On October 4, 2023, Deputy Attorney General Lisa O. Monaco announced a Department of Justice-wide safe harbor policy for voluntary self-disclosures made in connection with mergers and acquisitions. During her remarks at the Society of Corporate Compliance and Ethics’ 22nd Annual Compliance and Ethics Institute, the Deputy Attorney General said that the Safe Harbor provides companies with the presumption that the DOJ will decline criminal prosecution when they voluntarily self-disclose misconduct by companies they are acquiring or have recently acquired.
To receive the benefit of the Safe Harbor, companies must:
- Promptly and voluntarily disclose misconduct discovered at the acquired entity within six months from the closing date, regardless of whether the misconduct was discovered pre- or post-acquisition;
- Cooperate with the ensuing investigation; and
- Engage in requisite, timely, and appropriate remediation, restitution, and disgorgement within one year from closing.
In announcing the Safe Harbor, Deputy Attorney Monaco said that “the last thing the Department wants to do is discourage companies with effective compliance programs from lawfully acquiring companies with ineffective compliance programs and a history of misconduct.” She noted that Safe Harbor was designed “to incentivize the acquiring company to timely disclose misconduct uncovered during the M&A process.” The time limitations for voluntary self-disclosure (six months from closing) and remediation (one year from closing) are subject to a reasonableness analysis. The DOJ may permit an extension of those timelines when the facts and circumstances of a transaction warrant reconsideration. In the event the acquiring company later has to resolve other criminal allegations, the DOJ will not consider the disclosed misconduct by the acquired company under this policy in the DOJ’s future recidivist analysis. The acquiring company can still receive the presumption of a declination under the Safe Harbor even if aggravating factors exist at the acquired company.
The Deputy Attorney General clarified that this policy will only apply to criminal conduct discovered during a bona fide, arms-length M&A transaction—it will not apply to civil enforcement actions or to misconduct that was otherwise required to be disclosed, known to the public, or previously known to the DOJ.
This Safe Harbor is the latest of several corporate enforcement policies, in which the DOJ places a premium on timely self-disclosure of misconduct, cooperations, and subsequent remediation. See United States Department of Justice Issues Voluntary Self-Disclosure Policy Pursuant to Deputy Attorney General’s September 15, 2022, Memorandum
(Feb. 22, 2023) (“[T]he purpose of the VSD Policy is to incentivize companies to promptly disclose any misconduct by its employees or agents to the DOJ.”); DOJ Announces Revisions to the Criminal Division’s Corporate Enforcement Policy
(Jan. 17, 2023) (“The revisions aim to encourage additional companies to voluntarily self-disclose potential criminal conduct.”); The DOJ Reinforces and Updates Corporate Criminal Enforcement Priorities with Speech by Deputy Attorney General Lisa O. Monaco
(Sept. 15, 2022) (“Monaco announced that, going forward, every DOJ component that prosecutes corporate crimes will be required to have a program that incentivizes voluntary self-disclosure.”). Given the potential benefits afforded by the DOJ under the Safe Harbor, companies engaged in M&A now have even more reasons to develop and implement robust diligence efforts to uncover potential criminal exposure they will inherit as a result of an acquisition.