U.S. Department Of Justice Announces New Voluntary Self-Disclosure Policy For Corporate Misconduct

On Feb. 22, 2023, the United States Department of Justice (DOJ) announced a policy, effective immediately, that is intended to provide a nationwide standard for how the U.S. Attorney’s Office (USAO) will define and incentivize voluntary self-disclosures (VSDs) of misconduct made by companies to the USAO.

Under the Voluntary Self-Disclosure Policy, to be considered a VSD, the disclosure must be:

1. voluntary – not made pursuant to a regulation, contract, or other obligation to disclose;
2. timely – made before the misconduct is publicly disclosed, made known to the government, or under “imminent threat” of disclosure or government investigation; and
3. complete – includes all relevant facts known to the company and accompanied by a production of relevant documents and information, to be supplemented with updates as necessary.

The new policy provides significant incentives to encourage VSDs. Generally, the USAO will not seek a guilty plea against a company that has made a VSD, fully cooperated with the prosecutors, and timely and appropriately remediated the misconduct. In addition, the USAO will not seek a criminal fine that is more than 50% below the fine range provided for in the U.S. Sentencing Guidelines (USSG) and may choose not to seek a criminal fine at all.

The policy notes that there are three “aggravating factors” that may warrant seeking a guilty plea based on the misconduct disclosed in a VSD:

1. if the misconduct poses a grave threat to national security, public health, or the environment;
2. if there is a deep pervasiveness of misconduct throughout a company; or
3. if the company’s current executive management was involved in the misconduct.

However, the policy also makes clear that the presence of one or more aggravating factors does not automatically mean that a guilty plea will be required; the relevant facts and circumstances of each case will be considered.

Even if a guilty plea is found to be warranted for a company that has made a VSD, if the company has otherwise fully cooperated and remediated its misconduct, the USAO will recommend a reduction of at least 50% and up to 75% off of the low end of the fine range provided for in the USSG and, further, will not require the appointment of a monitor if the company has implemented and tested an effective compliance program.

A company’s decision on whether to self-disclose misconduct to the USAO may be the most important one it ever makes. Either choice can be fraught with peril. It appears the DOJ is attempting to provide much needed clarity and predictability for companies about the impact of making a VSD.

Only time will tell if the new policy accomplishes those aims. Certainly, the policy’s announcement is not without concerns. For example, will the policy create more confusion over its terms, such as what amounts to an “imminent threat” of disclosure or government investigation, and does the policy allow enough flexibility to consider the unique facts and circumstances surrounding the particular misconduct being disclosed?

Our White-Collar Criminal Defense and Government Investigations team will continue to monitor developments regarding this policy and its implementation. Please contact your regular AT lawyer or the authors of this advisory with any questions.