Key Takeaways
- As discussed in a prior BakerHostetler Insight,[1] earlier this year the Department of Justice (DOJ or the Department) created the National Fraud Enforcement Division (Fraud Division or the Division), which thereafter released a memorandum that outlined its key enforcement priorities.
- On Oct. 1, Assistant Attorney General Colin M. McDonald released a follow-up memorandum (the Memorandum) that further details the Fraud Division's corporate enforcement priorities, including its focus on health care, government, tax and trade fraud.[2]
- The Memorandum highlights the creation of a Corporate Enforcement Section and provides additional factors prosecutors should consider when deciding whether to prosecute a company or resolve a matter through a negotiated agreement.
- The Memorandum emphasizes the Fraud Division's intent to proactively generate new individual and corporate fraud investigations, including through whistleblowers and corporate self-reporting.
- DOJ continues to invest resources in the new Fraud Division. Companies should consider reviewing risk assessments and compliance policies and procedures, particularly those concerning healthcare, government contracts, tax and trade.
Key Details
This spring, the Department of Justice (DOJ or the Department) announced its creation of the National Fraud Enforcement Division (Fraud Division or the Division) and tasked the Division to “zealously investigate and prosecute those who steal or fraudulently misuse taxpayer dollars.”[3] On Aug. 13, Assistant Attorney General Colin M. McDonald released an initial memorandum that described the actions DOJ has taken to adequately resource the Division and that outlined the Division’s enforcement priorities. This memorandum noted that “fraud schemes have grown in complexity” because of “technological innovation[s] and economic expansion”[4] and sought to combat the same by building a comprehensive team that spans the many constituent parts of effective fraud investigations and prosecutions.
On Oct. 1, McDonald issued another memorandum (the Memorandum) to the Fraud Division that provides additional guidelines for the investigation and prosecution of corporate entities.[5]
First, notably, the Corporate Enforcement Section within the Fraud Division will oversee all the Division’s investigations and prosecutions of corporate entities. The Memorandum stresses that the Corporate Enforcement Section will work closely with Division prosecutors in other sections to leverage the Department’s resources and investigative tools. The Corporate Enforcement Section will also be responsible for evaluating companies’ compliance with the terms of corporate criminal resolutions.
Second, the Memorandum directs prosecutors to prioritize the investigation and prosecution of four types of cases. These priority offenses involve:
- Healthcare industry frauds, including the distribution of controlled substances and violations of the Federal Food, Drug, and Cosmetic Act
- Frauds involving public trust or financial integrity related to government contracts and procurement
- Schemes related to the evasion of internal and/or external revenue
- Tariff evasion frauds[6]
Third, in addition to the “Principles of Federal Prosecution of Business Organizations” guidelines in the Justice Manual, the Memorandum instructs prosecutors to consider certain factors when deciding whether to bring charges against corporate entities and when negotiating pleas or other agreements. Specifically, the Memorandum lists the following considerations for Division prosecutors:
- Management’s knowledge of or participation in the conduct
- Efforts to conceal conduct from the government or auditors, or to otherwise impede or obstruct a government function or oversight
- Conduct furthering the scheme lasting three or more years
- Conduct that threatens the safety or security of American citizens, including military readiness
- Conduct that causes substantial financial hardship to a taxpayer-funded program or other government function
- Conduct that affects multiple taxpayer programs or government functions
- Conduct that affects three or more federal districts
- Conduct that harms 25 or more individuals or that involves $25 million or more in loss
- Acts to send money abroad to support American adversaries
- Conduct that involves violations of immigration laws[7]
Finally, the Memorandum highlights the Fraud Division’s proactive stance in generating leads and opening individual and corporate fraud investigations. It emphasizes the role of whistleblowers and corporate self-reporting in helping the Department combat fraud, and it underlines that the Division’s policies “must encourage and protect the disclosure of information by whistleblowers, including by those who participated in the criminal conduct.” Accordingly, it directs Division leadership to consult with law enforcement partners and design and implement whistleblower policies and programs that bring credible, fraud-related information to light.[8]
Practical Considerations for Companies and Executives
The Memorandum reiterates that DOJ will take an “all tools approach,” including hiring additional resources and using technology to investigate potential frauds.[9] Given DOJ’s commitment to rooting out fraud, companies and executives should consider incorporating the Memorandum into their risk assessments and reviewing their policies and procedures to ensure current compliance with the law. In light of the Memorandum, prudent organizations will specifically review, among other things, policies, procedures and practices related to (1) tax compliance; (2) healthcare compliance, including billing and the marketing of goods and services; (3) import and export compliance; (4) government contracting and procurement compliance; (5) antitrust compliance; (6) sanctions compliance; (7) accounting and disclosure; and (8) employee conduct and investigations.[10]
The BakerHostetler White Collar, Investigations and Securities Enforcement and Litigation team is composed of dozens of experienced individuals, including numerous attorneys who have served in the DOJ and at the Securities and Exchange Commission (SEC). Our attorneys include four former U.S. attorneys, several former assistant U.S. attorneys and unit chiefs, and attorneys who have served in the SEC’s Division of Enforcement. Our team has extensive experience in defending regulatory investigations and litigation; conducting enterprise-wide, business-line and regulatory area-specific risk assessments; and providing compliance counseling.
BakerHostetler’s Cartel and Government Antitrust Investigations Task Force (Task Force) consists of attorneys with extensive experience in proactive antitrust compliance counseling and regulatory investigations and litigation. The Task Force includes former DOJ prosecutors as well as attorneys who are part of both the Antitrust and Competition and the White Collar, Investigations and Securities Enforcement and Litigation teams.
Please feel free to contact any of our experienced professionals if you have questions about this alert.
[1] BakerHostetlerInsights: “Assistant Attorney General Memorandum to Fraud Division Outlines Division’s Key Enforcement Priorities,”available at https://www.bakerlaw.com/insights/assistant-attorney-general-memorandum-to-fraud-division-outlines-divisions-key-enforcement-priorities/.
[2] Memorandum from Assistant Att’y Gen. Colin M. McDonald, “Directive 26-12 – Corporate Enforcement in the Fight Against Fraud”(Oct. 1, 2026), available at https://www.justice.gov/opa/pr/assistant-attorney-general-colin-m-mcdonald-issues-memorandum-national-fraud-enforcement-0.
[3] Memorandum from Acting Att’y Gen. Todd Blanche, “Creation of the National Fraud Enforcement Division” (Apr. 7, 2026), available at https://www.justice.gov/opa/pr/acting-attorney-general-todd-blanche-issues-memorandum-creation-national-fraud-enforcement.
[4] Id.
[5] Memorandum from Assistant Att’y Gen. Colin M. McDonald, “Directive 26-12 – Corporate Enforcement in the Fight Against Fraud”(Oct. 1, 2026), available at https://www.justice.gov/opa/pr/assistant-attorney-general-colin-m-mcdonald-issues-memorandum-national-fraud-enforcement-0. While the Fraud Division notes that it will continue to work closely with U.S. Attorneys’ Offices across the county and other DOJ components, the directives in the new Memorandum apply only to matters supervised by the Fraud Division.
[6] Memorandum from Assistant Att’y Gen. Colin M. McDonald, “Directive 26-12 – Corporate Enforcement in the Fight Against Fraud”(Oct. 1, 2026), available at https://www.justice.gov/opa/pr/assistant-attorney-general-colin-m-mcdonald-issues-memorandum-national-fraud-enforcement-0.
[7] Id.
[8] Id.
[9] Id.
[10] Importantly, the statutes of limitations for employee misconduct continue to run notwithstanding DOJ’s current priorities. Companies should continue to be diligent about compliance in all areas and forms.
