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Future of the ‘Effectiveness Questions’

The other day a compliance officer asked me an interesting question: What’s going to happen to the Justice Department’s guidelines for evaluating the effectiveness of compliance programs?

After all, the Trump Administration talks all the time about streamlining regulation. Deputy attorney general Rod Rosenstein has given a series of speeches this fall promising reviews of previous guidance. Could the Evaluation Guidance, published only nine months ago, simply disappear?

In the Orwellian sense of the word, sure; this administration has a penchant for pretending that certain facts don’t exist, especially when those facts suggest that the Obama Administration had good ideas. The Evaluation Guidance falls into that category. I wouldn’t be surprised if Rosenstein’s promised overhaul, whenever it arrives, declares the Evaluation Guidance no longer operative and the document vanishes from the Justice Department website.

Maybe the material will be subsumed into an updated U.S. Attorney’s Manual, or folded into a “Rosenstein Memo,” or buried in some other policy proclamation that can pass muster with Captain Queeg in the Oval Office. But that’s all nomenclature, really.

When you consider the substance of the Evaluation Guidance—what it pushes compliance officers to think about, and compliance programs to accomplish—I don’t believe those points are going disappear, regardless of what Rosenstein might publish.

On the contrary, you could just as well print out the questions asked in the Evaluation Guidance and have them framed. What matters is your ability to answer questions like them—and you’re still going to need that abilities that document encourages for a long, long time.

Evaluating the Evaluation Guidance

Let’s remember how this document came to exist in the first place. The Justice Department’s former compliance counsel, Hui Chen, wrote it in 2016 to help federal prosecutors evaluate the compliance programs of companies under investigation.

Evaluation Guidance

Hui Chen, looking fierce.

Originally, that’s all the Evaluation Guidance was. Chen herself, whom I interviewed her last summer, doesn’t even like the rest of us calling the document “guidance.” In the technical sense it isn’t that, since the document went through no formal review process with public comment and so forth. It wasn’t specifically designed for public consumption—but the points raised were so useful that leaders of the Fraud Section posted it publicly anyway.

And as Chen and others have also said, the Evaluation Guidance doesn’t break any new ground conceptually. It simply builds upon other guidance already out there: the FCPA Guidance published by the SEC and Justice Department in 2012, the U.S. Sentencing Guidelines, and pieces of the U.S. Attorney’s Manual and other guidance as well.

For example, you can chart most sections of the Evaluation Guidance to corresponding passages from the FCPA Guidance and the U.S. Sentencing Guidelines.

For the substance of the Evaluation Guidance to go away, implicitly we would need to repudiate the FCPA Guidance of 2012 and the U.S. Sentencing Guidelines as well. Those are much more formal pronouncements, ingrained into the corporate legal and compliance minds.

We can say the same for other recent guidance from the Justice Department as well—real guidance, such as the Yates Memo of 2015 or the FCPA Pilot Program of 2016. The specific language they use might not be to Rosenstein’s liking. And Rosenstein isn’t wrong to question the proliferation of guidance; if he wants to sweep those documents into one compendium of Justice Department policy, that’s not a bad idea.

But imagine a U.S. Attorney’s Manual that doesn’t encourage companies to disclose misconduct or cooperate with investigations. Picture a Rosenstein Memo that says, “Nah, you don’t need to remediate ineffective policies that allow misconduct to happen.” Will prosecutors stop caring about whether you tried to perform due diligence on third parties? Or whether the CEO offered at least boilerplate endorsement of ethics and compliance? Of course not.

That bizarro world is what reversal of the Yates Memo or the Evaluation Guidance would really look like. And that’s not going to happen. Whatever else people might think of Rosenstein, he’s a prosecutor. He isn’t going to disable his department’s ability to prosecute, and he isn’t going to shut down mechanisms that encourage companies to help his prosecutors fulfill their mission.

Inspiration for Compliance

When I interviewed Chen, she noted that Justice Department prosecutors would use the Evaluation Guidance to ask specific questions about specific fact patterns, when they were investigating specific companies. For them, that makes sense. The Evaluation Guidance helps them find the truth.

Compliance officers should use the questions in the Evaluation Guidance differently. Your goal is to build a compliance function that could answer any of the questions, for any fact pattern that might arise. For you, the Evaluation Guidance helps you to build capabilities.

Well, re-read the Evaluation Guidance and ponder the capabilities it drives you to build. Finding the root cause of a problem. Taking good conduct seriously at the highest level. Governing third parties for the risks they might bring to your organization. Investigating allegations thoroughly. Keeping those investigations free from interference.

Those principles will serve a compliance officer well under any circumstance. Whatever new form they might take in the future, they aren’t going away.

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