Client Alert
U.S. Department of Justice Announces New Voluntary Self-Disclosure Policy for all U.S. Attorney’s Offices
23 Feb 2023
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Estimated reading time: 10 minutes
Key Takeaways
- On February 22, 2023, the U.S. Department of Justice (DOJ) announced a new corporate voluntary self-disclosure (VSD) policy applicable to all 94 U.S. Attorney’s Offices across the United States and its territories. The new policy is intended to incentivize companies to voluntarily self-disclose misconduct to U.S. Attorney’s Offices, fully cooperate in U.S. Attorney’s Office investigations, and timely and appropriately remediate misconduct by providing standardized, transparent, and predictable benefits for doing so. The incentives available under the new policy include avoidance of a guilty plea, substantially reduced fines, and no independent compliance monitor.
- The new U.S. Attorney’s Office VSD policy comes in addition to the DOJ Criminal Division’s Corporate Enforcement Policy (CEP), which was implemented in 2017 and recently revised. Unlike the CEP, the U.S. Attorney’s Office VSD policy applies to all U.S. Attorney’s Offices, not just the Criminal Division. Notably, while the U.S. Attorney’s Office VSD policy has much in common with the CEP, it differs in several key respects, including whether prosecutors will presumptively decline to prosecute a compliant company and whether any fine reductions are available for companies that fully cooperate and remediate but do not self-disclose misconduct.
- The U.S. Attorney’s Office VSD policy is a fulfillment of a September 2022 directive by Deputy Attorney General Lisa Monaco directing all DOJ components to implement a VSD policy. This directive is part of an overall push by DOJ to re-invigorate corporate criminal enforcement by encouraging companies to bring possible wrongdoing to DOJ’s attention to jump start criminal investigations.
Introduction
On September 15, 2022, Deputy Attorney General Lisa Monaco announced new DOJ guidance and policies for corporate criminal enforcement. Among other directives, the “Monaco Memo” instructed all DOJ components to implement a policy to provide credit to companies that voluntarily self-disclose potential misconduct. According to the Monaco Memo, voluntary self-disclosure “enables the government to investigate and hold wrongdoers accountable more quickly than would otherwise be the case.” The Monaco Memo thus mandated that DOJ policies and procedures “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.” Moreover, policies and procedures “should be sufficiently transparent such that the benefits of voluntary self-disclosure are clear and predictable.” The Monaco Memo cited existing policies in certain DOJ divisions, such as the Antitrust Division’s Leniency Program, the Criminal Division’s Corporate Enforcement Program (CEP), and the National Security Division’s program for export control and sanctions violations, as potential models for additional VSD policies. At the time of the Monaco Memo, however, there was no VSD policy that applied to the 94 U.S. Attorney’s Offices across the country’s states and territories.
On February 22, 2023, Damian Williams, U.S. Attorney for the Southern District of New York and Chair of the Attorney General’s Advisory Committee, and Breon Peace, U.S. Attorney for the Eastern District of New York and Chair of the White Collar Fraud Subcommittee of the Attorney General’s Advisory Committee, announced the implementation of the new U.S. Attorney’s Office Voluntary Self-Disclosure Policy. The new U.S. Attorney’s Office VSD policy, which is effective immediately and applies to all 94 U.S. Attorney’s Offices, details the circumstances under which a company will be considered to have made a voluntary self-disclosure of misconduct to a U.S. Attorney’s Office and also spells out the benefits of voluntary self-disclosure.
According to U.S. Attorneys Williams and Peace, the goal of the policy is to “standardize how [voluntary self-disclosures] are defined and credited by U.S. Attorney’s Offices nationwide,” “incentivize companies to maintain effective compliance programs . . . and cooperate fully with the government in corporate criminal investigations,” and provide “transparency and predictability to companies and the defense bar concerning the concrete benefits” for voluntarily self-disclosing misconduct, fully cooperating, and timely and appropriately remediating.
Key Components of the U.S. Attorney’s Office Voluntary Disclosure Policy
The U.S. Attorney’s Office VSD policy:
- Explains what constitutes a voluntary self-disclosure:
- A disclosure is not voluntary when there is a preexisting obligation to disclose, such as pursuant to regulation, contract, or a prior DOJ resolution (e.g., non-prosecution agreement or deferred prosecution agreement);
- The disclosure must be made to the U.S. Attorney’s Office prior to an “imminent threat of disclosure” or government investigation, prior to the misconduct being publicly disclosed, and within a reasonably prompt time after the company becomes aware of the misconduct; and
- The disclosure must include all relevant facts concerning the misconduct that are known to the company at the time of the disclosure.
- Provides that U.S. Attorney’s Offices will not seek a guilty plea and may resolve an investigation through a declination, non-prosecution agreement, or deferred prosecution agreement when the following conditions are met:
No aggravating factor is present; and
The company has voluntarily self-disclosed, fully cooperated, and timely and appropriately remediated the criminal conduct.
- Offers potential reductions in criminal penalties for companies that have voluntarily self-disclosed, fully cooperated, and timely and appropriately remediated the criminal conduct:
- In the absence of aggravating factors, the U.S. Attorney’s Office may choose not to impose a criminal penalty and a company will receive at least a 50% fine reduction off the low end of the U.S. Sentencing Guidelines fine range; or
- Even when aggravating circumstances are present, a company could earn a fine reduction between 50% and 75% off the low end of the U.S. Sentencing Guidelines fine range.
Comparison to the Criminal Division’s Corporate Enforcement Policy
As noted above, in September 2022, Deputy Attorney General Monaco encouraged DOJ components to enact voluntary self-disclosure policies similar to existing policies applicable to particular DOJ divisions. The U.S. Attorney’s Office VSD policy is substantially similar to the Criminal Division’s Corporate Enforcement Policy (CEP), which was first implemented in November 2017 and was most recently revised in January 2023. There are, however, notable differences between the U.S. Attorney’s Office VSD policy and the CEP that companies should be aware of, as summarized in the table below.
Criminal Division CEP | U.S. Attorney’s Office VSD Policy | Summary | |
Presumption of Declination or Presumption of No Guilty Plea? | Presumption of declination. When a company has voluntarily self-disclosed, fully cooperated, and timely and appropriately remediated the misconduct and no aggravating circumstances are present, there is a rebuttable presumption that the Criminal Division will decline prosecution. | Presumption of no guilty plea. When a company has voluntarily self-disclosed, fully cooperated, and timely and appropriately remediated the misconduct and no aggravating circumstances are present, there is a rebuttable presumption that the U.S. Attorney’s Office will not seek a guilty plea but may seek a declination, non-prosecution agreement, or deferred prosecution agreement. | The CEP is arguably more favorable to companies because it provides a presumption of declination for full compliance, while the U.S. Attorney’s Office VSD policy only provides a presumption of no guilty plea. |
When is a Disclosure Voluntary? | A disclosure is voluntary when:
| A disclosure is voluntary when:
| Essentially the same standard for when a disclosure is considered voluntary. |
What is An Aggravating Circumstance or Factor? | “Aggravating circumstances” that may warrant a criminal resolution include, but are not limited to:
| “Aggravating factors” that may warrant a guilty plea include, but are not limited to, misconduct that:
| Substantial areas of overlap in terms of considering involvement of management and pervasiveness of the misconduct, but the CEP is arguably more stringent in that it considers additional factors of egregiousness, profit, and recidivism. |
What Fine Reductions are Available? | Where a non-recidivist company cannot overcome the presence of an aggravating factor but otherwise fully meets requirements of the CEP, the company will be afforded at least 50% and up to a 75% reduction off the low end of the U.S. Sentencing Guidelines fine range. A similarly situated recidivist company will be afforded the same reduction off a point above the low end of the U.S. Sentencing Guidelines fine range. Where a non-recidivist company has not self-disclosed but has fully cooperated and remediated, the company will be afforded up to a 50% reduction off the low end of the U.S. Sentencing Guidelines fine range. A similarly situated recidivist company will be afforded the same reduction off a point above the low end of the U.S. Sentencing Guidelines fine range. | Where a company fully meets the requirements of the VSD policy, the U.S. Attorney’s Office may choose not to impose a criminal penalty, but in no event will impose a criminal penalty that is greater than 50% below the low end of the U.S. Sentencing Guidelines fine range. When an aggravating factor is present, and a guilty plea is required, a company that otherwise fully meets the requirements of the VSD policy, generally will be afforded at least 50% and up to a 75% reduction off the low end of the U.S. Sentencing Guidelines fine range. The VSD policy does not distinguish between recidivist and non-recidivist companies and only provides benefits to companies that self-disclose. The VSD policy does not provide benefits to a company that has not self-disclosed, even if that company fully cooperated and remediated. | Comparable fine reductions available under each, but CEP requires only cooperation and remediation while U.S. Attorney’s Office VSD requires voluntary self-disclosure (in addition to cooperation and remediation). |
How Can a Company Avoid an Independent Compliance Monitor? | The Criminal Division “generally will not require appointment of a monitor if a company has, at the time ofresolution, demonstrated that it has implemented and tested an effective complianceprogram and remediated the root cause of the misconduct.” | The U.S. Attorney’s Office will not require appointment of a monitor if the company has, at the time of resolution, demonstrated that it has implemented and tested an effective compliance program. In making this assessment, the U.S. Attorney’s Office will refer to the Monaco Memo and consider resources such as the Criminal Division’s Evaluation of Corporate Compliance Programs. | Very similar standard for avoiding a compliance monitor, with a focus on demonstrated effectiveness of a compliance program. The CEP expressly considers remediation of root causes, but in practice, the U.S. Attorney’s Office VSD policy will likely also consider this factor. |
Joint Prosecutions by U.S. Attorney’s Offices and Other DOJ Components
Litigating sections at “Main Justice” have nationwide jurisdiction to prosecute cases that fall within their scope of responsibility, but often pair with local U.S. Attorney’s Offices to jointly prosecute cases in a specific district. For example, the Criminal Division’s Fraud Section has exclusive authority to investigate and prosecute cases involving alleged violations of the anti-bribery provisions of the Foreign Corrupt Practices Act (FCPA), but regularly teams with U.S. Attorney’s Offices to investigate and prosecute corporate FCPA cases. In such circumstances, which VSD policy will apply – the Criminal Division’s CEP or the U.S. Attorney’s Office VSD policy?
According to the VSD policy, “In cases where the company is being jointly prosecuted by a [U.S. Attorney’s Office] and another Department office or component, or where the misconduct reported by the company falls within the scope of conduct covered by VSD policies administered by other Department offices or components, the [U.S. Attorney’s Office] will coordinate with, or, if necessary, obtain approval from, the Department component responsible for the VSD policy specific to the reported misconduct when considering a potential resolution and before finalizing any resolution. Consistent with relevant provisions of the Justice Manual and as allowable under alternate VSD policies, the [U.S. Attorney’s Office] may choose to apply any provision of an alternate VSD policy in addition to, or in place of, any provision of this policy.” Experience suggests that the VSD policy for the specialized section will likely be applied in these circumstances. Thus, for example, in FCPA cases brought jointly by the Fraud Section and a U.S. Attorney’s Office, the CEP should apply. But this will be something to keep an eye on over time.
Conclusion
The adoption of a uniform VSD policy across all U.S. Attorney’s Offices provides increased “transparency and predictability to companies and the defense bar concerning the concrete benefits” of self-disclosure, as Deputy Attorney General Monaco directed, in the sense that companies and counsel now know that every U.S. Attorney’s Office will apply the same VSD policy to their disclosures. Because the U.S. Attorney’s Office VSD policy affords benefits only to companies that self-disclose, it arguably creates a new and substantial incentive for companies to act first and not rely only on cooperation and remediation. Nevertheless, choosing to self-disclose is a difficult and multi-faceted decision, and it remains to be seen if the benefits offered by the new policy provide sufficient advantages for companies to self-disclose.
Charles Tso, a law clerk in Morrison & Foerster LLP’s New York office, contributed to this alert.
