Chapter Three:
DOJ Monitorships

Independent corporate monitors have long been an important tool for the US Department of Justice to evaluate a company’s compliance with the terms of a corporate criminal resolution and to effectively mitigate the risk of future misconduct and compliance failures.[1] This section provides an overview of the key DOJ policy updates from 2023 that may affect its stance on corporate monitorships. This section also discusses why these changes may indicate a potential increase in corporate monitorships in the near future.

Policy Updates

DOJ’s Policies on Self-Disclosure of Corporate Misconduct

On February 22, 2023, DOJ announced a new voluntary self-disclosure policy that now governs corporate prosecutions by US Attorneys’ Offices nationwide.[2] The new policy defines the circumstances under which a company will be deemed to have made a voluntary self-disclosure. It also codifies the benefits of self-disclosure, which may include sharp reductions in fines and expanded options for non-guilty plea resolutions, including avoiding a monitorship. DOJ explained that the goal of the policy is to incentivize companies “to maintain effective compliance programs capable of identifying misconduct, expeditiously and voluntarily disclose and remediate misconduct, and cooperate fully with the government in corporate criminal investigations.”[3]

The self-disclosure policy provides guidance to US Attorneys’ Offices regarding when and how to consider whether monitorships should be required as part of corporate resolutions, although it makes clear that the US Attorney’s Office has sole discretion in deciding the need for a monitor. As a general matter, the US Attorney’s Office will not impose an independent compliance monitor for a cooperating company that voluntarily self-discloses the relevant conduct and timely and appropriately remediates the criminal conduct, if the company demonstrates that it has implemented and tested an effective compliance program at the time of resolution.[4] Through the self-disclosure policy, DOJ clarifies that even if an aggravating factor is present—such as misconduct that posed a grave threat to national security, public health, or the environment, even if it was deeply pervasive throughout the company or involved current executive management of the company—a US Attorney’s Office will not require a monitor if the company has demonstrated it has implemented and tested an effective compliance program.[5]

Clarifications Regarding Monitorship Factors and Monitor Selection Considerations

In March 2023, DOJ issued its “Revised Memorandum on the Selection of Monitors in Criminal Division Matters,” which clarifies and compiles several recent revisions to DOJ policies and practices on the selection of monitors in Criminal Division matters.[6] Importantly, the new policy changed DOJ’s presumption regarding whether to require monitorships in corporate resolutions. In 2018, guidance from then-Assistant Attorney General Brian Benczkowski[7] was widely interpreted to suggest monitorships would be disfavored.[8] Now, DOJ has clarified that prosecutors should apply no presumption in favor of or against monitors and should consider 10 non-exhaustive factors when assessing the need for, and potential benefits of, a monitor (discussed in more detail below). In addition to changing the presumption regarding whether to require a monitorship, DOJ sought to clarify that:

• The qualifications and requirements for the named monitor also apply to the monitor’s team.

• Monitor selections are and will be made in keeping with DOJ’s commitment to diversity, equity, and inclusion.

• The cooling off period[9] for monitors is not less than three years from the date of termination of the monitorship, up from two years.[10]

These are the 10 non-exhaustive factors to be considered when assessing the need for, and potential benefits of, a corporate monitor:[11]

• Whether the corporation voluntarily self-disclosed the underlying misconduct in a manner that satisfies the particular DOJ component’s voluntary self-disclosure policy;

• Whether, at the time of the resolution and after a thorough risk assessment, the corporation has implemented an effective compliance program and sufficient internal controls to detect and prevent similar misconduct in the future;

• Whether, at the time of the resolution, the corporation has adequately tested its compliance program and internal controls to demonstrate that they would likely detect and prevent similar misconduct in the future;

• Whether the underlying criminal conduct was long-lasting or pervasive across the business organization or was approved, facilitated, or ignored by senior management, executives, or directors (including by means of a corporate culture that tolerated risky behavior or misconduct or did not encourage open discussion and reporting of possible risks and concerns);

• Whether the underlying criminal conduct involved exploiting an inadequate compliance program or system of internal controls;

• Whether the underlying criminal conduct involved active participation of compliance personnel or the failure of compliance personnel to appropriately escalate or respond to red flags;

• Whether the corporation took adequate investigative or remedial measures to address the underlying criminal conduct, including, where appropriate, the termination of business relationships and practices that contributed to the criminal conduct, and discipline or termination of personnel involved, including with respect to those with supervisory, management, or oversight responsibilities for the misconduct;

• Whether, at the time of the resolution, the corporation’s risk profile has substantially changed, such that the risk of recurrence of the misconduct is minimal or nonexistent;

• Whether the corporation faces any unique risks or compliance challenges, including with respect to the particular region or business sector in which the corporation operates or the nature of the corporation’s customers; and

• Whether and the extent to which the corporation is subject to oversight from industry regulators or is receiving a monitor from another domestic or foreign enforcement authority or regulator.[12]

Potential Increase in New Monitorships

Although it was expected that the more neutral stance on the decision of whether to appoint a monitor might cause the number of DOJ-imposed corporate monitorships to increase,[13] there was no such increase in monitorships in 2023—to the contrary, DOJ did not impose any new monitorships in 2023.[14] So far, DOJ has not announced a significant number of large corporate criminal resolutions, which likely explains why there have been fewer opportunities for monitorships. This dynamic could change in 2024 because DOJ has indicated in the past year that there would be more corporate criminal resolutions.[15] In addition, DOJ made it clear that it will continue to ramp up enforcement in certain areas, such as sanctions and export control compliance, referring to those areas as “the new FCPA.”[16] In combination with the outlined policy changes, it seems likely that there will also be more opportunities for DOJ-imposed corporate monitorships in the near future.