This resolution follows Deputy Attorney General (DAG) Lisa O. Monaco’s October 28, 2021 announcement that DOJ was moving away from prior DOJ guidance that suggested monitorships were “disfavored or are the exception.” The Stericycle resolution suggests the shift in DOJ’s approach is more than rhetorical.
DOJ has long employed independent compliance monitors
DOJ regularly requires corporations that resolve criminal investigations through a deferred prosecution agreement (DPA) or a non-prosecution agreement (NPA) to adopt a strict compliance program. Beginning in the 1990s, and with increasing frequency since, DOJ also sometimes requires that companies retain an independent compliance monitor to assess and monitor its adherence to its new compliance program.
DOJ first set forth the guiding principles for when a corporate monitor should be appointed in what is known as the “Morford Memo” in 2008. The Department has since supplemented this guidance with the 2009 “Breuer Memo,” the 2010 “Grindler Memo” and the 2018 “Benczkowski Memo.” The Benczkowski Memo identifies specific factors prosecutors should consider when deciding whether a monitor is needed. Public remarks made by former Assistant Attorney General Brian A. Benczkowski further explained that a monitor should be imposed “only as necessary to ensure compliance with the terms of a corporate resolution and to prevent future misconduct . . . consistent with our longstanding practice of imposing monitors as the exception, not the rule.” On October 28, 2021, DAG Monaco announced DOJ would move away from this policy and more liberally employ independent compliance monitors “whenever it is appropriate to do so in order to satisfy our prosecutors that a company is living up to its compliance and disclosure obligations under the DPA or NPA.” She explained that the Department was moving away from all prior guidance that suggested monitorships were “disfavored or are the exception.”
Although the full impact of this policy shift is not yet clear, the imposition of a compliance monitor on Stericycle despite the fact that the company earned full cooperation credit is noteworthy.
The Stericycle resolution
According to DOJ, Stericycle conspired to corruptly offer and pay approximately $10.5 million in bribes to foreign officials in Brazil, Mexico, and Argentina in order to obtain and retain waste management services business. The DPA confirms that “the Company received full credit for its cooperation with the Fraud Section’s investigation” and describes its “extensive remedial measures” as including:
(i) commencing remedial measures based on internal investigations of the misconduct prior to the commencement of the Government’s investigation; (ii) strengthening its corporate governance by appointing numerous new individuals to senior management and Board of Directors positions and establishing a Safety, Operations, and Environmental Committee to enhance Board oversight; (iii) strengthening its compliance organization by hiring additional compliance personnel, including an experienced new Chief Ethics and Compliance Officer who reports directly to Stericycle’s Chief Executive Officer and Chair of the Audit Committee of the Board of Directors; (iv) updating its code of conduct, policies, procedures and internal controls relating to, among other things, anti-corruption, retention and management of commercial agents and other third parties, and gifts, travel and entertainment; (v) enhancing its internal reporting, investigations and risk assessment processes; (vi) overhauling its compliance training and communications; (vii) disciplining certain employees involved in the relevant conduct, including terminating certain employees including senior managers; and (viii) divesting its subsidiaries in Mexico and Argentina and taking steps to address its risks in Brazil.
However, the DPA explains that despite these “extensive remedial measures,” Stericycle “has not fully implemented or tested its enhanced compliance program, and thus the imposition of an independent compliance monitor for a term of two years . . . is necessary to prevent the recurrence of misconduct."
The imposition of a monitor in this case is in contrast with recent DOJ practices. A review of DOJ’s list of DOJ’s Active Fraud Section Monitorships reveals that none of those were appointed to enforce compliance at a company that had earned full cooperation credit. However, heavier reliance on independent compliance monitors is consistent with DAG Monaco’s recent announcement that DOJ will employ monitors “whenever it is appropriate to do so in order to satisfy our prosecutors that a company is living up to its compliance and disclosure obligations under the DPA or NPA.”
Looking ahead
-
The Stericycle resolution underscores the significance of DAG Monaco’s October 28, 2021 announcement and DOJ’s more liberal use of independent compliance monitors – even on companies that fully cooperate and adopt extensive remedial measures.
-
Companies should pro-actively prioritize bribery and corruption compliance in advance of any investigation. A robust compliance program is not only important to prevent misconduct, but DOJ may also consider whether a robust compliance program is in place and fully implemented and tested when determining whether a compliance monitor is needed to resolve any investigation.
- Companies preparing to resolve a DOJ investigation must be ready to argue that a compliance monitor is not needed. However, they should also be prepared to strategically negotiate to narrow the scope of responsibility and length of term for any independent compliance monitor DOJ insists on.
Authored by Stephanie Yonekura, Ann Kim, and Rebecca Umhofer.
