Key Takeaways

• This week the Department of Justice rolled out its new United States Attorney’s Offices’ Voluntary Self-Disclosure Policy.
• The Policy, which is effective immediately, details when a company will be considered to have made a voluntary self-disclosure of misconduct to any one or more of the 94 United States Attorney’s Offices.
• The Policy is intended to provide transparency and predictability to companies, their Boards and executive teams, and the defense bar regarding the concrete benefits and potential outcomes in cases where companies voluntarily self-disclose misconduct, fully cooperate, and timely and appropriately remediate.

Earlier this week, the United States Attorneys for the Southern and Eastern Districts of New York announced the implementation of a new nationwide United States Attorney’s Offices’ Voluntary Self-Disclosure Policy (the “Self-Disclosure Policy” or “Policy”). The Policy sets out the criteria under which a company will be considered to have made a voluntary self-disclosure of misconduct regardless of which U.S Attorney’s Office is handling the matter. There are three standards federal prosecutors will now consider when determining whether a company’s actions amount to a voluntary self-disclosure.

First, the disclosure must be voluntary. A disclosure of misconduct is not voluntary if the company is under a preexisting obligation to disclose (e.g., regulatory disclosure requirements, by contract, pursuant to a non-prosecution or deferred prosecution agreement).

Second, the disclosure must be timely. A disclosure is timely when it is made (a) prior to an imminent threat of disclosure or government investigation; (b) prior to the misconduct being publicly disclosed or otherwise known to the government; and (c) within a reasonably prompt time after the company becomes aware of the misconduct. The government has placed the burden on the company to demonstrate timeliness.

Third, the disclosure must include all relevant facts concerning the misconduct that are known to the company at the time of disclosure.

Enumerated Benefits of Self-Disclosure: Significantly, the new Self-Disclosure Policy expressly sets out the concrete benefits companies will enjoy from voluntary self-disclosure. Under the Policy, absent an aggravating factor, the USAO (i) will not seek a corporate guilty plea; (ii) may choose not to impose any criminal penalty; and (iii) in any event, will not impose a criminal penalty that is greater than 50% below the low end of the United States Sentencing Guidelines fine range so long as a company (a) voluntarily self discloses, (b) fully cooperates, and (c) timely and appropriately remediates the criminal conduct. For purposes of the Policy, remediation includes agreeing to pay all disgorgement, forfeiture, and restitution resulting from the misconduct.

No Monitor: In addition, pursuant to the Policy, the USAO will not require an independent compliance monitor for cooperating companies that voluntarily self-disclose and timely remediates the criminal conduct, provided that the company demonstrates at the time of resolution that it has implemented and tested an effective compliance program. The USAO will decide whether a monitor is warranted on a case-by-case basis.

Aggravating Misconduct: The Policy identifies potentially aggravating misconduct as that which: (a) poses a grave threat to national security, public health, or the environment; (b) is deeply pervasive throughout the company; or (c) involved current executive management of the company. Even when one (or more) aggravating factor is present, federal prosecutors still have the discretion not to require a company to plead guilty. Instead, the U.S. Attorney’s Office is expected to assess the relevant facts and circumstances to determine the appropriate resolution. Should federal prosecutors decide that a guilty plea ultimately is required, the company will still receive the Self-Disclosure Policy’s other benefits, including that the U.S. Attorney’s Office will recommend a criminal penalty of at least a 50% and up to a 75% reduction off the low end of the Sentencing Guidelines fine range. In addition, companies with aggravating facts are still eligible not to be subject to a corporate monitor, so long as the company has implemented and tested an effective compliance program.

Building on “Monaco Memorandum”: The Self-Disclosure Policy builds on the September 2022 Monaco Memorandum, which we previously wrote about and which instructed each DOJ component that prosecutes corporate crime to review its policies on corporate voluntary self-disclosure and, if there was no formal written policy to incentivize self-disclosure, to draft and publicly share such a policy. The new Self-Disclosure Policy is effective immediately and its nationwide scope satisfies the Monaco Memo’s mandate that all U.S. Attorney’s Offices have such a policy in place.

DOJ Coordination: Per the Policy, when a company is being jointly prosecuted by a particular U.S. Attorney’s Office as well as another Department of Justice component, or where a company’s reported misconduct falls within the scope of conduct covered by one or more self-disclosure policies administered by other DOJ components, as part of considering a potential resolution, the U.S. Attorney’s Office is to coordinate with, or, if necessary, obtain approval from, the DOJ component responsible for the self-disclosure policy specific to the reported misconduct.

Considerations for the Business Community: The Self-Disclosure Policy sets a nationwide standard for how U.S. Attorney’s Offices will determine whether a company made a voluntary self-disclosure. It ensures that no matter where a company operates, it will receive the same treatment and benefits for voluntary self-disclosure of criminal conduct. Thus, the Policy seeks to provide transparency and predictability to companies, their Boards and executive teams, and the defense bar regarding the concrete benefits and potential outcomes in cases where companies voluntarily self-disclose misconduct, fully cooperate, and timely and appropriately remediate.

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The new Self-Disclosure Policy has the potential to be a real game changer in the corporate criminal investigation and prosecution arena. The opportunity to resolve cases under highly favorable and predictable terms such as those articulated in the Policy, necessarily changes (or at least should change) the calculus that companies undertake when deciding whether and when to self-disclose misconduct. This is particularly true for conduct likely to lead to significant penalties and/or the implementation of a corporate monitor.

Regardless, with a Justice Department so focused on pursuing corporate misconduct and seeking to hold individuals accountable, companies that operate in an environment with any meaningful enforcement risk should familiarize themselves with both the new Policy as well as the Monaco Memorandum. And, when misconduct arises, companies should undertake a careful cost-benefit analysis of making a prompt voluntary disclosure, all while factoring in the likelihood that the government will learn of the misconduct anyway, whether through whistleblowers or otherwise. Although disclosure and cooperation are two central themes of the Justice Department’s latest policy pronouncements, companies should continue to focus on assessing existing corporate policies, compensation agreements, and compliance programs. Undertaking such analyses surely place companies on better footing should they learn of potentially reportable issues in the future—or even worse, should federal prosecutors (or even other regulators) proactively reach out to the company whether through a grand jury subpoena, search warrant, phone call, “knock and talk interview,” or otherwise.