Thought Leadership

DOJ Unveils New Guidance Regarding the Imposition of Corporate Fines and Penalties

Client Updates

One of the sticking points that often stands in the way of a final criminal resolution between a corporate client and the Department of Justice (“DOJ” or the “Government”) is the amount of the monetary fine or penalty that the Government seeks to impose.  A fine or penalty – otherwise authorized under the law – can cripple a company in a variety of ways, including its ability to remain in business.  Under such a circumstance, it is not uncommon for a company to assert an “inability to pay” defense, arguing that economic realities warrant a fine significantly less than what the Government initially requests.

On October 8, 2019, Assistant Attorney General Brian A. Benczkowski, the head of the DOJ’s Criminal Division, issued a memorandum entitled “Evaluating a Business Organization’s Inability to Pay a Criminal Fine or Criminal Monetary Policy” (the “Memorandum”). 1  The stated purpose of the Memorandum is to provide prosecutors with an “analytical framework” in assessing “assertions by a business organization that it is unable to pay an otherwise appropriate criminal fine or monetary penalty.”  Although the intent of the Memorandum is to guide prosecutorial decision making, Benczkowski highlighted, in a speech at the Global Investigations Review in New York last Tuesday, that the Memorandum’s release to the public was also intended to promote “transparency” and give “companies looking to resolve matters” with the DOJ “greater insight” on what it considers “to be a legitimate inability to pay argument." 2

The Memorandum’s Contents: What You Need to Know

To begin with, the Memorandum makes clear that companies bear the burden of demonstrating their inability to pay.  Moreover, the Memorandum emphasizes that “[i]n every case where an inability to pay is asserted, the business organization will be expected to provide a complete and timely response to the Inability-to-Pay Questionnaire.”  The Inability-to-Pay Questionnaire, attached to the Memorandum, calls for detailed information, including, inter alia, a company’s: (1) cash flow projections; (2) operating budgets and projections of future profitability; (3) proposed changes in financing or capital structure; (4) acquisition, divestiture and/or restructuring plans; (5) claims to insurers; and (6) liens on a company’s assets.  The list set forth in the Memorandum is not exhaustive; the Government may request additional materials, including audited financial statements, substantiating the business organization’s inability to pay claim. 

Armed with a company’s response to the Inability-to-Pay Questionnaire, the Memorandum instructs prosecutors to consider a range of factors where a company raises a legitimate concern regarding its ability to pay.  Prosecutors, for example, are directed to “assess what gave rise to [an] organization’s current financial condition,” including whether “ownership or management [took] capital out of the organization in the form of dividends, distributions, loans or other compensation.”  Companies, in the face of criminal wrongdoing, that knowingly dissipated assets, are less likely to receive the benefit of any inability to pay defense. The Memorandum also counsels DOJ lawyers to consider a company’s access to capital, via a sale of assets or equity or through a credit facility to test inability to pay claims.  A company’s restitution obligation is another factor that prosecutors should weigh: where a monetary fine will negatively impact a company’s ability to make restitution payments to victims, a fine reduction may be warranted.  

Counsel, advocating on behalf of corporate clients, regularly point to the collateral consequences their clients will face resulting from the imposition of a criminal fine or penalty.  The Memorandum makes clear that DOJ is receptive to these arguments and outlines the types of collateral consequences prosecutors can consider before agreeing to a fine or penalty reduction.  Proper collateral consequences include the company’s future viability and “impacts on an organization’s ability to fund pension obligations or provide the amount of capital, maintenance, or equipment required by law or regulation [and] whether the proposed monetary penalty is likely to cause layoffs, product shortages or significantly disrupt competition in a market.”  By contrast, the Memorandum explicitly states a criminal fine’s impact on a company’s future growth, product lines, dividends, as well as any impact on unvested or future executive compensation or bonuses are “generally not relevant” in determining a company’s ability to pay.

Where DOJ agrees with a company that a reduction of the otherwise appropriate fine is called for by the company’s financial circumstances, the Memorandum authorizes prosecutors to recommend adjustments to the monetary penalty amount, “but only to the extent necessary to avoid (1) threatening the continued viability of the organization and/or (2) impairing the organization’s ability to make restitution to victims.”  In a footnote, the DOJ appears to carve out an exception to this general rule, permitting monetary fine adjustments where “adverse collateral consequences” exist that, “while severe, may not necessarily threaten the continued viability of the organization.” The Memorandum also requires supervisory approval for any fine reductions, including, in some circumstances, by the Assistant Attorney General for the Criminal Division or his or her designee.


Companies – in disparate, non-uniform ways – have achieved reductions to the potential criminal fines or monetary penalties they face under the appropriate circumstances.  The Memorandum released by the DOJ this week aims to institute uniformity to the process by which companies seek – and obtain – those reductions.  DOJ’s message to companies and their counsel in the Memorandum cannot be clearer: the devil is in the details.  Companies have the heavy burden of furnishing the DOJ with an extraordinary amount of financial information justifying their request for a decreased fine.  Deciding how to present that information to the Government is no easy feat.  Our team of experienced former federal and state prosecutors is equipped to package a company’s financials in the most impactful way and is prepared to advocate at the negotiating table a just criminal resolution that minimizes the harmful effects a monetary fine or penalty can have on a company’s going concern.

Questions: please do not hesitate to reach us if you have questions or if we can be of assistance in any way.

A complete copy of the Memorandum can be found here: (last accessed October 11, 2019).


Assistant Attorney General Benczkowski’s full remarks can be found here: (last accessed October 11, 2019).

Baker Botts is an international law firm whose lawyers practice throughout a network of offices around the globe. Based on our experience and knowledge of our clients' industries, we are recognized as a leading firm in the energy, technology and life sciences sectors. Since 1840, we have provided creative and effective legal solutions for our clients while demonstrating an unrelenting commitment to excellence. For more information, please visit

Related Professionals