New DOJ Fraud Division Directive Reinforces Heightened Corporate Enforcement Risks and Continues Open Door Policy for Early Disclosure

On October 1, Assistant Attorney General Colin M. McDonald of the DOJ’s National Fraud Enforcement Division issued a new directive titled “Corporate Enforcement in the Fight Against Fraud.” The memo commits the Fraud Division to “an aggressive, all-tools approach” to its health care, government, tax, and trade fraud priorities, while pledging to “firmly guard against overbroad corporate enforcement.” For companies that are, or have been, subjects or targets of DOJ investigations, the directive clarifies how the Division will select cases, weigh charges, and reward early disclosure.

DOJ Directive Centralizes Corporate Enforcement and Targets Four Fraud Priorities

The memo reaffirms that Fraud Division prosecutors must follow both the Principles of Federal Prosecution of Business Organizations and the department-wide Corporate Enforcement and Voluntary Self-Disclosure Policy (CEP). The memo also reveals that the DOJ will centralize oversight in the Division’s new Corporate Enforcement Section, requiring Fraud Division prosecutors to (1) report any corporate criminal investigation within seven days of the initiation of the investigation to the Corporate Enforcement Section and (2) coordinate the investigation with the Corporate Enforcement Section “from case intake through completion.” The Corporate Enforcement Section will also have primary responsibility for monitoring compliance with corporate criminal resolutions, including a company’s efforts to implement or enhance its compliance program. Notably, the memo outlines four key areas of fraud that the Division will focus on in taking enforcement actions against companies. 

• Health Care Fraud: Schemes involving the health care industry, “including health care fraud, distribution of controlled substances, and violations of the Federal Food, Drug, and Cosmetic Act” (FDCA). Providers, distributors, and drug and device manufacturers should expect continued scrutiny.
• Government Fraud: Schemes “involving the public trust or financial integrity of Americans and markets related to procurement, government contracts, and other government functions.” 
• Tax Fraud: Schemes “involving significant evasion of internal or external revenue.” 
• Trade Fraud: Schemes “involving tariff evasion, importation of goods or services, or forced labor.” Importers should treat customs, origin, and forced-labor diligence as criminal-risk areas.

The Division’s directive outlines that prosecutors “must place great weight” on 10 enumerated factors when determining whether to bring charges and when negotiating plea or other agreements. These factors include: 

1. Corporate management’s knowledge of or involvement in the fraud. 
2. Efforts to conceal fraud from the government or auditors. 
3. Fraudulent conduct that lasted three or more years. 
4. Actions threatening Americans’ safety and security. 
5. Conduct causing “substantial financial hardship” to a taxpayer-funded program. 
6. Conduct affecting multiple taxpayer-funded programs.
7. Conduct affecting three or more federal districts.
8. Financial harm to 25 or more victims or $25 million or more in loss.
9. Exfiltration of American dollars to support foreign adversaries.
10. Conduct involving immigration offenses.

The list is expressly non-exhaustive, and prosecutors must also follow and implement the CEP. Several factors are objective thresholds (duration, geographic impact of the alleged fraud, victim count, and loss amount) that companies can assess early in an internal review. Others, such as management involvement and concealment, inherently require an analysis of the company’s conduct. This should prompt companies to closely evaluate their circumstances when weighing disclosure to the government.

DOJ Continues to Reward Early Voluntary Self-Disclosure

The memo notes that efforts to investigate fraud “can be aided by the assistance of individuals and companies who seek to do the right thing.” Accordingly, the memo directs Division leadership to design programs that “appropriately incentivize whistleblowers” — including those “who participated in the criminal conduct” — to provide credible information about unlawful activities.

The logic of this policy is obvious. The memo’s stated goals include “appropriately incentiviz[ing] the disclosure of misconduct” and “reward[ing] those who cooperate with the government,” and it binds prosecutors to the CEP, under which prompt disclosure, full cooperation, and remediation can lead to a declination of criminal charges. Meanwhile, expanding data analytics and whistleblower incentives make it increasingly likely that misconduct will be uncovered, even absent a company’s voluntary disclosure. The question is less whether the government will learn of a violation but more so who reports it first. And early disclosure should result in more favorable outcomes for a corporate target. 

Earlier this year, the Department illustrated the benefits of voluntary disclosure. On July 28, the National Fraud Enforcement Division declined to prosecute Campus Eye Management Holdings, LLC, and an affiliated management services company, for health care fraud, kickback, and conspiracy violations. The scheme, led by a founder who also served as the companies’ CEO, caused Medicare and other insurers to pay approximately $3.7 million for duplicative and medically unnecessary tests. In deciding to decline prosecution, the government credited the companies’ timely voluntary self-disclosure, full and proactive cooperation, and remediation, including a substantially improved compliance program. 

Similarly, in June, the National Security Division issued its first-ever CEP declination to Robert Bosch GmbH, which “promptly disclosed the misconduct,” “fully cooperated,” and “timely and appropriately remediated” export-control violations. Bosch agreed to pay $36 million to settle allegations it improperly exported technology products to sanctioned Chinese company Huawei Technologies. 

DOJ leadership has recently reinforced this message. 

In an October interview, Criminal Division Assistant Attorney General Tysen Duva said that “if you come in, and you self disclose, … you can obtain the declination, but you have to fully cooperate.” Full cooperation requires “laying out what you learned, how you learned it, and who did it.” He warned that companies that do not come forward risk disclosure by “a whistleblower or a confidential informant.” He noted, however, that “[t]he focus is not to ruin a company”: Duva warned that the harshest penalties are reserved for situations where “systemic fraud is suspected.”

Key Takeaways for Corporate Clients

• Invest in Compliance Monitoring: Bosch’s experience demonstrates that under-resourced compliance functions lead to violations which can persist for years. Early detection preserves the ability to self-disclose and obtain a declination. The Corporate Enforcement Section will monitor compliance programs during the life of any criminal resolution. 
• Engage Experienced Counsel Immediately: If misconduct is discovered, credit under the CEP depends on prompt disclosure, full cooperation, and timely remediation. Delay can foreclose a declination, particularly as whistleblower programs and DOJ data analytics accelerate. Counsel can assess whether early voluntary disclosure is strategically beneficial, and how best to engage the government.
• Watch Sector-Specific Priorities: Companies in health care, international trade, and securities and financial markets should pay particular attention to compliance programs. The directive expressly prioritizes health care and FDCA violations, tariff evasion and import fraud, and schemes threatening the “financial integrity of Americans and markets.” Companies in these sectors should reassess their risk profiles against the memo’s priorities and 10 charging factors and determine what adjustments should be implemented.