On October 8, 2019, Assistant Attorney General Brian Benczkowski announced at a conference the issuance of a new DOJ policy aimed at creating “greater transparency” in aspects of white collar crime enforcement. This policy describes the factors the DOJ evaluates in considering a company’s claim that it is unable to pay a proposed criminal fine or monetary penalty.
As an initial matter, before considering an inability to pay argument, the company and the DOJ prosecutors must reach an agreement as to the form of the settlement (i.e., a non-prosecution agreement, deferred prosecution agreement or guilty plea) and an agreement as to the appropriate monetary penalty, ignoring any considerations of ability to pay. Once that is done, the DOJ will then consider a number of factors, including:
- the company’s current financial condition;
- the company’s ability to raise additional capital, including through the issuance of debt or equity, or the sale of assets;
- the collateral consequences of the monetary penalty, including the ability of the company to fund pension obligations, whether the penalty is likely to cause the company to lay off employees, and whether the penalty might cause product shortages; and
- the effect the penalty will have on the company’s ability to pay restitution to victims.
Attached to the policy memorandum is a questionnaire that lists information a company is to provide to the DOJ when making an inability to pay claim. The policy also explicitly identifies factors that are not relevant in this type of analysis, including the expected impact on the company’s future growth, future product lines, the issuance of future dividends, and future executive compensation.
Before any reduction to a criminal monetary penalty is made, the relevant DOJ Section Chief must approve the reduction. Moreover, if the proposed reduction is greater than 25%, the Assistant Attorney General for the Criminal Division (or his/her designee) must approve.
Benczkowski stated that this policy is consistent with other recent policies issued by the DOJ that were similarly designed to increase transparency as to DOJ decision-making in white collar enforcement matters. He specifically discussed the April 2019 updated DOJ guidance on how the DOJ evaluates corporate compliance programs and the October 2018 memorandum on corporate monitorships.
Benczkowski also announced that the Securities and Financial Fraud Unit will be renamed the Market Integrity and Major Frauds Unit. The Unit will also be reorganized into five “teams:” 1) Securities Fraud, 2) Commodities Fraud, 3) Government Procurement Fraud, 4) Fraud on Financial Institutions, and 5) Consumer Fraud, Regulatory Deceit, and Investor Schemes.