Does “good faith” mean “effective”?
On November 17, 2017 the DOJ issued a press release titled “Attorney General Jeff Sessions Ends the Department’s Practice of Regulation by Guidance”. It provided, in part:
“Today, in an action to further uphold the rule of law in the executive branch, Attorney General Jeff Sessions issued a memo prohibiting the Department of Justice from issuing guidance documents that have the effect of adopting new regulatory requirements or amending the law. The memo prevents the Department of Justice from evading required rulemaking processes by using guidance memos to create de facto regulations. ‘Guidance documents can be used to explain existing law,’ Associate Attorney General Brand said. ‘But they should not be used to change the law or to impose new standards to determine compliance with the law … This Department of Justice will not use guidance documents to circumvent the rulemaking process, and we will proactively work to rescind existing guidance documents that go too far.’”
On April 30, 2019 the DOJ issued a press release titled “Criminal Division Announces Publication of Guidance on Evaluating Corporate Compliance Programs.” It provided, in part:
“The Criminal Division announced today the release of a guidance document for white-collar prosecutors on the evaluation of corporate compliance programs. The document, entitled ‘The Evaluation of Corporate Compliance Programs,’ updates a prior version issued by the Division’s Fraud Section in February 2017. It seeks to better harmonize the guidance with other Department guidance and standards while providing additional context to the multifactor analysis of a company’s compliance program.”
This new Guidance Document brings far-reaching consequences for corporations and those that work for corporations. It provides as follows:
“As the Justice Manual notes, there are three ‘fundamental questions’ a prosecutor should ask:
- ‘Is the corporation’s compliance program well designed?’
- ‘Is the program being applied earnestly and in good faith?’ In other words, is the program being implemented effectively?
- ‘Does the corporation’s compliance program work’ in practice?
And then it cites JM [Justice Manual] § 9-28.800.
So as I usually do, I went to the source – the Justice Manual – to make sure that it does, in fact, have those same three fundamental changes. What does that section actually provide? Accessing https://www.justice.gov/jm/jm-9-28000-principles-federal-prosecution-business-organizations#9-28.800 on May 3, 2019, it provides as follows:
“The fundamental questions any prosecutor should ask are: Is the corporation’s compliance program well designed? Is the program being applied earnestly and in good faith? Does the corporation’s compliance program work?”
So it appears that the Guidance has interpreted “applied earnestly and in good faith” to mean “implemented effectively.”
This appears to be a shift from one that appears more focused on intent – earnestness and good faith both describe the intent of the actor – to one that is more focused on outcome – effectiveness.
That appears to be a real change. Does it mean that acting earnestly and in good faith doesn’t bear much weight if, at the end of the day, the program was found to have been implemented ineffectively?
Notwithstanding former AG Sessions “no more guidance!” command, perhaps AG Barr can provide some guidance on the guidance of whether they’ve shifted from an intent standard to a result standard.
Finally, I didn’t see anything in the new Guidance, nor in the DOJ press release, that referenced the September 5, 2015 memo (guidance) put out by then-DAG Sally Yates titled “Individual Accountability for Corporate Wrongdoing”. Among other things, that guidance provided that “to be eligible for any cooperation credit, corporations must provide to the Department all relevant facts about the individuals involved in corporate misconduct.”
Perhaps that guidance was rescinded by then-AG Sessions at or around the same time he rescinded the Cole and Ogden Memos around federal priorities for cannabis prosecutions?