Earlier this year, the U.S. Department of Justice established, for the first time in two decades, a new stand-alone division, headed by Assistant Attorney General. The new division, the National Fraud Enforcement Division, has the mandate of investigating and prosecuting “fraud against the American people,” including fraud in government contracting and procurement, trade and customs-fraud, healthcare fraud, and tax fraud. The prosecution of certain “private” frauds (presumably including most forms of criminal securities fraud) remains in the purview of DOJ’s Criminal Division.

On October 1, 2026, the new Fraud Division took a significant step in outlining its approach to corporate enforcement by releasing a directive entitled “Corporate Enforcement in the Fight Against Fraud,” to all Fraud Division personnel.¹ The Directive describes an “all-tools” approach to the Division’s health care, government, tax, and trade fraud priorities, and states that the Division’s directives aim to advance its mission efficiently and fairly, provide transparency, incentivize disclosure, reward cooperation, hold individuals and corporate criminals accountable, and promote the recovery of fraudulent proceeds.

This Directive builds on the Department-wide Corporate Enforcement Policy that DOJ unveiled in March 2026, which we discussed in our March 11, 2026 update.² Below, we summarize the Directive, explain how it fits with the Department-wide policy, and offer practical takeaways for companies.

Background: The March 2026 Department-Wide CEP

On March 10, 2026, DOJ released an updated Corporate Enforcement and Voluntary Self-Disclosure Policy (“CEP”) that, for the first time, covers most corporate criminal matters across the Department.³ The CEP builds on revisions made in May 2025 and is designed to incentivize prompt self-reporting, cooperation, and remediation while producing clearer and more predictable outcomes.

Under the CEP, a company that voluntarily self-discloses, fully cooperates, and timely remediates will generally receive a declination absent significant aggravating factors—such as egregious conduct, pervasive misconduct, substantial harm, or recent recidivism—and prosecutors may still recommend a declination even where aggravators exist. Declinations carry no federal criminal fines, but the company must still pay any disgorgement, forfeiture, restitution, or victim compensation arising from the misconduct. Declinations are publicly disclosed. The CEP applies Department-wide (excluding certain antitrust matters) and supersedes all component- and U.S. Attorney’s Office (“USAO”)-specific policies, although USAOs may still use their own programs and sign off on declinations.

As we noted in March, key features include: (i) a single policy replacing the prior Criminal Division-only framework; (ii) “near miss” penalty reductions—available where a company self-reports in good faith but DOJ already knew of the conduct or aggravating factors warrant a resolution—that are now discretionary in the 50–75% range (rather than an automatic 75%) and presumptively take the form of a non-prosecution agreement; (iii) the importance of directing disclosures to the appropriate component, although a good-faith disclosure to one component qualifies even if another ultimately handles the matter; and (iv) the critical need to respond rapidly to internal whistleblower reports given the 120-day disclosure window.

Key Elements of Fraud Division Directive 26-12

1. Guiding Principles

Building on the Department’s earlier guidance in the CEP, the Fraud Division’s new Directive states that DOJ prosecutes companies when wrongdoing is serious and pervasive and the company’s compliance policies, controls, and history show that it caused or encouraged the offense. At the same time, the Directive instructs Fraud Division prosecutors to protect law-abiding companies and credit those that disclose, cooperate, and remediate. Prosecutors must follow the Principles of Federal Prosecution of Business Organizations⁴ and the Department-wide CEP when opening or joining any corporate investigation.

2. The Corporate Enforcement Section

The Directive assigns the Fraud Division’s Corporate Enforcement Section, created earlier this year, the lead role in ensuring consistent corporate prosecution across the Division’s fraud portfolio. Prosecutors are to work with the Section at all phases, from intake through resolution or litigation.

Specifically:

• Initial reporting. Within seven days of the Directive, prosecutors must report all ongoing corporate investigations to the Section Chief.


• Ongoing notice. The Section must be promptly notified of new corporate investigations and major developments and will participate in matters as appropriate.


• Monitoring of resolutions. The Section has primary responsibility for evaluating compliance with corporate criminal resolutions—including implementation and enhancement of compliance programs, disclosure and reporting obligations, and other issues arising during the resolution term.


• Scope. The directives do not extend to cases assigned to a District Fraud Counsel by a USAO that is not also supervised by the Fraud Division, though the Section may serve the USAO network where helpful.⁵ The Division will account for differences among its health care, government, tax, and trade areas and work closely with USAOs.

3. Investigative Priorities

The Directive instructs prosecutors to prioritize four areas when opening and conducting corporate investigations:

1. health care fraud, controlled substances distribution, and violations of the Federal Food, Drug, and Cosmetic Act;


2. schemes involving the public trust or financial integrity of Americans and markets related to procurement, government contracts, and other government functions;


3. significant evasion of internal or external revenue; and


4. tariff evasion, importation of goods and services, and forced labor.

4. Ten “Great Weight” Factors

In making charging decisions and in negotiating plea or other agreements, prosecutors are to give “great weight” to whether the misconduct:⁶

1. involved management knowledge or involvement;


2. involved concealment from agencies or auditors, or obstruction;


3. lasted three or more years;


4. threatened the safety or security of Americans, including military readiness;


5. caused substantial financial hardship to a taxpayer-funded program or government function;


6. affected multiple taxpayer-funded programs or government functions;


7. affected three or more federal districts;


8. harmed 25 or more victims or caused a loss of $25 million or more;


9. involved the exfiltration of American dollars to support foreign adversaries; or


10. involved immigration offenses.

The list is non-exhaustive; prosecutors may consider other factors and must exercise thoughtful, pragmatic judgment.⁷ In all circumstances, prosecutors are to follow and implement the CEP.

5. Disclosure and Whistleblower Incentives

The Directive notes that the National Fraud Detection Center, technology, and data analytics are generating leads and opening investigations at a rapid pace. It states that the Division’s policies must encourage and protect whistleblowers—including those who participated in the conduct—and directs Division leadership, with law enforcement partners, to design and implement programs that incentivize whistleblowers to bring credible information, with public transparency.⁸

How Directive 26-12 Fits with the Department-Wide CEP

In our view, the Directive both reinforces and operationalizes the CEP in the government fraud context:

• Express deference to the CEP. Consistent with the CEP’s overriding of component-specific policies, the Directive does not set out its own corporate self-disclosure terms; it instructs prosecutors to follow and implement the CEP.


• Great-weight factors may shape CEP outcomes. Several of the ten factors—conduct lasting three or more years, $25 million in loss or 25 victims, three or more districts, management involvement, and concealment—appear to overlap with the CEP’s aggravating factors (pervasive or egregious misconduct, substantial harm), but the Directive frames these factors as charging and pleas considerations rather than expressly tying them to the CEP. These bright-line thresholds could affect whether a self-reporting company remains eligible for a presumptive declination or is instead channeled into “near miss” treatment, and where within the discretionary 50–75% reduction range it lands.


• Centralization promotes consistency. Routing all corporate matters through the Corporate Enforcement Section aligns with the CEP’s goal of predictability and centralizes the monitoring of resolutions, which may lead to more uniform post-resolution oversight.


• Data analytics heighten near-miss risk. As DOJ continues to seek to detect misconduct through its own analytics, the likelihood rises that the government will already know of conduct before a company reports it—the scenario that converts a declination candidate into a near miss. This underscores the urgency of acting within the CEP’s 120-day window.


• Whistleblower incentives intensify the race to disclose. Programs that reward even culpable participants increase the risk that an insider reaches DOJ first.


• Where to disclose matters. Under the CEP, a good-faith disclosure to one component still qualifies even if another ultimately handles the matter and USAOs may still use their own programs and sign off on declinations. The Directive’s District Fraud Counsel carve-out reflects an internal case-assignment rule that companies may not be able to see by excluding cases assigned to a District Fraud Counsel by a USAO not supervised by the Fraud Division.


• USAO versus Fraud Division. Given the Directive’s carve-out for District Fraud Counsel cases handled by USAOs not supervised by the Fraud Division, companies should consider carefully whether a disclosure belongs with the Fraud Division or a USAO, bearing in mind that a good-faith disclosure to one component still qualifies under the CEP.

Key Takeaways

• Fraud Division will investigate corporate matters. When the Fraud Division was first created, some believed that it would focus mainly on low-level government fraud, like food-stamp fraud or social-security benefits fraud. The new Directive makes clear that the Fraud Division views its mandate as also included complex, corporate enforcement matters.


• Assess sector exposure. Companies in health care, life sciences, government contracting, tax-sensitive, and import/trade sectors—including those exposed to tariff and forced-labor risk—should evaluate their risk profile against the Directive’s priorities.


• Map the ten factors. Internal investigations should assess early whether the conduct implicates any great-weight factor (e.g., duration, loss amount, victim count, geographic reach, management involvement), since these may influence declination eligibility and resolution terms.


• Accelerate escalation. Strengthen intake and triage of internal reports so that credible allegations are evaluated quickly, preserving the ability to self-disclose within the 120-day window before a whistleblower or DOJ analytics surface the issue.


• Eliminate concealment risk. Because concealment and obstruction carry great weight, ensure document preservation, transparent dealings with auditors and agencies, and careful handling of communications once an issue arises.


• Plan the disclosure path. Determine early whether the Fraud Division, a USAO, or another component is the appropriate recipient of a disclosure.


• Prepare for centralized monitoring. Companies under existing or future resolutions with the Fraud Division should expect the Corporate Enforcement Section to scrutinize compliance program implementation, enhancement, and reporting obligations, and should document compliance accordingly.


• Revisit compliance programs. Data-driven monitoring of claims, billing, procurement, revenue, and import data can help companies identify issues at least as quickly as DOJ’s own analytics.

Directive 26-12 signals that the Fraud Division intends to pursue corporate fraud aggressively while operating within the Department-wide CEP framework. Companies operating in the Division’s priority areas should review their compliance, escalation, and disclosure protocols now. Baker Botts will continue to monitor implementation of the Directive and related whistleblower programs.

---

¹ Memorandum from Colin M. McDonald, Assistant Attorney General, National Fraud Enforcement Division, to All Fraud Division Personnel, Fraud Division Directive 26-12, “Corporate Enforcement in the Fight Against Fraud” (Oct. 1, 2026) (the “Directive”).
² See Baker Botts L.L.P., “One Policy For All: DOJ Unveils First Ever Department-Wide Corporate Enforcement Policy” (Mar. 11, 2026).
³ U.S. Dep’t of Justice, Corporate Enforcement and Voluntary Self-Disclosure Policy (Mar. 10, 2026), available at https://www.justice.gov/dag/media/1430731/dl (the “CEP”).
⁴ Justice Manual § 9-28.000, Principles of Federal Prosecution of Business Organizations.
⁵ Directive, Part II n.2 (directives do not extend to cases assigned to a District Fraud Counsel by a U.S. Attorney’s Office that is not also supervised by the Fraud Division).
⁶ Justice Manual § 9-28.300 (Factors to Be Considered).
⁷ Directive, Part III.
⁸ Directive, Part IV.

ABOUT BAKER BOTTS L.L.P.
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 bakerbotts.com.