February 21, 2017
SIDLEY UPDATE
Department of Justice Publicizes Questions Used to Evaluate
Corporate Compliance Programs
On Feb. 8, the Fraud Section of the Department of Justice (DOJ) publicized new guidance, titled “Evaluation
of Corporate Compliance Programs.” The guidance sets forth sample questions prosecutors may ask when
evaluating a company’s compliance program in the context of a criminal investigation. This document is the
latest direction released under the Fraud Section’s “compliance initiative,” which began when the Fraud
Section hired Hui Chen as a full-time compliance expert in November 2015. This guidance provides insights
into how the DOJ will assess the effectiveness of a company’s overall compliance program, with a specific
focus on how the program will be viewed in the context of the underlying misconduct identified.
Under the United States Attorney’s manual, federal prosecutors are counseled to consider several principles
when investigating and deciding whether to charge corporate entities. These factors, commonly known as
the “Filip Factors,” include two that focus on a company’s compliance program: (1) “the existence and
effectiveness of the corporation’s pre-existing compliance program” and (2) the company’s remedial efforts
“to implement an effective corporate compliance program or to improve an existing one.” The intent of the
new Fraud Section guidance is to provide more specific examples of how federal prosecutors will probe a
company’s compliance program under these factors in the process of investigating and resolving an
enforcement matter.
The questions set forth in the new guidance reveal a broad-based “pressure testing” of a company’s
compliance program as part of the DOJ’s investigative process. The questions are organized under 11 general
topics and reflect distilled guidance from a variety of sources, including the United States Sentencing
Guidelines, the DOJ and Securities and Exchange Commission’s November 2012 Foreign Corrupt Practices
Act guide, the Fraud Section corporate resolution agreements and, perhaps reflecting an emphasis on global
standards, guidance from the Organization for Economic Cooperation and Development. For each topic, the
questions posed are designed to look behind a company’s paper program and evaluate how the program has
been implemented, updated and enforced in practice.
In a more narrow sense, the document reaffirms that the DOJ expects a company to go beyond just
remediation of the specific issue identified and requires a broader evaluation of the issue in the context of
the company’s overall compliance program. In particular, prosecutors will evaluate the compliance program
in light of the identified misconduct as well as the implications of the misconduct on the “big picture”
compliance environment, including, for example, whether adequate resources are devoted to compliance,
how management reinforces compliance and whether the company’s board of directors has appropriate
oversight of the program.
Attorney Advertising: For purposes of compliance with New York State Bar rules, our headquarters are Sidley Austin LLP, 787 Seventh Ave., New York, NY 10019, +1 212 839
5300; 1 S. Dearborn, Chicago, IL 60603, +1 312 853 7000; and 1501 K St., NW, Washington, DC 20005, +1 202 736 8000. Sidley Austin provides this information as a service
to clients and other friends for educational purposes only. It should not be construed or relied on as legal advice or to create a lawyer-client relationship.
SIDLEY UPDATE
Page 2
Because it provides general insight into the government’s expectations of how a corporate compliance
program should operate in practice, the guidance has broader utility, however, even for companies that do
not have an identified problem. The document makes clear that it is not enough to have strong written
policies and procedures; a company must also demonstrate that the program has been effectively put into
practice, is subject to continuous improvement and is enforced through appropriate incentives and
disciplinary measures. Companies should review the guidance and evaluate their compliance programs in
light of the questions posed to ensure that they are prepared before a problem arises.
The document contains probing questions regarding the following 11 topics:
1.
Analysis and Remediation of Underlying Conduct
2. Senior and Middle Management
3. Autonomy of Resources
4. Policies and Procedures
5. Risk Assessment
6. Training and Communications
7. Confidential Reporting and Investigation
8. Incentives and Disciplinary Measures
9. Continuous Improvement, Periodic Testing and Review
10. Third-Party Management
11. Mergers and Acquisitions
If you have any questions regarding this Sidley Update, please contact the Sidley lawyer with whom you usually work or
Ike Adams
Partner
[email protected]
+1 202 736 8173
Colleen M. Lauerman
Partner
[email protected]
+1 202 736 8365
Leslie A. Shubert
Partner
[email protected]
+1 202 736 8596
Joseph B. Tompkins Jr.
Partner
[email protected]
+1 202 736 8213
Sidley FCPA/Anti-Corruption Practice
Our FCPA/Anti-Corruption practice, which involves over 90 of our lawyers, includes creating and implementing compliance
programs for clients, counseling clients on compliance issues that arise from international sales and marketing activities,
conducting internal investigations in more than 90 countries and defending clients in the course of SEC and DOJ proceedings.
Our clients in this area include Fortune 100 and 500 companies in the pharmaceutical, healthcare, defense, aerospace, energy,
transportation, advertising, telecommunications, insurance, food products and manufacturing industries, leading investment
banks and other financial institutions.
To receive Sidley Updates, please subscribe at www.sidley.com/subscribe.
BEIJING ∙ BOSTON ∙ BRUSSELS ∙ CENTURY CITY ∙ CHICAGO ∙ DALLAS ∙ GENEVA ∙ HONG KONG ∙ HOUSTON ∙ LONDON ∙ LOS ANGELES ∙
MUNICH ∙ NEW YORK ∙ PALO ALTO ∙ SAN FRANCISCO ∙ SHANGHAI ∙ SINGAPORE ∙ SYDNEY ∙ TOKYO ∙ WASHINGTON, D.C.
Sidley and Sidley Austin refer to Sidley Austin LLP and affiliated partnerships as explained at www.sidley.com/disclaimer. www.sidley.com