New DOJ Policy Sets High Standards, Offers Strong Incentives for Misconduct Self-Disclosure

The U.S. Attorney's Offices (USAOs) Voluntary Self-Disclosure Policy, announced on Feb. 22, 2023, sets forth a nationwide standard for how USAOs will define and credit corporate self-disclosures of misconduct by employees or agents. USAOs are part of the U.S. Department of Justice (DOJ) and currently lead federal prosecution efforts in 94 districts nationwide. The new policy aims to ensure consistency throughout the country by providing uniform criteria for all USAOs when evaluating and crediting voluntary self-disclosures.

The policy is an expansion of recent changes by DOJ to the Criminal Division's Corporate Enforcement and Voluntary Self-Disclosure Policy (CEP) announced on Jan. 17, 2023,¹ and was developed pursuant to a Sept. 15, 2022, memorandum from U.S. Deputy Attorney General Lisa Monaco titled "Further Revisions to Corporate Criminal Enforcement Polices Following Discussion with Corporate Crime Advisory Group" (Monaco Memo).²

Consistent with the recent CEP changes and the Monaco Memo, the USAO Voluntary Self-Disclosure Policy emphasizes holding individuals accountable and resolving cases quickly.

Standards of Voluntary Self-Disclosure

USAOs will require that a disclosure meets each of the following requirements to constitute a "voluntary self-disclosure" under the new policy:

1. Disclosures of Misconduct Must Be Made Voluntarily. A disclosure will not be deemed voluntary if there is a preexisting obligation to disclose, such as pursuant to a regulation, contract or a prior DOJ resolution (i.e., a Non-Prosecution or Deferred Prosecution Agreement).

2. Disclosures Must Be Timely. The disclosure must be made to the USAO:

• 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 becomes aware of the misconduct, with the burden being on the company to demonstrate timeliness

3. Disclosures Must Include "all relevant facts" and Be Accompanied by Certain Actions. A disclosure will be deemed a voluntary self-disclosure under the policy only if it includes all relevant facts about the misconduct known to the company at the time. The policy acknowledges that a company may not be in a position to know all of the relevant facts at the time it contacts the USAO. Thus, the policy advises companies to make clear to the government that the disclosure is based on "a preliminary investigation or assessment of information." As with the CEP, the policy reiterates DOJ's expectations that companies act quickly to preserve, collect and produce relevant documents and/or information and provide "timely updates" to the USAO. If a company conducts an internal investigation, the USAO expects "appropriate factual updates" as the investigation proceeds, consistent with Main Justice's guidance on cooperation. See DOJ Justice Manual, Section 9-28.700

Benefits of Meeting Voluntary Self-Disclosure Standards: Possibility of No Guilty Plea, Significantly Reduced Fines

The policy seeks to incentivize companies to self-disclose by offering potentially significant benefits. Specifically, the policy states that, barring the presence of an aggravating factor,³ the USAO will not seek a guilty plea where a company has voluntarily self-disclosed pursuant to the criteria set forth above, fully cooperated and "timely and appropriately remediated the criminal conduct," pursuant to relevant provisions of the Justice Manual and DOJ policy. Appropriate remediation must include agreeing to pay all disgorgement, forfeiture and restitution resulting from the misconduct.

Additionally, the policy notes that where a company meets the policy's requirements, the USAO may choose not to impose a criminal penalty and, where it does, it will not impose a criminal penalty greater than 50 percent below the low end of the U.S. Sentencing Guidelines range.

Even in the presence of an aggravating factor, the policy provides flexibility to USAOs to not require a guilty plea. The policy notes that USAOs will assess the relevant facts and circumstances of each case individually and determine the appropriate resolution. And where a guilty plea is warranted due to aggravating factors, but where a company otherwise complies with the requirements of the policy, the policy states that USAOs will:

• accord or recommend to a sentencing court a fine reduction of "at least 50% and up to a 75%" from the low end of the applicable Sentencing Guidelines fine range after any applicable reduction for self-reporting and cooperation under the Guidelines; and
• not require the appointment of an independent compliance monitor if the company has, at the time of resolution, demonstrated that it has implemented and tested an effective compliance program consistent with the Monaco Memo

Interplay with Other DOJ Component Policies

The USAO policy acknowledges that companies may face investigation or prosecution by more than one DOJ office or component (e.g., a USAO and DOJ's Antitrust Division or Tax Division), each with their own voluntary self-disclosure policy. In that case, the USAO will coordinate with "or, if necessary, obtain approval from, the Department component responsible for the [voluntary self-disclosure] policy specific to the reported misconduct" when considering a potential resolution "and before finalizing any resolution." The USAO may choose to apply any provision of any alternate voluntary self-disclosure policy "in addition to, or in place of, any provision" of the USAO policy.

Takeaways

The criteria set forth in the new policy reveal high standards for evaluating company voluntary self-disclosures for misconduct by employees or agents. Practically speaking, this means that effective and strong compliance programs are critical to limiting criminal liability for companies. And given the policy's guidelines on timely disclosures, it is prudent for companies to confer with outside counsel immediately upon learning of potential misconduct to carefully assess all options and consider next steps.

Notes:

¹See Holland & Knight's previous alert, "DOJ Makes Significant Revisions to Corporate Enforcement Policy," Jan. 20, 2023.

²See Holland & Knight's previous alert, "DOJ Expands Framework for Cracking Down on Corporate Crime," Sept. 19, 2022.

³According to the policy, aggravating factors that may warrant a guilty plea include misconduct that: 1) poses a grave threat to national security, public health or the environment; 2) is deeply pervasive throughout the company; or 3) involves current executive management of the company.

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