On February 22, 2023, the Department of Justice (“DOJ”) released a new voluntary self-disclosure (“VSD”) policy (available here) that applies to all United States Attorney’s Offices (“USAO”). The policy details the circumstances under which a company will be considered to have made a VSD of misconduct to a USAO and the benefits associated with doing so.
In a press release announcing the new policy, DOJ explained that it is seeking to provide “transparency and predictability to companies and the defense bar concerning the concrete benefits and potential outcomes in cases where companies voluntarily self-disclose misconduct, fully cooperate, and timely and appropriately remediate.” It further explained that the new VSD policy is intended to “standardize how VSDs are defined and credited by USAOs nationwide, and to incentivize companies to maintain effective compliance programs capable of identifying misconduct, expeditiously and voluntarily disclose and remediate misconduct, and cooperate fully with the government in corporate criminal investigations.”
The New VSD Policy
Under the new policy, a company is considered to have made a VSD if it becomes aware of misconduct by employees or agents before that misconduct is publicly reported or otherwise known to the DOJ, and discloses all relevant facts known to the company about the misconduct to a USAO in a timely fashion prior to an imminent threat of disclosure or government investigation.
Absent the presence of an aggravating factor,1 a company that voluntarily self-discloses, fully cooperates, and timely and appropriately remediates the criminal conduct (including agreeing to pay all disgorgement, forfeiture, and restitution resulting from the misconduct), will receive significant benefits, including that the USAO will not seek a guilty plea. Further, where a company fully meets the VSD policy, the USAO may choose to forego a criminal penalty.2
The new policy also provides that the USAO will not require the imposition of an independent compliance monitor for a cooperating company that voluntarily self-discloses the relevant conduct and timely and appropriately remediates the criminal conduct, assuming that the company demonstrates at the time of resolution that it has implemented and tested an effective compliance program.
Finally, it provides that companies that voluntarily self-disclose misconduct to the USAO will receive resolutions under more favorable terms than if the government had learned of the misconduct through other means.3
Further elaborating on the new policy at the American Bar Association’s National Institute on White Collar Crime in Miami, Andrea Griswold, chief counsel to U.S Attorney Damian Williams of the Southern District of New York, said that companies that do not immediately self-disclose take a big risk, and that those that come in later must have a good explanation. In response to concerns expressed that defense counsel cannot advise on self-disclosure until the relevant facts are developed through an internal investigation, Griswold explained that defense counsel will have to show how they worked diligently to get to a point at which they could advise on self-disclosure.
The new policy leaves companies to deal with a difficult balance: disclosing soon enough to receive credit under the policy, but with sufficient knowledge of the scope and degree of the misconduct they’re reporting. It also remains unclear how companies can know that disclosure will lead to a more favorable resolution when a comparison class is not readily available. Finally, in the event a criminal penalty is imposed, any purported sentencing benefit suggested by the policy is far from certain, given that the ultimate sentence will be determined by a judge, not by prosecutors.
Takeaways
- Although the new policy provides greater clarity and transparency around the potential benefits of self-disclosing misconduct not already know to DOJ, it is far less clear regarding the potential benefits of disclosure and cooperation regarding misconduct that may already be known.
- Companies considering disclosure should also carefully consider whether they are willing to timely remediate the misconduct, including paying all disgorgement, forfeiture, and restitution that resulted from the misconduct. If a company begins disclosure and cooperation, only to balk at full restitution and forfeiture, it might find itself worse off than if it had never begun the process.
- Given the potential negative consequences to changing course after beginning to disclose, companies should make a decision as to a VSD only after an effective internal investigation with consideration given to the importance of timely submission
If you have any questions related to the topics in this memo, please reach out to Michael Considine, Jaimie Nawaday, Noah Czarny or your primary Seward & Kissel attorney.
