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DOJ Unveils New Policies to Incentivize Responsible Corporate Citizenship and Deter Wrongdoing

On September 15, 2022, before an audience at NYU School of Law that included the Director of the SEC’s Enforcement Division Gurbir Grewal, U.S. Attorneys for the Southern District of New York and District of New Jersey, and several line prosecutors, Deputy Attorney General Lisa O. Monaco announced important changes to corporate criminal enforcement. These changes are the result of ongoing study by the DOJ’s Corporate Crime Advisory Group, a group of DOJ experts tasked with a review of corporate enforcement efforts, which Monaco first publicized last October. During her most recent remarks, Monaco emphasized that the DOJ will implement a combination of incentives and deterrents to “make the business case for responsible corporate behavior” and shift the burden of corporate financial penalties away from shareholders. The Department also released an accompanying memorandum further describing the changes. Monaco’s remarks make clear that the DOJ is taking concrete steps to accompany the more aggressive prosecutorial stance against corporate crime that it adopted last October.

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Delaware Court Decision Changes Expectations for Directors' Indemnification and Advancement Rights


Time to Read: 1 minutes Practices: Litigation, Corporate & Securities Litigation, Securities & Public Companies

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The litigation risks facing private equity firms and their portfolio companies have increased significantly in the last several years. Until recently, the widespread expectation of private equity investors whose principals sit on the board of directors of a sponsor's portfolio company has been that, in the event of litigation against the sponsor's director designees, the portfolio company would provide full advancement and indemnification to the sponsor's designee(s), with the private equity sponsor providing such advancement or indemnification only in the event that the portfolio company is legally or financially unable to pay. A single Delaware Chancery Court decision has, however, disrupted this settled expectation and, in so doing, raised the financial stakes faced by private equity firms and their principals in the event of litigation.

In the attached article, "Director and Officer Liability: Delaware Reinforces the Limits on Indemnification Claims," Ropes & Gray partner Randall Bodner and associate Peter Welsh discuss the implications of the Levy v. HLI Operating Co. decision on the indemnification and advancement rights of private equity firms' board designees. The authors also suggest potential work-arounds to the issues raised by the Levy decision. One of the work-arounds the authors discuss was recently embraced by the Delaware Chancery Court in Sadona v. American Stock Exchange, which was issued after the attached article was written. 

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