Remarks as Prepared for Delivery
Good morning. Thank you for that warm welcome and kind introduction. It is always a pleasure to discuss the Justice Department’s corporate criminal enforcement priorities with such a knowledgeable and experienced group. And I like nothing better than coming home to New York City, where New Yorkers tell it like it is. In my remarks, I will focus on the Department’s commitment to consistency, predictability, and transparency in our corporate enforcement work, and discuss how our corporate enforcement program is increasingly centered on the protection of our national security.
If you’ve been following our message on corporate crime in the last year, I trust one thing has come through loud and clear: the Department is placing a new and enhanced premium on voluntary self-disclosure (VSD).
We have promoted consistency across the Department, with Deputy Attorney General Lisa Monaco directing every DOJ component with responsibility for corporate enforcement matters to adopt a VSD policy. Those policies are available on the DOJ website, and they adhere to core Department-wide principles. For the first time, all 94 U.S. Attorneys’ Offices have now adopted a single Voluntary Self-Disclosure policy that applies from Anchorage to Honolulu to right here in New York — and everywhere in between.
We’ve also enhanced transparency and predictability as to the requirements for a voluntary self-disclosure and the significant benefits involved. By laying those policy requirements out, the Department can be more consistent in their application, companies can better predict outcomes, and those of you who counsel corporations can do so with more confidence and precision.
For example, the Criminal Division’s policy explains exactly what a company needs to do to secure the presumption of a declination through a voluntary self-disclosure. The revised policy makes clear that even companies that have so-called “aggravating circumstances” still have a path to a declination if they come forward and voluntarily self-disclose. And early returns demonstrate that Department components are following through on their VSD Policy Commitments.
- To give just one example, earlier this year, Corsa Coal Corporation received a declination from the Criminal Division and the U.S. Attorney’s Office for the Western District of Pennsylvania, despite having used bribes to secure $143 million in coal contracts from an Egyptian state-owned company through bribes paid by a third-party intermediary.
- The company timely and voluntarily self-disclosed the misconduct. It provided information about individual wrongdoers, including two former vice presidents who have now been charged for their involvement in the scheme. The company remediated, cooperated, and disgorged profits to the extent of its capability. And because the company stepped up and owned up, it received a declination.
Now, policy changes like these take time to bear fruit, so it’s premature for a full assessment. But we’ve seen multiple companies self-report misconduct, with resulting investigations well under way.
One area where we’ve received lots of feedback about self-disclosure from the private sector relates to mergers and acquisitions. Encouraging corporate responsibility includes avoiding unintended consequences – like deterring companies with good compliance programs from acquiring companies with histories of misconduct. Acquiring companies should not be penalized when they engage in careful pre-acquisition diligence and timely post-acquisition integration to detect and remediate misconduct at the acquired company’s business.
The Criminal Division’s Evaluation of Corporate Compliance Programs emphasizes the importance of including compliance voices in the M&A process. The Criminal Division’s Corporate Enforcement Policy also offers the incentive of the prospect of a declination – in essence, a safe harbor – for misconduct reported to the Department that is uncovered during pre- or post-acquisition due diligence. The Safran declination from December 2022 is a great example. There, the company voluntarily self-disclosed that two companies it acquired paid a consultant to win contracts with the Chinese government, knowing that some of the money would be used to bribe senior officials. The conduct ended prior to the acquisition, Safran timely voluntarily self-disclosed, cooperated, and remediated, and the company thus secured a declination with disgorgement.
We are working toward an extension of this approach across the Department as part of our ongoing efforts to promote and standardize voluntary self-disclosure. That extension will highlight the critical importance of the compliance function having a prominent seat at the table in evaluating and de-risking M&A decisions.
As part of the Department’s ongoing effort to enhance consistency, transparency, and predictability in corporate enforcement, I expect that Deputy Attorney General Monaco will address voluntary self-disclosure in the M&A space in the near future.
It’s important also to highlight the enormous gulf between the outcomes for companies that do the right thing – that step up and own up – and the consequences for companies that do the opposite.
One area where this is most apparent is in the Department’s approach to breaches of prior resolutions. The Department will not hesitate to hold accountable companies that do not honor their obligations under deferred prosecution agreements (DPAs) and non-prosecution agreements (NPAs), or under the terms of corporate probation following convictions. Requiring a guilty plea after a company violates a DPA or NPA is no longer a “special” for certain customers – it’s now on the main, everyday menu.
Let me provide a recent, high-profile example. When the global telecommunications company Ericsson entered into a deferred prosecution agreement in 2019 to resolve a multinational bribery scheme, it paid a criminal penalty of over $500 million, and a subsidiary pleaded guilty to an FCPA violation. But the DPA also required the company to get on the straight and narrow: Ericsson was required to disclose all relevant information about the scheme, disclose information about other criminal misconduct, and accept the imposition of an independent compliance monitor for three years.
Put simply, Ericsson failed to live up to its commitments. The company failed to timely disclose requested and highly relevant documents related to the bribery scheme at the time of resolution; and it failed to timely disclose additional evidence and allegations of other potential FCPA violations. And so it paid the price.
Ericsson was required to plead guilty to the two original charges filed in connection with the DPA. It paid an additional $200 million in penalties, and its monitorship was extended.
As the Deputy Attorney General has stated: we will hold accountable any company that breaches the terms of an agreement resolving criminal charges – and there will be serious consequences.
And we are extending that approach beyond the criminal context to breaches of other resolution agreements — from breaches of civil settlement agreements to violations of CFIUS mitigation agreements or orders. Where companies shirk their agreed-upon responsibilities, they will pay a steep price.
We have also taken active steps to enhance transparency with respect to our approach to incentive compensation. The Department expects companies to use compensation systems to align their executives’ financial interests with the company’s overall interest in good corporate citizenship.
So when Department prosecutors evaluate the strength of a compliance program, a key consideration will be whether the company’s compensation system effectively incentivizes good behavior and deters wrongdoing.
And to put the Department’s money where its mouth is, the DAG directed the Criminal Division to launch a two-part pilot program on compensation incentives and clawbacks.
Critical to the first part of the program is the Department’s view that compensation systems should reward compliance-promoting behavior. For years, companies have designed and fine-tuned sophisticated incentive compensation systems that reward profit-enhancing behavior; we expect the same types of investments in adopting and calibrating compensation systems that reward employees who promote an ethical corporate culture and mitigate compliance risk.
Now, under the pilot program, every corporate resolution involving the Criminal Division will require that the resolving company include compliance-promoting criteria within its compensation and bonus system. The criteria should be tailored to fit the company’s existing compensation program and may include elements such as:
- Prohibitions on bonuses for employees who do not satisfy compliance performance requirements;
- Incentives linked to the demonstration of full commitment to compliance processes; and
- Disciplinary measures and clawbacks for employees who violate applicable law and executives who had supervisory authority over the employees engaged in the misconduct, and who knew of, or were willfully blind to, the misconduct.
For example, in a DPA that resolved the recent FCPA case involving the Colombian financial services company Corficolombiana S.A., the company pledged to incentivize compliance-promoting behavior amongst directors, officers, employees, and agents, including through “criteria related to compliance in the Company’s compensation and bonus system consistent with local labor laws.”
The second part of the pilot program provides clear and predictable monetary incentives for companies to claw back, or withhold, compensation paid or otherwise due to wrongdoers. Indeed, companies will be able to reduce criminal penalties when they attempt in good faith to claw back compensation – even if those efforts are unsuccessful.
Allow me to walk through this in concrete terms. For every dollar that a resolving company claws back from a wrongdoer, the otherwise applicable fine for the conduct will be reduced by a dollar. A company thus receives a double benefit from a clawback – it gets to keep the money it recoups from the wrongdoer, and it gets to subtract that amount off its fine.
But we also understand that clawbacks take time, and they may not be completed at the time of the resolution. So in that circumstance, at the time of resolution, the resolving company will pay the applicable fine, minus a reserved credit equaling the amount of compensation the company is actively attempting to claw back from culpable executives and employees.
Once the company successfully completes the clawback, the corresponding reserved credit will be released to the company. And even if the company is unable to achieve the clawback, prosecutors can credit the good faith effort by releasing to the company up to 25% of the amount the company sought.
So, for example, if a company is attempting to claw back $20 million in bonuses and it succeeds, that’s a swing of $40 million. And if it operates in good faith and just isn’t successful, the Department may still reduce the criminal penalty by $5 million.
Corporate executives and board members have a responsibility to take note. Existing clawback capabilities should be regularly deployed; a paper policy not acted upon will not move the needle – it’s really no better than having no policy at all. Clawback policies and employment contracts should be reviewed to ensure they are fit for purpose – and that review needs to take place long before a company discovers misconduct, so that it is well positioned to get the best result for its shareholders.
To be clear, we expect companies to find innovative, effective, and targeted ways to use compensation to incentivize good corporate behavior and deter misconduct, using their own mix of carrots and sticks. Those that do will be rewarded. Those that don’t will have a lot of explaining to do, not just to the Department of Justice but to the company’s shareholders.
Let me now turn to the increasing intersection between corporate crime and our national security.
As Deputy Attorney General Lisa Monaco and I have stressed in recent months, in today’s geopolitical environment, companies in the private sector are on the front lines of national security challenges like never before. As sanctions and export control laws are increasing in scope and importance, so too are the corporate risks related to national security compliance failures. As nation-state adversaries and associated criminal actors engage in increasingly sophisticated money laundering, cryptocrime, technology theft, and sanctions and export control evasion, so too must corporate compliance programs become increasingly sophisticated to keep up. And as the Department of Justice and our regulatory partners invest in national security-related corporate enforcement, so too must companies invest in compliance measures if they are to mitigate national security risks.
Where in the past a company’s compliance team might have mitigated national security risks through sanctions-screening software and attention to a couple of sanctioned countries, today a new level of diligence and attention is required.
It is for all of these reasons that the DAG has warned that from a compliance standpoint “sanctions are the new FCPA.”
Since I returned to the Department last June, the majority of our major corporate criminal resolutions have implicated United States national security; and this number has more than doubled from 2022 to 2023.
These national security cases are splayed out across every walk of corporate life. The charges have varied – from sanctions violations to money laundering to terrorism crimes. The corporate defendants have ranged – across industries, from construction and shipping to agriculture and telecommunications. And the national security risks have run the gamut – from money laundering for Russian interests to trafficking in Iranian crude oil to sanctions evasion to support the North Korean nuclear program.
Put simply: the trend is real, it is accelerating, and at DOJ we’re dedicating the resources necessary to counter the threat.
This year, we have surged capacity at the intersection between corporate crime and national security, including the ongoing hiring of more than 25 new prosecutors into the National Security Division (NSD) to investigate national security-related economic crimes, and expanding the Criminal Division’s Bank Integrity Unit by adding six prosecutors to target national security-related financial misconduct, a 40 percent expansion of a unit whose sole focus is on violations of the Money Laundering Control Act, the Bank Secrecy Act, and economic and trade sanctions programs.
Just last week, the National Security Division brought on board its first-ever Chief Counsel for Corporate Enforcement, Ian Richardson, who led key corporate crime and national security prosecutions at the U.S. Attorney’s Office for the Eastern District of New York (EDNY).
For example, in October 2022, Ian and a team of NSD and EDNY prosecutors secured the Department’s first-ever corporate conviction for providing material support to a foreign terrorist organization – securing a guilty plea from Lafarge, SA, the world’s largest cement manufacturer, for paying bribes to ISIS to protect profits and expand its market share.
As Chief Counsel, Ian will coordinate and oversee the National Security Division’s Corporate Enforcement Program as it expands to meet the moment.
Meanwhile, earlier this year Deputy Attorney General Lisa Monaco announced the formation of the Disruptive Technology Strike Force – a multi-agency collaboration led by the Justice and Commerce Departments to target illicit actors, harden technology supply chains, and protect critical technological assets from acquisition by our adversaries.
To be clear, the illegal export of sensitive technology is a direct threat to our national security, with implications for our economic stability and the competitiveness of U.S. businesses. By proactively enforcing our national security laws and collaborating with the private sector, we can safeguard America’s innovation economy and protect our nation’s investment in the technologies of the future.
And our efforts are already bearing fruit:
- As I mentioned, last October, the Department secured the first-ever corporate guilty plea to material support for terrorism from LaFarge, S.A.
- In May, the Department reached a ground-breaking resolution with the British American Tobacco company and its Asia-based subsidiary in a case involving bank fraud and sanctions violations. Despite its venerable history – having been in business for over 120 years – and its market-leading status as the largest tobacco company in the world by net sales, for over a decade from 2007 to 2017, BAT used an offshore subsidiary and a third-party intermediary to conduct illicit business in North Korea that propped up the DPRK regime and supported its nuclear weapons program.
- Two weeks ago, we announced a guilty plea by Suez Rajan Limited and a deferred prosecution agreement with its parent company, Empire Navigation, for conspiring to violate the International Emergency Economic Powers Act (IEEPA) by transporting crude oil on behalf of Iran’s Islamic Revolutionary Guard Corps. This is the first-ever corporate criminal resolution for sanctions violations through illicit sale and transport of Iranian oil, and it was accompanied by the successful seizure of over 980,000 barrels of contraband crude oil.
- And just this week, working with our Task Force Kleptocapture, our Disruptive Technology Strike Force took down a Hong Kong-based business operation that illegally circumvented export controls to funnel millions of dollars-worth of microelectronics with military applications to Russia.
Today, virtually every significant company engages in business in dangerous parts of the world. Even business operations and lines far removed from the defense sector – like cigarettes, cement, and shipping – can pose dire national security risks if companies are not highly sensitive to high-risk actors, high-risk regions, and high-risk activities.
Particularly for any company whose operations touch parts of the world controlled by autocracies, the message is simple: national security laws must rise to the top of your compliance risk chart, with the recognition that even the most innocuous-looking transaction or activity could implicate our collective security.
At the Department of Justice, we are working every day not only to conduct robust enforcement but to do so with transparency, consistency, and predictability so we can empower and incentivize companies to detect, deter, and report corporate misconduct. We look forward to continuing our work with the corporate compliance community on that important effort.
But secondly – and just as importantly, we need to put a premium on collaboration. On the cyber- and crypto-enabled crime front, the Department of Justice is working more closely with victim companies than ever before, as we prioritize dynamic threat disruption and place victims at the center of our work. And the Department is increasing outreach to the private sector about national security compliance risks. With threats shifting and risks morphing, it is mission-critical that we work together – government and industry – to identify and share information about new risk streams and threat actors.
Thank you for your time and attention this morning. I look forward to answering questions and engaging in dialogue to continue our efforts to improve corporate enforcement.
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