On October 12, the U.S. Department of Justice’s Assistant Attorney General Brian Benczkowski delivered remarks that addressed two significant aspects of corporate compliance: improving the compliance expertise of Criminal Division prosecutors; and the Department’s approach to corporate monitors. Because each topic deserves separate review and analysis, this post will address the first issue of prosecutorial corporate-compliance expertise.
Benczkowski first noted that compliance “is an important factor we take into consideration in every corporate enforcement matter we review.” Because prosecutors assess a company’s compliance program’s operation both at the time of the alleged misconduct and at the time of resolution to reach a fair and appropriate resolution, he stated, “our prosecutors and supervisors must have a strong foundational understanding of what constitutes an effective approach to compliance.”
Benczkowski then addressed the Criminal Division’s hiring of Hui Chen in the Fraud Section as a compliance consultant with broad expertise in compliance matters. He acknowledged that this approach “had its benefits,” but cited two types of “inherent limitations in having the locus of our compliance expertise consolidated in a single person in a single litigating section”:
- Limitations of Single Professional’s Expertise: “Even when fully briefed on a matter, a single compliance professional who has not been involved in a case throughout an investigation is not likely to have the same depth of factual knowledge as the attorneys who make up the case team. Nor can any one person be a true compliance expert in every industry we encounter. An effective, state of the art compliance program in the banking industry, for example, is going to look very different from one in the health care, energy, or casino industries.”
- Limitations of Criminal Division’s Reliance on Single Professional: “Relying on a single person as the repository of all of our compliance expertise also is shortsighted from a management perspective. Anyone who holds such a job will inevitably and quickly feel a strong pull to the private sector. Their expertise is simply too valuable in this day and age. If and when that person departed, we would have to start from scratch and find a replacement. And that process undoubtedly would repeat itself every few years, with little long-term benefit to the Criminal Division. That is the position we find ourselves in right now.”
Benczkowski added that Chen “spent considerable time training our attorneys and developing in-house knowledge and expertise among attorneys in the Division,” noting that “[t]hat work was very beneficial.”
Benczkowski then announced his plans for increasing compliance capacity and knowledge across the relevant Sections of the Criminal Division, beginning with the Fraud Section and the Money Laundering and Asset Recovery Section, “where the bulk of our corporate enforcement activity takes place.” He stated that these plans had two elements: diverse hiring and the development of targeted training programs.”
- Diverse Hiring: Benczkowski said that Criminal Division” will focus on building a team of attorneys who offer diverse skillsets. That means not just attorneys with experience as prosecutors and in the courtroom, but also those who bring compliance experience to the table.” For corporate-enforcement cases, he indicated that the approach would be to team “a trial attorney with experience litigating corporate cases . . . with an attorney who has experience developing and testing corporate compliance programs,” in order to leverage prosecutorial talent, “which should lead to better and more just outcomes.” Rather than “outsourc[ing] a separate review of the compliance program when considering the merits of a corporate matter,” Benczkowski maintained that the same attorneys on a case team should be considering all of the factors in the Department’s Principles of Federal Prosecution of Business Organizations (informally known as the “Filip Factors”), “as part of a single, comprehensive review and determination of the right outcome.”
- Training: Benczkowski first summarized the longstanding approaches to training that the Department has provided to attorneys on how to investigate and try cases. Those included trial-advocacy courses at the Department-operated National Advocacy Center (NAC), detailing of Criminal Division attorneys to U.S. Attorney’s Offices across the country, and “a broad array of both voluntary and mandatory training to all of our attorneys across the Department.” Benczkowski then stated his expectation
that the Division will develop a training program that addresses compliance programs generally, as well as issues specific to each section and unit. As a result, more of our health care fraud attorneys who work on corporate cases will become experts in health care industry compliance; attorneys working on securities and commodities cases will become experts in compliance relating to securities laws and trading. We will take this same approach for attorneys who work on FCPA cases, or MLARS attorneys who do cases involving the banking industry. Ultimately, our goals are to ensure a balance of experience across the Division and to enhance the expertise of our trial attorney workforce.
Benczkowski explained that “[w]e want to ensure that we build and maintain the capacity we need not just for today or next year, but for ten years down the road. And it will lessen the impact when people inevitably leave the Department to retire or follow other career paths.”
Note: The Assistant Attorney General’s general approach to increasing compliance expertise via more diverse hiring and increased training is commendable. It is no reflection on Hui Chen – who brought an unparalleled depth and breadth of compliance expertise to the Division’s Fraud Section, and materially increased the sophistication of the Section’s evaluation of corporate-compliance programs – to say that the Criminal Division (and by extension the Department overall) would benefit from having broader and more sustainable expertise in every Section that handles corporate criminal investigations and cases.
With regard to the Criminal Division’s hiring and use of more attorneys with compliance expertise, a few observations are in order. Benczkowski’s remarks, as noted above, seem to indicate that his corporate case-staffing approach envisions two distinct categories of attorneys: a trial attorney with experience in litigating corporate cases, and an attorney with experience developing and testing corporate compliance programs. In practice, that demarcation may be inadvisable over the long term. As litigating sections in the Department, Criminal Division Sections need to maintain long-term flexibility in their ability to assign investigations and cases to their trial attorneys. An attorney hired into a Section based on his or her in-house compliance expertise may be of immense value in certain cases where the attorney’s expertise matches with the type of company under investigation, but of lesser value in other cases if he or she does not have at least some litigating experience. In fact, a number of corporate-compliance officers and managers have been prosecutors before moving into in-house roles, so the Division may not find it necessary to choose between hiring separate categories of trial attorneys and compliance attorneys.
The greater challenge in recruiting such attorneys, however, may be simple economics. An experienced Assistant U.S. Attorney or Criminal Division prosecutor who takes an in-house compliance position is likely to improve his or her income significantly (taking into account salary, bonuses, and other compensation) over a federal-government salary. The longer that those attorneys spend in compliance roles, meaning the greater the expertise they are amassing, the disparity between government and private-sector salaries can only increase. Although the Department has often been fortunate in attracting attorneys who are willing to leave more lucrative private-sector positions for the opportunity to engage in public service, the question for the Criminal Division will be whether it can find enough of such people with both litigating and compliance experience to meet its needs in the next one to three years.
As for increased training, Benczkowski described the proposed training program in very general terms. Certainly the NAC, which for many years has offered a wide variety of white-collar crime seminars taught by experienced prosecutors, can play a role in bringing more compliance-related training to Criminal Division chiefs and trial attorneys. But the Division would benefit from adopting a broader conception of compliance training – one that includes three approaches that in-house compliance functions themselves use.
First, when I headed the global anti-bribery and corruption program for a global financial institution, I not only hired compliance professionals who already had relevant expertise, but encouraged them to maintain their current professional certifications and to pursue additional certifications in anti-corruption, fraud, and money laundering as appropriate. Training courses offered by reputable certifying organizations enable compliance professionals to hear from a variety of experts in their field, and can enhance the certified professionals’ knowledge and professional credibility.
Second, I also sought funding from my superiors to enable my compliance team to attend external compliance conferences on a regular basis. In-house corporate-compliance managers and specialists routinely benefit from hearing from their peers in their industry or other industries – to obtain informed perspectives on significant compliance trends and developments, to benchmark their compliance programs with other companies in their industry, and to learn methodologies and processes that could enhance their programs. Criminal Division attorneys can derive similar benefits.
Third, the Division needs to consider developing its own more advanced training on specific compliance issues, as I and my peers in other firms did for our in-house compliance teams. While the NAC always seeks to maintain a high standard in its training seminars, its training calendar in any given year fills quickly. That can make it difficult for the Division to use the NAC as the venue for compliance training without substantial lead time. Although the Department can hardly look to law firms that appear before it on corporate-compliance matters to provide such training, there are other sources of expertise in the private sector and academia on which the Division might draw. In any event, the Division should be open to adopting whatever training approaches enhance the compliance knowledge and expertise of its prosecutors.
Afterword: A passing comment by Benczkowski during his remarks deserves separate mention. In discussing the need to improve prosecutorial compliance expertise, he stated his belief that “our prosecutors should consider the adequacy of a compliance program at the same time they are considering, for example, a company’s remedial actions or the timeliness of any voluntary self-disclosure.” Other commentators –such as Professor Andy Spalding of the University of Richmond Law School – have urged that the Department consider pre-existing compliance as part of its consideration of potential corporate liability, along with the standard factors such as timely and voluntary self-disclosure, full cooperation, and remediation. It is not clear whether Benczkowski’s comment is more a personal observation or a telltale of future Department policy changes, but corporate-compliance professionals should closely watch future speeches by Benczkowski and other Department officials for indications of further changes in the Department’s corporate-enforcement policies.
Dipping Through Geometries 