On October 1, Assistant Attorney General Colin M. McDonald issued a memo on “Corporate Enforcement in the Fight Against Fraud” (the “Memo”), announcing an “all-tools approach to investigating and prosecuting our health care, government, tax, and trade fraud priorities.”[1] The Memo includes directives to ensure that the National Fraud Enforcement Division (NFED) “efficiently and fairly advances [its] mission, provides transparency to stakeholders, appropriately incentivizes the disclosure of misconduct, rewards those who cooperate with the government, holds individuals and corporate criminals accountable, and promotes the recovery of fraudulent proceeds for the American people.”
The Memo starts out by noting that the Department of Justice “has a long history of prosecuting companies for fraud . . . particularly when a company’s wrongdoing is serious and pervasive, and its compliance policies, internal controls, and history of misconduct, among other factors, establish that the company caused or encouraged the offense.” It further states that “[a]n effective corporate enforcement practice is a necessary component to advancing the mission of the Department, because it holds criminal entities accountable, furthers individual prosecutions, promotes a culture of compliance and integrity, and protects and fosters honest and good-faith markets and institutions.”
Assistant Attorney General McDonald issues several directives in furtherance of his stated objectives:
First, the Memo directs that NFED prosecutors “follow the Department’s policies concerning corporate enforcement, including the Principles of Federal Prosecution of Business Organizations and the Department-wide Corporate Enforcement and Voluntary Self-Disclosure Policy (CEP)”;
Second, the Memo directs that NFED prosecutors “work closely with the Corporate Enforcement Section [CES] at all phases of corporate investigations, from case intake through completion of any corporate resolution or litigation” to “maximize efficiency, consistency, and results in the Division’s corporate enforcement portfolio, leveraging the unique toolbox of our corporate enforcement specialists.” Further, the CES must be informed of ongoing and new corporate investigations as well as “major developments in ongoing corporate cases, and participate in matters as necessary and appropriate to ensure that [NFED] is dedicating adequate resources to corporate matters and complying with Department policies regarding corporate enforcement.”
Third, the Memo directs that “[i]n opening and closing a corporate investigation,” NFED prosecutors are directed to prioritize, among other subject areas, “[f]raud schemes involving the health care industry, including health care fraud, distribution of controlled substances, and violations of the Federal Food, Drug, and Cosmetic Act”;
Fourth, the Memo directs that “[w]hen recommending appropriate outcomes in corporate matters, Division personnel must place great weight” on certain enumerated factors in “determining whether to bring charges and negotiating plea or other agreements.” These factors include, among others:
- Knowledge of or involvement in a fraud scheme by corporate management;
- Efforts to conceal fraud from government agencies or auditors or otherwise impede or obstruct a government function or oversight;
- Conduct that furthers the scheme lasting three years or more;
- Conduct that causes substantial financial hardship to a taxpayer-funded program or government function;
- Conduct that affects multiple taxpayer-funded programs or government functions;
- Conduct that affects three federal districts or more; and
- Conduct that results in financial harm to 25 or more victims or $25 million or more in loss.
Fifth, the Memo directs, in order to “encourage and protect the disclosure of information by whistleblowers, including by those who participated in the criminal conduct,” that “Division leadership, in consultation with law enforcement partners . . . design and implement policies and programs that appropriately incentivize whistleblowers to bring forward credible information pertaining to fraud and provide the public with transparency to the extent possible regarding those policies and programs.” The Memo states that these policies and programs “should be designed to uncover criminal conduct, strengthen ongoing investigations, help prevent fraud losses, and enable the Department to effectively respond to both latent and emerging criminal fraud threats.”
If you have questions about DOJ’s new corporate fraud enforcement guidance or how it could affect your organization, you may contact the author at Geoffrey.Kaiser@rivkin.com or (516) 357-3161.
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