The Fraud Section of the United States Department of Justice (“DOJ”) Criminal Division has released new guidance on its evaluation of corporate compliance programs. The Fraud Section is the Criminal Division’s largest litigating section, with sole criminal responsibility for large corporate and health care fraud units. The Fraud Section’s view of corporate compliance programs is therefore required reading for Boards of Directors and Chief Compliance Officers in all industries, including health care, as it sets the tone not only for Fraud Section prosecutions, but for the activities of other civil and criminal enforcement entities, as well.
The new guidance outlines specific factors for prosecutors to consider in conducting an investigation of a corporate entity, determining whether to bring charges, and negotiating plea or other agreements. These factors, commonly known as the “Flip Factors,” include “the existence and effectiveness of the corporation’s preexisting compliance program” and the corporation’s remedial efforts “to implement an effective corporate compliance program or to improve an existing one.”
The Fraud Section evaluates corporate compliance programs in the specific context of a particular criminal investigation triggering application of the Flip Factors. While no rigid formula is used, the new guidance outlines important issues and common questions the Fraud Section has frequently found relevant in making individualized determinations of the effectiveness of corporate compliance programs.
The new guidance breaks down the evaluation of corporate compliance programs into 11 topics, many of which also appear in existing DOJ sources on compliance and investigations, including the United States Attorneys’ Manual and Sentencing Guidelines. The topics, some of which may or may not be relevant to the particular facts at issue, are as follows:
- Analysis and Remediation
- Senior and Middle Management
- Autonomy and Resources
- Policies and Procedures
- Risk Assessment
- Training and Communications
- Confidential Reporting and Investigation
- Incentives and Disciplinary measures
- Continuous Improvement, Periodic Testing and Review
- Third Party Management
- Mergers and Acquisitions
Each of the 11 topics includes a series of sample questions framed using existing misconduct as a benchmark against which a compliance program will be assessed. Although the new guidance is formulated to evaluate compliance programs after a failure has been discovered, it provides organizations in health care and other fields a useful roadmap for determining whether an existing compliance program is up to snuff. It also indicates the steps that should be taken to demonstrate a preexisting commitment to compliance when problems are discovered.