May 11, 2018 – On May 9, 2018, Deputy Attorney General Rod Rosenstein announced a new Department of Justice (DOJ) policy, to be incorporated into the U.S. Attorneys’ Manual, discouraging the practice of “piling on” — imposing excessive or redundant penalties — in corporate enforcement actions. The policy instructs DOJ attorneys to coordinate with attorneys in other DOJ components that are investigating the same corporate misconduct, and with other domestic and foreign enforcement agencies (when possible), to achieve equitable results. In announcing the policy, Rosenstein explained that it strives to “ensure that corporate resolutions that flow from parallel or joint investigations into the same conduct are reasonable and proportionate to that conduct.” The new policy articulates the emerging practice by DOJ but is careful in the flexibility it affords DOJ in determining when multiple penalties will be deemed appropriate.
The policy responds to the growing reality that businesses operate in multiple jurisdictions and are accountable to multiple domestic and foreign regulatory bodies. “That creates a risk,” explained Rosenstein, “of repeated punishment that goes beyond what is necessary to rectify the harm and deter future violations.”
The policy’s four key features
The policy has four main components. First, it reaffirms that the federal government’s criminal enforcement authorities should not be used to extract larger civil settlements.
Second, the policy directs components within DOJ seeking to resolve a case based on the same misconduct to coordinate with one another in order to achieve equitable results.
Third, the policy encourages DOJ attorneys, when possible, to coordinate with other federal, state, local, or foreign enforcement authorities investigating a company for the same misconduct.
Fourth, the policy articulates factors to guide the determination of whether multiple penalties serve the interests of justice in a particular case. These factors include (1) the egregiousness of the wrongdoing; (2) statutorily mandated penalties; (3) the risk of delay in finalizing a resolution; and (4) the adequacy and timeliness of a company’s disclosures and cooperation with DOJ.
What does this mean in practice?
This policy represents a positive development for companies subject to multiple authorities, as it recognizes the dangers of “piling on” and requires DOJ attorneys to coordinate with one another in order to achieve equitable results. It also encourages DOJ attorneys to work with enforcement and regulatory agencies to avoid repeated or excessive punishment for the same misconduct.
However, the policy does not entirely eliminate the risk of piling on.
Indeed, the policy only governs the actions of DOJ attorneys – it does not bind outside regulators like the Securities and Exchange Commission, Commodities Futures Trading Commission, Federal Reserve, the Office of Foreign Assets Control, or other domestic and foreign regulatory or enforcement agencies. Additionally, it encourages, but does not require, DOJ attorneys to coordinate with other domestic or foreign regulators and authorities “when possible.” The encouragement of such cooperation, however, is a positive sign for companies and will hopefully be welcomed, and even adopted, by other enforcement authorities.
It is also important to note that DAG Rosenstein made clear that the new policy is not an invitation for companies to forum shop by making inadequate disclosures to other agencies or foreign governments to secure lenient penalties before approaching DOJ. Companies facing multi-jurisdictional enforcement matters should bear this in mind when analyzing whether, when and where to disclose misconduct.