On February 22, 2023, the U.S. Department of Justice (DOJ) announced a new policy for corporate criminal enforcement, governing how all U.S. Attorney’s Offices (USAOs) across the country determine whether a company has made a voluntary self-disclosure of criminal wrongdoing, and how USAOs will credit companies for making such disclosures. This new policy sets a national standard to incentivize voluntary self-disclosures (VSD), offering significant benefits to companies meeting the DOJ’s requirements. The new national policy was developed in response to Deputy Attorney General Lisa Monaco’s September 15, 2022 memorandum directing all DOJ components to develop and publish VSD policies.
The Benefits of Self-Disclosure
Absent aggravating factors, companies that voluntarily self-disclose and meet the other requirements of the policy by fully cooperating in remediating the criminal conduct (including agreeing to pay all disgorgement, forfeiture, and restitution resulting from the misconduct), will receive significant benefits, including:
- The USAO will not seek a guilty plea.
- The USAO may choose not to impose any criminal penalty, and in any event will not impose a criminal penalty that is greater than 50 percent below the low end of the United States Sentencing Guidelines (USSG) fine range.
- The USAO will not seek the imposition of an independent compliance monitor if the company demonstrates that it has implemented and tested an effective compliance program.
Under the new uniform national policy, a company is considered to have made a VSD if it meets the following criteria:
- The company becomes aware of misconduct by employees or agents before that misconduct is publicly reported or otherwise known to DOJ.
- The company discloses all relevant facts known to the company about the misconduct to a USAO in a timely fashion, before an imminent threat of disclosure or government investigation.
Aggravating Factors and Joint Prosecutions
The new policy identifies three aggravating factors that may warrant a USAO seeking a guilty plea even if the other requirements of the VSD policy are met:
- The misconduct poses a grave threat to national security, public health, or the environment.
- The misconduct is deeply pervasive throughout the company.
- The misconduct involved current executive management of the company.
However, an aggravating factor does not necessarily mean that a guilty plea will be required. Instead, the new VSD policy directs the USAO to assess the relevant facts and circumstances to determine the appropriate resolution. If a guilty plea is ultimately required, companies can still receive the other benefits under the VSD policy, including that the USAO will recommend a criminal penalty of at least a 50 percent and up to a 75 percent reduction off the low end of the USSG fine range, and that the USAO will not require the appointment of a monitor where companies implement and test effective compliance programs.
Where companies are being jointly prosecuted by a USAO and another DOJ component, or where the reported misconduct falls within the scope of conduct covered by VSD policies administered by other DOJ components, the USAO will coordinate with, or if necessary, obtain approval from, the DOJ component responsible for the VSD policy specific to the reported misconduct when considering a potential resolution. A USAO can elect to apply any provision of any alternate voluntary self-disclosure policy in addition to, or in place of, any provision of the USAO policy.
Implications for Companies
DOJ’s implementation of a national VSD policy provides companies with disclosure standards linked to specific benefits that provide at least some clarity to the process of cooperating with federal investigations. The new policy also underscores that effective compliance programs are important to limiting potential criminal liability for companies.
Equally important in light of the policy’s timing requirements, companies should promptly consult with outside white collar counsel after learning of potential misconduct in order to assess potential options and next steps.
Vince Farhat, Chair, White Collar Defense & Investigations Group
JMBM’s White Collar Defense & Investigations Group is keenly focused on our clients’ business objectives and is committed to minimizing the disruption, anxiety, and public scrutiny that can arise from criminal and civil investigations and litigation. We are leaders in the representation of companies, boards of directors, management, and individuals in connection with a broad range of government investigations, enforcement actions, remediation and compliance, administrative proceedings, internal investigations and white collar criminal investigations and prosecutions.
This update is provided to our clients, business associates and friends for informational purposes only. Legal advice should be based on your specific situation and provided by a qualified attorney.