On Feb. 22, 2023, the U.S. Department of Justice announced a new Voluntary Self-Disclosure Policy to encourage self-disclosure of potential criminal activity in exchange for varying levels of amnesty from criminal charges. Under the policy, U.S. attorney’s offices (“USAO”) will not seek a guilty plea and will only impose limited criminal penalties where a company voluntarily and timely self-discloses all relevant facts concerning misconduct known to the company; cooperates with the government; and agrees to pay all disgorgement, forfeiture and restitution resulting from the misconduct. This policy is effective immediately and applies to all USAOs.
To qualify, a disclosure must be (1) voluntary, (2) timely and (3) complete. The USAO has the sole discretion to determine whether these criteria are met and will make determinations on a case-by-case basis. To that end, the policy provides relevant criteria for each of the three standards. First, a voluntary self-disclosure (VSD) is not “voluntary” if it is made pursuant to a preexisting obligation to disclose, like a regulatory requirement or a non-prosecution agreement. Second, a disclosure is only timely if it precedes an imminent threat of disclosure or government investigation, occurs prior to public disclosure or government knowledge of the misconduct, and occurs within a reasonably prompt time after the company becomes aware of the misconduct. Third, and finally, a disclosure must include all relevant facts concerning the misconduct that are known to the company and should be updated based on any subsequent internal investigation.
If a company satisfies the criteria set forth in the VSD policy, fully cooperates with the government during its investigation and remediates the criminal conduct, then “the USAO will not seek a guilty plea,” so long as there is not an aggravating factor. Moreover, “the USAO may choose not to impose a criminal penalty.” If they do pursue a criminal penalty, it “will not impose a criminal penalty that is greater than 50% below the low end of the U.S. Sentencing Guidelines fine range,” even if an aggravating factor is present. And finally, unlike companies that resolve fraud and abuse issues through a corporate integrity agreement, companies availing themselves of the VSD policy will not be subject to an independent compliance monitor.
Accordingly, the VSD policy strongly incentivizes companies to have a compliance program that is actively monitoring and auditing compliance with the fraud and abuse laws so as to catch unlawful conduct in time for the company to take advantage of this new policy. This is particularly true for companies operating in the health care space, which has been increasingly subject to investigation and prosecution by USAOs across the country. For example, in the most recent fiscal year, the DOJ recovered $5.6 billion from civil fraud and false claims cases—more than $5 billion of those funds came from cases related to the health care industry. Because of the thicket of regulation, a strong and active compliance program prepared to detect and correct any misconduct may be an ounce of prevention worth a pound of cure.
Any company considering self-disclosure should first consult with counsel experienced in working with USAOs to ensure the best outcome and compliance with the VSD policy.
