Takeaways

To receive credit for self-disclosure, disclosures must be voluntary, timely and include all relevant facts known to the company at the time of the disclosure.
Absent aggravating factors, the USAO will not seek a guilty plea where companies voluntarily self-disclose, fully cooperate and timely remediate criminal conduct.
Even when aggravating factors exist, voluntary self-disclosure can still entitle companies to favorable treatment in the form of fine reductions and no compliance monitoring where all prescribed elements are satisfied.

It is a reality of corporate America that most companies at one point or other will become aware of misconduct at some level within their ranks. When an organization learns of such misconduct, it is important to move quickly to investigate and remediate any misdeeds. When such misconduct rises to the level of a potential criminal violation, however, organizations seeking to reduce the risk of criminal prosecution or the severity of potential penalties also can consider the further step of voluntary self-disclosure to manage risk.

In all instances of corporate criminal wrongdoing, the ultimate goal for impacted organizations is to receive a declination or, failing that, a deferred or non-prosecution agreement (DPA or NPA) in exchange for minimal fees and other penalties. In deciding whether to agree to such an arrangement, the U.S. Department of Justice (DOJ) has long considered whether an organization voluntarily undertook an investigation of the misconduct and reported it to authorities before an imminent threat of prosecution. Section 9-28.900 of the DOJ’s Justice Manual specifically states that “prosecutors may consider a corporation’s timely and voluntary disclosure, both as an independent factor and in evaluating the company’s overall cooperation and the adequacy of the corporation’s compliance program and its management’s commitment to the compliance program.”

Expanding on that standard, in a September 15, 2022, Memorandum titled “Further Revisions to Corporate Criminal Enforcement Policies Following Discussions with Corporate Crime Advisory Group,” Deputy Attorney General Lisa Monaco stated that the Department’s “policies and procedures must ensure that a corporation benefits from its decision to come forward to the Department and voluntarily self-disclose misconduct, through resolution under more favorable terms than if the government had learned of the misconduct through other means.” Therefore, each DOJ component that prosecutes corporate crime was directed to “review its policies on corporate voluntary self-disclosure, and if the component lacks a formal, written policy to incentivize such self-disclosure, it must draft and publicly share such a policy.” In a speech that same day, DAG Monaco explained that the goal of the program is “to reward those companies whose historical investments in compliance enable voluntary self-disclosure and to incentivize other companies to make the same investments going forward.”

Following this directive, several DOJ components began working to update or adopt written policies regarding voluntary self-disclosure. On February 22, 2023, a working group of U.S. Attorney’s Offices (USAOs) released a new Voluntary Self-Disclosure Policy to establish a nationwide standard for how USAOs will assess and credit voluntary self-disclosure in determining an appropriate resolution for corporate misconduct. The Policy is effective immediately. To be considered a voluntary self-disclosure and receive credit, a disclosure must satisfy the following criteria:

  • Voluntary: A disclosure must be made voluntarily by the company. A disclosure is not voluntary “where there is a preexisting obligation to disclose, such as pursuant to regulation, contract, or a prior Department resolution.”
  • Timing: A disclosure must be made “prior to an imminent threat of disclosure or government investigation”; “prior to the misconduct being publicly disclosed or otherwise known to the government”; and “within a reasonably prompt time after the company becoming aware of the misconduct, with the burden being on the company to demonstrate timeliness.”
  • Substance: The disclosure “must include all relevant facts concerning the misconduct that are known to the company at the time of the disclosure.” Where a company is not aware of all relevant facts at the time of a disclosure, it “should make clear that its disclosure is based upon a preliminary investigation or assessment of information.” Moreover, the company should “move in a timely fashion to preserve, collect, and produce relevant documents and/or information, and provide timely factual updates to the USAO.”

Although organizations should strive to satisfy the above criteria, the USAOs’ Policy makes clear that “prompt self-disclosures to the government will be considered favorably, even if they do not satisfy all the … criteria.”

Where an organization has satisfied the above criteria, its chances of receiving a favorable resolution increase substantially. According to the new Policy, “absent the presence of an aggravating factor, the USAO will not seek a guilty plea where a company has (a) voluntarily self-disclosed …, (b) fully cooperated, and (c) timely and appropriately remediated the criminal conduct.” Where there are aggravating factors that warrant a guilty plea—i.e., misconduct that “poses a grave threat to national security, public health, or the environment; is deeply pervasive throughout the company; or involved current executive management of the company”—companies that have otherwise voluntarily self-disclosed, fully cooperated and timely and appropriately remediated the misconduct will still receive favorable treatment, including a recommendation from the USAO for a 50% – 75% reduction off the low end of the U.S. Sentencing Guidelines fine range and an agreement not to appoint a (potentially costly) independent compliance monitor.

Given these tangible benefits of voluntary self-disclosure and the ability to approach prosecutors within clearer parameters, any organization would be wise to explore the potential benefits of this Policy by moving quickly to internally investigate possible misconduct when it comes to light. Experienced outside counsel are an invaluable resource in conducting such reviews and carefully considering the implications and potential benefits of voluntary self-disclosure. Should an organization determine that the facts, circumstances and possible benefits warrant such disclosure, outside counsel can manage the process with the USAOs every step of the way, from initial discussions with the government to resolution of the matter.

Pillsbury’s Corporate Investigations & White Collar Defense team includes former federal prosecutors and former government officials from the highest levels of the DOJ, standing ready to help organizations to navigate all aspects of the investigation and disclosure process.

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