The U.S. Justice Department issued new guidance Tuesday detailing how prosecutors will evaluate the effectiveness of corporate programs to prevent fraud and other misconduct, a key consideration in determining the penalties imposed against companies.

At 18 pages, the guidance expands on a previously issued list of sample topics and questions for prosecutors to weigh when determining whether a company has demonstrated a commitment to compliance and is deserving of credit in a corporate settlement.

Indeed, the new guidance provides greater detail about what prosecutors should look for in compliance programs, including the tone set by top corporate executives, training for staff and the existence of confidential tip lines for employees to report misconduct. In the section about training, for instance, the newly released guidance notes that some companies give employees case studies to address real-life scenarios.

“Any well-designed compliance program entails policies and procedures that give both content and effect to ethical norms and that address and aim to reduce risks identified by the company as part of its risk assessment process,” according to the guidance. “As a threshold matter, prosecutors should examine whether the company has a code of conduct that sets forth, among other things, the company's commitment to full compliance with relevant federal laws that is accessible and applicable to all company employees.”

Prosecutors, according to the guidance, “should also assess whether the company has established policies and procedures that incorporate the culture of compliance into its day-to-day operations.”

Speaking Tuesday in Dallas, Brian Benczkowski, the head of the Justice Department's criminal division, said the revised guidance is intended to aid not only prosecutors but also companies, giving them deeper insight into what the government will demand of compliance programs.

“In drafting the updated version of the document, we have sought to provide additional transparency in how we will analyze a company's compliance program,” Benczkowski said in prepared remarks.

“We hope this updated version provides additional insight to both prosecutors and companies with respect to the evaluation of compliance programs,” he added.

The guidance marked the latest in a series of Justice Department moves to clarify its expectations for compliance programs and its approach to penalizing companies.

U.S. Department of Justice. Photo by Diego M. Radzinschi/ALM.

In February, the Justice Department declined to prosecute Cognizant Technology Solutions Corp., a New Jersey-based outsourcing operations company, on charges it paid bribes to fast-track the construction of a corporate campus in India. In a letter to Cognizant, the Justice Department cited the “existence and the effectiveness of the company's pre-existing compliance program.”

Cognizant, represented by the law firms Latham & Watkins and DLA Piper, agreed to disgorge nearly $20 million in ill-gotten profits as the Justice Department charged two former executives, including the company's former chief legal officer, with authorizing a $2 million bribe payment.

Last year, the Justice Department extended across the criminal division a policy for rewarding companies that voluntarily self-disclose misconduct, cooperate with the investigation and bolster their compliance programs to prevent future wrongdoing. The policy had originally applied specifically to cases involving violations of the Foreign Corrupt Practices Act, a federal law prohibiting bribery meant to build business overseas.

In October, Benczkowski issued separate guidance that was viewed as likely to curtail settlement agreements requiring companies to hire outside monitors to ensure their compliance with federal laws. That guidance, urging prosecutors to consider the “projected costs and burdens” of such an outside monitor, directed Justice Department lawyers to take stock of a company's compliance program at the time of a settlement.

In his remarks Tuesday, Benczkowski sought to dispel the notion that the policy would, as he put it, “spell the death of monitorships.”

“By now, you should all realize that this is not true,” he said.

“Put simply, this guidance was not meant to do away with monitors—it was meant to focus our prosecutors' determination on the appropriate factors so that monitors are imposed only where necessary and under the terms and scope that is appropriate for that given case,” he said.

Benczkowski pointed to a pair of settlements within the past two months, both resolving allegations of foreign bribery, in which the Justice Department imposed a monitor because the companies' compliance programs had not been fully tested at the time of the resolution.

The guidance released Tuesday reflected also the Justice Department's increased desire to provide compliance training to prosecutors. As Benczkowski spoke in Dallas at the Ethics and Compliance Initiative 2019 Annual Impact Conference, the Justice Department was holding an all-day training in Washington for federal prosecutors, with representatives of the U.S. Securities and Exchange Commission and other agencies among the nearly 200 in attendance. The training sessions were led by top officials from the fraud and money laundering sections of the Justice Department's criminal division.

“In October of last year,” Benczkowski said, “I announced that we would be implementing training programs across the criminal division to enhance our prosecutors' understanding of compliance.”

“I am proud to report that as I speak here today the first such training is taking place in Washington, “ he added.