On February 22, 2023, the United States Department of Justice (“DOJ”) issued the United States Attorney’s Offices’ Voluntary Self-Disclosure Policy (the “VSD Policy”) for corporate criminal enforcement, which sets forth the criteria the 94 United States Attorney’s Offices ( “USAOs”) will use to determine the appropriate resolution for a corporate entity that voluntarily self-discloses (VSD) misconduct to a USAO.
[1] The VSD Policy is intended to provide incentives, including declinations or reduced fines, to corporations that timely disclose misconduct, cooperate with the DOJ’s investigation, and remediate misconduct. It applies to all USAOs and is effective immediately.
The DOJ Criminal Division has applied its Corporate Enforcement and Voluntary Self-Disclosure Policy (“CEP”) since 2017, but the 94 USAOs across the country had not promulgated a similar policy in the years that followed. This created an interesting landscape for corporations because while the Criminal Division is involved in many of the DOJ’s largest investigations of alleged corporate misconduct, including all investigations involving the Foreign Corrupt Practices Act, there remain a significant number of corporate criminal investigations led by the 94 USAOs without involvement by the Criminal Division.
In September 2022 Deputy Attorney General Lisa Monaco issued the “Monaco Memo,” which revised portions of the CEP and directed that all DOJ components provide similar guidance designed to incentivize corporations to self-disclose misconduct and fully cooperate with the DOJ.
[2] According to the DOJ, the goal of the VSD is to “standardize how [voluntary self-disclosures] are defined and credited by U.S. Attorney’s Offices nationwide,” “incentivize companies to maintain effective compliance programs … and cooperate fully with the government in corporate criminal investigations,” and provide “transparency and predictability to companies and the defense bar concerning the concrete benefits” that companies can obtain for voluntarily self-disclosing misconduct, cooperation, and full remediation.
As mentioned, the purpose of the VSD Policy is to incentivize companies to promptly disclose any misconduct by its employees or agents to the DOJ in exchange for “resolutions under more favorable terms than if the government had learned of the misconduct through other means.” It provides incentives for self-disclosure, including discounts on fines and non-guilty plea resolutions for companies that timely and voluntarily self-report corporate criminal offenses. The VSD Policy lays out the standards that must be satisfied to constitute a voluntary self-disclosure while requiring the USAO to engage in a case-by-case analysis to determine whether a disclosure meets those standards and providing that the decision is at the sole discretion of the USAO.
First, the company must
voluntarily disclose the misconduct. A disclosure is not voluntary if it is made pursuant to a preexisting obligation to disclose, such as a regulation, contract, or a prior DOJ resolution.
Second, the disclosure must be
timely. The timeliness criteria require:
- The disclosure is made to the USAO “prior to an imminent threat of disclosure or government investigation” (the VSD derived this language from United States Sentencing Guidelines (U.S.S.G.) § 8C2.5(g)(1));
- The disclosure is made to the USAO prior to public disclosure of the misconduct or when the misconduct is otherwise known to the government; and
- The disclosure is made within a reasonably prompt time after the company becomes aware of the misconduct.
Third, the company
must disclose all relevant facts known to the company about the misconduct at the time of the disclosure. Recognizing that a company may not know all facts surrounding the misconduct at the time of the self-disclosure, the VSD Policy permits the disclosing company to make clear that the disclosure is based on a preliminary investigation or assessment of information. Furthermore, in the event the disclosing company conducts an internal investigation, the USAO expects updates as the investigation progresses.
In the absence of aggravating factors, a USAO will not seek a guilty plea when the company has (i) voluntarily self-disclosed pursuant to the criteria discussed above, (ii) fully cooperated, and (iii) timely and appropriately remediated the criminal conduct (
i.e., the USAO will rely on operative provisions of the Justice Manual and Department policy to evaluate whether the company fully cooperated and timely and appropriately remediated the criminal conduct). When a company meets the applicable standard, a USAO may choose to seek a lower criminal penalty (
e.g., a criminal penalty that is not greater than 50% below the low end of the U.S. Sentencing Guidelines fine range) or decline all criminal penalties. The company would still be required to pay all disgorgement, forfeiture, and restitution resulting from the misconduct at issue.
However, a USAO is likely to seek a guilty plea where aggravating factors are present, which include, but are not limited to, “misconduct that (i) poses a grave threat to national security, public health, or the environment; (ii) is deeply pervasive throughout the company; or (iii) involved current executive management of the company.” The presence of an aggravating factor does not require a USAO to demand a guilty plea. When an aggravating factor is present and a guilty plea is entered, the USAO may still recommend at least a 50% to 75% reduction to the low end of the U.S. Sentencing Guidelines and may also decline to require appointment of a monitor if the company has implemented and tested an effective compliance program.
The release of the VSD Policy provides companies facing investigation by a USAO with more clarity regarding the potential benefits should they choose to self-disclose misconduct and fully cooperate and remediate misconduct, akin to what companies investigated by the Criminal Division have encountered for the last several years. Companies’ experiences and satisfaction with application of the CEP have varied however and it remains to be seen how the 94 USAOs, which vary greatly in size and experience investigating corporate misconduct, will apply the VSD in practice.
[1] Dep’t of Just., United States Attorneys’ Offices Voluntary Self Disclosure Policy (Feb. 22, 2023).
[2] Dep’t of Just., Off. of the Deputy Att’y General, Further Revisions to Corporate Criminal Enforcement Policies Following Discussions with Corporate Crime Advisory Group (Sept. 15, 2022).
