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A review of President Biden’s proposed Budget (“Budget”) for 2023 spotlights the enforcement priorities of the president’s Justice Department as the administration enters its third year. Vinson & Elkins’ review of the budget shows what the Biden administration is focused on and what that means for you and your company.
Among other things, the budget includes nearly $5.8 trillion in spending, including $37.65 billion for the Department of Justice (“DOJ” or “the department”) – a $2.63 billion increase from fiscal year 2022. The budget emphasizes historic efforts across multiple DOJ components to ramp up enforcement for certain areas of non-violent crime. These include, among others, antitrust, cybercrime and cyber threats, environmental, corporate fraud, and pandemic-related fraud. Statements from the White House and DOJ leadership indicate that, regardless of whether the proposed budget passes in whole or in part, investigations and prosecutions in these areas will increase. The growing number of companies on the government’s enforcement radar should remain vigilant to ensure that their compliance programs adequately control the new and emerging risks as well as DOJ’s new enforcement priority areas.
Of the $37.65 billion requested for DOJ, the proposed Budget includes $20 billion for the department’s law enforcement components and U.S. Attorneys’ Offices. As the budget request illustrates, DOJ will devote ample resources to its initiatives against violent crime, fund federal law enforcement, strengthen and safeguard civil rights, and prioritize its goal of addressing continued reform of the criminal justice system. The Biden administration, however, has stated additional enforcement priorities which will certainly compete with those previously mentioned. The Budget proposal and DOJ leadership’s recent statements illustrate that certain initiatives will take center stage and are likely to see an increase in enforcement in the months ahead.
Antitrust and Consumer Protection
As highlighted in a March 28, 2022 DOJ Press Release, the Budget directs $273 million to the DOJ Antitrust Division (“Antitrust Division”), “for the Antitrust Division to reinvigorate antitrust enforcement and protect consumers.” The White House Budget Fact Sheet describes this as a “historic increase” of $88 million from the last fiscal year. Of the $273 million allotted, over $80 million would help address the strain on litigation resources. In his Opening Remarks at the April 4, 2022 Spring Enforcers Summit (“Summit”), Assistant Attorney General Jonathan Kanter stated, regarding that $80 million, that the Antitrust Division “intend[s] to put it to good use.”
It is safe to say that the spotlight on antitrust enforcement is only getting brighter. To meet the enforcement demand, AAG Kanter noted that the Antitrust Division’s capacity for litigation must grow. He emphasized personnel increases at the Summit. For example, he said it is the first time he can recall that the Antitrust Division has had two litigation deputies rather than just one – one of many signs that DOJ intends to try more antitrust cases.
New angles for enforcement are also on the horizon, as DOJ seeks to use the “whole legislative toolbox” at its disposal – Section 8 of the Clayton Act, AAG Kanter said, is something that the Division could use more. Its bright-line rule against interlocking directorates can help prevent collusion before it can occur, he added. Rather than limit Section 8’s reach in practice to the merger review process, the Antitrust Division is “ramping up efforts to identify violations across the broader economy,” and to bring cases to break up interlocking directorates if warranted.
While this may be a new era in terms of funding for Antitrust enforcement, the focus on antitrust and consumer protection has been building for the last several years (See, e.g., the recent and aggressive pursuit of “No Poachers”; the growth of the Procurement Collusion Strike Force since its inception in 2019). Rather, the government has every incentive to continue and increase enforcement against antitrust violators because its returns through criminal antitrust fines and penalties already “more than surpass” the Antitrust Division’s annual expenditures. Over the past ten fiscal years, the Antitrust Division deposited more than $8.7 billion in criminal antitrust fines and penalties to the Crime Victims Fund, which is 42% of the $20.8 billion total. Now, the Antitrust Division may be doubling down on its returns with its newly revised leniency guidelines, demanding more from individuals and companies attempting to satisfy the requirements.
While antitrust enforcement is already a crucial piece of DOJ’s enforcement strategy, additional resources are set to add volume, complexity in legal approach, and strength in numbers to antitrust enforcement actions.
Climate and Environmental Justice
Environmental justice is essential to protect the economy, Attorney General Merrick Garland said in March 10, 2022 Remarks to Justice Department Heads. Reinvigorating environmental criminal enforcement, along with enforcement in antitrust and white collar crime, he said, is “necessary to ensure the economic foundations of the country are secure.”
The Budget supports the Environmental Protection Agency (“EPA”) in its environmental justice efforts with $670 million slated specifically for EPA enforcement and compliance assurance efforts. To assist with EPA goals, the Budget would provide DOJ with $6.5 million to support its existing Environment and Natural Resources Division (“ENRD”). AG Garland noted, in his March 3, 2022 Remarks to the ABA Institute on White Collar Crime (“White Collar-ABA Remarks”), that as of March 2022, ENRD had cases underway against 11 companies and 34 individuals for a range of criminal environmental offenses. The department also would continue its mission to bolster environmental justice – a March 30, 2022 White House Press Release explains that the Budget provides $1.4 million to establish a DOJ Office for Environmental Justice to further environmental justice enforcement efforts across agencies.
The Budget further provides DOJ with over $1.2 billion to protect department systems from cyber threats, and to identify and prosecute perpetrators of cybercrimes. This comes in the wake of DOJ’s Civil Cyber-Fraud Initiative, announced in October 2021 as a result of the department’s ongoing comprehensive cyber review. “Investing in cyber security has never been more important,” Deputy Attorney General Lisa O. Monaco said in her Remarks on the Fiscal Year 2023 Funding Request, as “the threats we face from adversaries have never posed a higher risk than they do today.” Further, and more than ever before, companies doing business with the federal government will have to ensure compliance with cybersecurity requirements.
Beyond security enhancements, DOJ is committed to targeting and prosecuting cybercriminals. The proposed Budget would help further these goals. The DOJ Budget Request to Keep Our Country Safe by fighting cybercrime includes $52 million and 38 additional agents for the FBI, $1.4 million and six additional attorneys at the National Security Division, and $15.3 million and 50 attorneys across the U.S. Attorneys’ Offices to help achieve the litigation mission.
Pandemic-Related Fraud and Corporate Crime
“The Justice Department does not intend to fail,” AG Garland said in his White Collar-ABA Remarks, establishing prosecution of corporate crime as a Justice Department priority. Prosecuting individual defendants is a resource-intensive road for DOJ, he said, but the “Department is marshaling its resources to enable us to successfully take that road.” Specifically, the president’s Budget seeks $36.5 million for the U.S. Attorneys’ Offices and the department’s Criminal Division to combat pandemic-related fraud. This translates to 120 additional attorneys to execute this mission. On March 10, 2022, the department announced the appointment of Associate Deputy Attorney General Kevin Chambers as Director for COVID-19 Fraud Enforcement to lead this specific effort.
With ADAG Chambers at the helm, DOJ’s prosecution teams have already taken swift action. On April 20, 2022, DOJ announced charges against 21 defendants in nine federal districts for various health care fraud schemes that exploited nearly $150 million in false billings from federally-funded pandemic assistance programs. Prosecution efforts will build on the existing work of the COVID-19 Fraud Enforcement Task Force that President Biden established in May 2021. Cross-agency efforts further help to oversee pandemic relief funding, and DOJ is working closely with Inspectors General across the federal government to identify perpetrators of fraud.
As further evidence of the prioritization of corporate enforcement, AG Garland noted in his White Collar-ABA Remarks that 2021 was one of the busiest years on record for the Fraud Section, convicting nearly 300 defendants via guilty plea and securing convictions of 30 individuals at trial. This pace is only set to increase as agents, prosecutors, and trial attorneys are less impacted by the trial backlogs created by the Covid 19 pandemic.
Overall, white collar criminal charges were up 10% in 2021 over 2020, and with an additional $325 million budgeted to support more than 900 new agents in the FBI’s White Collar Crime Program, it seems that this number, too, is likely on the rise.
There is reason to believe that multi-agency actions are on an upward trajectory as well, which has the potential to coordinate and stretch resources across agencies. Based on the ABA’s March 3, 2022 session on recent Foreign Corrupt Practices Act (“FCPA”) investigations, we reported that the DOJ and Securities and Exchange Commission (“SEC”) are prioritizing coordination, both domestically and internationally. The SEC requests approximately $2.15 billion for its 2023 operations, up from approximately $1.9 billion in FY 2022.
What This Means for You
The initiatives discussed above all merit attention for companies navigating important business decisions and strategies in a challenging climate.
Antitrust enforcement efforts will require companies to ensure safeguards against liability for any anticompetitive conduct, taking care to consider a wider variety of Sherman Act conspiracy and monopolization claims than in recent years. We recently reported that labor market prosecutions, such as against “No Poach” agreements, are likely to persist despite back-to-back trial losses for the department in April – companies should not let their guards down in any aspect of antitrust compliance as DOJ continues to add to its arsenal for enforcement. Any entity contracting with the government, for instance, would be well-served to revisit and reinforce its procurement compliance policies and avoid bid-rigging pitfalls and other conduct that would garner negative attention from the ever-expanding Procurement Collusion Strike Force. The updated leniency guidelines also underscore the importance of whistleblower policies and internal reporting.
Cybersecurity is another focus that places demands on federal government contractors. They will have to be vigilant when it comes to cybersecurity compliance and ensure that the proper measures are in place to be positioned to win and maintain work with the federal government. This will likely require updated internal policies and training related to secure systems.
The Biden administration has repeatedly stated the importance of environmental justice, and companies will want to ensure ample efforts related to internal education, awareness, and compliance policies. Whistleblowing and remediation considerations all warrant attention and suggest that companies be deliberate about investing in environmental justice efforts.
Finally, DOJ’s growing fraud and corporate crime initiatives remind companies and their leadership that enforcement actions are targeting individuals, not just the companies they run. Internal education efforts and continuous monitoring and enhancements to corporate compliance programs are crucial. These efforts demonstrate an organization’s ongoing efforts to fight against fraud and corruption at a time when federal law enforcement has the resources to prosecute individuals and companies alike.
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