On April 30, 2019, the Department of Justice (DOJ) Criminal Division issued an updated version of the “Evaluation of Corporate Compliance Programs” guidance originally published by the Criminal Division’s Fraud Section in February 2017. The update is more of a consolidation of various compliance program evaluation sources under the broader Criminal Division umbrella than a sweeping change in policy or philosophy, but there are some practical takeaways.

In announcing the release, Assistant Attorney General Brian A. Benczkowski noted that the revised guidance is intended to “better harmonize the prior Fraud Section publication with other Department guidance and legal standards.”

The key structural change in the new guidance was a reorganization of the “sample topics and questions” from the 2017 guidance under the rubric of three overarching questions for prosecutors to ask in evaluating compliance programs:

  1. Is the corporation’s compliance program well designed?
  2. Is the program being applied earnestly and in good faith? (i.e., is it implemented effectively?)
  3. Does the corporation’s compliance program work in practice?

The topics covered under the prior guidance are then expanded upon in narrative form, often with more nuanced questions to consider, along with illustrative examples of steps some companies have taken to enhance their compliance programs.

In addition to consolidating the Fraud Section’s prior guidance under the broader Criminal Division umbrella and simplifying its conceptual approach, the key thematic takeaway of this update is that DOJ expects compliance to be an iterative, ongoing process that is focused not just on what policies say or whether there is comprehensive training, but also on whether companies are learning from experience and adjusting accordingly. Much as a company would adapt its business plan to reflect changes in technology, trade relations, and/or geopolitical developments, DOJ expects compliance regimes, writ large, to adapt to evolving compliance challenges and standards.

In practical terms this means that compliance programs need to be updated to reflect actual experiences, both internal (e.g., incidents at the company) and external (e.g., infractions in a particular industry or geographic region). Whether those updates reflect changes in particular control functions, results of internal audits or investigations, enforcement actions in a particular industry or region, or simply better messaging, will vary from company to company. But the message from DOJ is that they are going to assess not only a company’s compliance policies and training records, but also records of how and why the compliance program evolved over time. Although not an entirely new approach, the focus on real world experiences and responses to those experiences is noteworthy.

Unsurprisingly, DOJ’s updated guidance on assessing corporate compliance programs makes clear that it is still intended to assist prosecutors on a wide range of determinations including charging decisions, resolution format, monetary penalties, and whether to impose compliance obligations as part of a resolution (e.g., a monitorship or reporting obligations). And, importantly, the guidance reaffirms that DOJ “does not use any rigid formula to assess the effectiveness of corporate compliance programs” and that it “recognize[s] that each company’s risk profile and solutions to reduce its risks warrant particularized evaluation.” It is not a one size fits all approach, to be sure, but companies under the spotlight should be prepared to defend their unique approach to compliance in a way that reflects their particular experience.

Photo of Lorraine M. Campos Lorraine M. Campos

Lorraine M. Campos is a partner in Crowell & Moring’s Government Contracts Group and focuses her practice on assisting clients with a variety of issues related to government contracts, government ethics, campaign finance, and lobbying laws. Lorraine regularly counsels clients on all aspects of the General Services Administration (GSA) and the U.S. Department of Veterans Affairs (VA) Federal Supply Schedule (FSS) programs. She also routinely advises clients on the terms and conditions of these agreements, including the Price Reduction Clause, small business subcontracting requirements, and country of origin restrictions mandated under U.S. trade agreements, such as the Trade Agreements Act and the Buy American Act. Additionally, Lorraine advises life sciences companies, in particular, pharmaceutical and medical device companies, on federal procurement and federal pricing statutes, including the Veterans Health Care Act of 1992.

Photo of Jacinta Alves Jacinta Alves

Jacinta Alves, a partner in our Washington, D.C. office, practices in the Health Care and Government Contracts groups. Jacinta’s practice includes representing and counseling health care providers, managed care organizations, and a variety of government contractors and grantees in a wide array of litigation, regulatory, and compliance matters. Her practice includes counseling and representing entities on matters related to internal and government investigations, the physician self-referral law (Stark Law), the Anti-Kickback Statute, the FCA, receipt of government overpayments, procurement and grant fraud, suspension and debarment, and other federal and state fraud and abuse issues. In 2015, Jacinta served for six months as interim General Counsel and Chief Compliance Officer of a healthcare non-profit that provided nearly $1 billion in assistance, in part, to specifically assess the adequacy of the organization’s compliance and audit plan in light of identified risk areas.

Photo of Payal Nanavati Payal Nanavati

Payal Nanavati is an associate in the firm’s Washington, D.C. office, where she practices in the Health Care and Government Contracts groups. Payal’s government contracts practice focuses on contract claims/disputes under the Contract Disputes Act (CDA), litigation before the Armed Services Board of Contract Appeals (ASBCA), and bid protests before the Government Accountability Office (GAO). Her health care practice includes regulatory compliance governing digital health initiatives and fraud and abuse.

Admitted in New York only; practicing under the supervision of DC Bar members

Photo of Nkechi Kanu Nkechi Kanu

Nkechi A. Kanu is an associate in the Washington, D.C. office of Crowell & Moring, where she is a member of the firm’s Government Contracts Group.

Nkechi’s practice focuses on government and internal investigations involving various regulatory matters, suspension and debarment proceedings, and False Claims Act litigation. In addition, she provides affirmative and defensive claims counseling to clients in connection with complex government contracts. Her practice also includes conducting compliance reviews, counseling on regulatory and compliance matters, and performing government contracts due diligence.