough review of Non Prosecution Agreements (“NPAs”) and Deferred Prosecution Agreements (“DPAs”) publicly available on the DOJ website in order to measure and compare corporate compliance policies against them.

Companies should take Caldwell’s remarks as a call to examine their compliance programs and the policies and procedures for implementing internal corporate investigations, as well as the resources devoted for such tasks.  Compliance programs should be thoroughly reviewed and held up to NPAs and DPAs to measure the effectiveness of such programs and to identify areas requiring improvement.  Competent white collar defense counsel may offer guidance here, and companies should definitely consider retaining outside counsel to conduct necessary internal investigations to help maintain independence and to protect the results of any investigation under attorney-client privilege.