DOJ Announces a New Corporate Voluntary Self-Disclosure Policy

Legal Alerts

2.27.23

On February 22, 2023, the U.S. Department of Justice (DOJ) announced an important new nationwide corporate voluntary self-disclosure policy for U.S. Attorney’s Offices (USAOs) when deciding how much leniency to offer companies that promptly and fully disclose misconduct. This policy implements a September 2022 DOJ directive to federal prosecutors in order to encourage voluntary corporate self-disclosures. Under the new policy, companies that discover potential criminal misconduct must act quickly and make far-reaching decisions about whether and what to disclose. Discussed below are some key features of DOJ’s new policy.

Disclosure Standards

Under the new policy, federal prosecutors may offer significant penalty reductions to companies that make disclosures of criminal wrongdoing and meet the following standards:

  • The disclosures must be timely, meaning made: (a) reasonably promptly after the company becomes aware of the alleged misconduct; (b) before the government or public learns about the conduct; and (c) before an “imminent” likelihood that the government will learn about it.
  • The disclosures must be voluntary and not required by a regulation or previous resolution with, or obligation to, the government.
  • The disclosures must include all relevant facts the company knows about the alleged wrongdoing, although the company can clarify that its disclosures are subject to supplementation if more information comes to light during its internal investigation.

Disclosure Benefits

If a company satisfies the government that it has met these exacting standards, fully cooperates, and undertakes appropriate remedial steps, the government will offer substantial leniency. The amount of that leniency will depend, however, on whether there are “aggravating factors,” such as involvement by current company executive management, pervasiveness within the company, or a grave threat to national security, public health, or the environment.

  • If there are no aggravating factors, the prosecutor generally will not require a corporate guilty plea and may seek a criminal penalty 50% or more below the low end of the Sentencing Guidelines fine range, including the possibility of no criminal penalty at all. The form of the resolution may include a declination, a non-prosecution agreement, or a deferred prosecution agreement. The prosecutor will not require an independent compliance monitor if the company has implemented and tested an effective compliance program.
  • If there are aggravating factors, the government may require a guilty plea with a recommended fine reduction of 50% to 75% off the low end of the Guidelines fine range, and may not require an independent compliance monitor if the company has implemented an effective compliance program and taken remedial activity.

Key Takeaways

Companies are often confronted with unsubstantiated and unreliable allegations of misconduct. The decision of whether, when, and how much to disclose to the government can be complex, and made more challenging by the speed in which the government expects to hear from the company. Moreover, when making disclosures of “all relevant facts” in near real-time, as the government expects, a company must consider how to avoid waiving the attorney-client privilege, which can cause risks down the line in later civil and administrative actions.

DOJ’s new self-disclosure policy gives companies clearer guidance regarding the factors prosecutors will consider when companies promptly and fully disclose misconduct. But prosecutors still retain a high degree of flexibility in applying these standards, so it will be important for companies to engage outside counsel with insight on how such decisions are made.

The new guidelines apply only to U.S. Attorney’s Offices, not to other DOJ components that prosecute corporate crimes such as the Tax, Antitrust, and Environment and Natural Resources Divisions. To the extent such DOJ components jointly investigate or prosecute such matters with a USAO (which is often the case), the DOJ component must coordinate with the USAO to ensure their respective self-disclosure policies are consistently applied.

DOJ has previously emphasized its priority of holding individual bad actors responsible for corporate crimes. Under the new voluntary self-disclosure policy, will DOJ depart from its emphasis on individual accountability and demand more corporate guilty pleas if companies don’t satisfy DOJ’s exacting standards for self-disclosure? The upcoming year should provide more clarity on DOJ’s thinking in this regard.

If you have any questions about these issues, please contact Mark Chutkow, Jonathan Feld, or your Dykema relationship attorney.