SDNY quick-declination policy poses risks on both sides, lawyers say

Ed Imperatore spoke to Global Investigations Review about a new policy from the U.S. Attorney for the Southern District of New York (SDNY) that states companies will receive a conditional declination letter “shortly” after self-reporting misconduct if they agree to cooperate with investigators and meet eligibility requirements, including “full restitution of victim losses.” Ed noted that companies could face broader risks from having a declination letter that spells out what prosecutors see as “illegal activity” in writing.

Ed stated, “It could set off lawsuits by private shareholders; it could raise the possibility of an SEC investigation, and it could cause significant reputational harm. In the case of a public company, it could lead to damages to shareholders.”

He added that, in the past, SDNY’s declinations were generally informal, with prosecutors often telling companies over the phone that they would not push prosecutions through, instead of outlining a declination in writing.

"It certainly raises questions about what the consequences of self-disclosure will be, and whether SDNY is now going to be pursuing written declinations with companies as opposed to pursuing a more informal practice," said Ed.

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