DOJ Issues New Guidance on Corporate Monitors Reflecting More Pragmatic Approach

White Collar Crime & Corporate Compliance

Brower_GregGarnettStanGregory A. Brower, a Shareholder with Brownstein Hyatt Farber Schreck, LLP in Las Vegas, NV and Washington, DC, with Stanley L. Garnett, a Shareholder in the firm’s Denver, CO office.

In an October 12 speech at the NYU School of Law last Friday, the head of the Department of Justice’s (DOJ) Criminal Division announced a policy memo that sets forth the department’s new process for the approval of corporate monitorship agreements and the selection of monitors. Assistant Attorney General for the Criminal Division Brian A. Benczkowski explained that the new policy follows a recent review of DOJ’s corporate enforcement policies led by Deputy Attorney General Rod Rosenstein.

In his speech, Benczkowski clarified that while this new memo supersedes the 2009 Breuer Memorandum regarding the selection of corporate monitors, it is intended to be a supplement to the Morford Memorandum, issued in 2008, which applied to deferred prosecution (DPA) and non-prosecution agreements (NPA) only. This new “Benczkowski Memo” clarifies that the Criminal Division will apply the same principles set forth in the Morford Memo to court-approved plea agreements that impose a monitor.

After affirming DOJ’s position that independent corporate monitors can be a “helpful resource and beneficial means of assessing a business organization’s compliance with the terms of a corporate criminal resolution, whether a DPA, NPA, or plea agreement,” the memo acknowledges that the imposition of a monitor “will not be necessary in many corporate criminal resolutions, and the scope of any monitorship should be appropriately tailored to address the specific issues and concerns that created the need for the monitor.”

The memo goes on to provide that, generally, “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.” The memo emphasizes that “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 use of monitors as part of settlements in corporate fraud cases has grown dramatically in recent years. The new guidance seems aimed at reversing or, at least, slowing this trend by allowing companies that show a commitment to improved compliance a chance to do so on their own without the imposition of a monitor which can, of course, be a very costly, intrusive, and seemingly never-ending burden on a business.

This seems to reflect current DOJ leadership’s more pragmatic approach to fairly resolving corporate investigations, an approach first articulated by Attorney General Jeff Sessions back in April of 2017. In remarks at the Ethics and Compliance Initiative Annual Conference, General Sessions clarified that in making charging decisions, the department will “take into account whether companies have good compliance programs.” The new Benczkowski Memo seems to be the latest step toward putting this pragmatic approach into practice, at least when it comes to the imposition of monitors.

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