The U.S. Department of Justice (DOJ) recently released “Fraud Section Year in Review 2021.” This annual report showcases not only what the DOJ accomplished in 2021 but also provides insights on its priorities for 2022. Additionally, recent comments from the President and senior officials leave little doubt about what to expect in 2022.
The DOJ continues to focus its enforcement efforts on individuals, which resulted in an increase in guilty pleas and individual convictions in 2021. In 2020, the DOJ secured convictions against 213 individuals. In 2021, this number jumped to 329 convictions, a 54 percent increase. It is reasonable to expect more of the same in 2022.
In a recent speech, Attorney General Merrick Garland reiterated that the DOJ continues to be razor-focused on individual accountability, stating that: “I have made it clear that the Department’s first priority in corporate criminal cases is to prosecute the individuals who commit and profit from corporate malfeasance. It is our first priority because corporations only act through individuals.”
LOOKING TO THE COOPERATION CREDIT
The DOJ is also making a policy change on how companies receive cooperation credit. Previously, companies had some discretion and could limit disclosures regarding misconduct to those whom the company deemed were “substantially involved.” To receive full cooperation credit going forward, companies must provide all non-privileged information about individuals involved in or responsible for the misconduct at issue.
HOW PREVIOUS MISCONDUCT IS FACTORED IN
An additional policy shift relates to how previous misconduct is weighed in reaching a resolution. Previously, prior compliance with the laws and regulations involving the matter being investigated was a primary factor in weighing misconduct. Going forward, the DOJ will consider “the full criminal, civil and regulatory record of any company that is the subject or target of a criminal investigation.”
INCREASED USE OF INDEPENDENT MONITORS
Another expected change is the increased use of independent corporate monitors as a part of settlements. Deputy Attorney General Lisa Monaco’s recent public comments have made it clear that the use of independent monitors will increase. Going forward, DOJ prosecutors will be “free to require the imposition of independent 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.” Expect to see full employment of independent monitors in 2022.
A FOCUS ON PANDEMIC-RELATED FRAUD
President Biden announced another key 2022 priority during his State of the Union address. The DOJ will soon be naming a Chief Prosecutor to lead specialized teams to combatting pandemic fraud. This will build on the existing work of the COVID-19 Fraud Enforcement Task Force that Attorney General Garland established in May 2021. This new Chief Prosecutor will undoubtedly be targeting what the U.S. Secret Service estimates is close to $100 billion in pandemic-related fraud.
WHAT SHOULD COMPANIES DO?
1. Evaluate current compliance structure. Companies that received PPP loans or pandemic relief funds should ensure proper policies and procedures have been implemented and document all compliance.
2. Perform a risk assessment. Solicit feedback from employees at all levels on potential risks. A good risk assessment is the foundation of an effective compliance program.
3. Focus on internal controls. A strong compliance structure capable of preventing and detecting misconduct will minimize risk and help with the DOJ.
4. Invest in technology and data analytics. The DOJ expects companies to adequately fund their IT infrastructure and use the latest tools and data analytics for monitoring and testing their compliance programs.
5. Hire experienced outside advisors. Impartial expertise from an outside party can help make sure a company is compliant.
Peter Brown, CPA, CFF, ABV, leads GHJ’s Forensic Services Practice and has extensive experience conducting internal investigations that involve governmental inquiries and alleged non-compliance with laws and regulations.