Whenever a company detects criminal misconduct, it is faced with the difficult decision of whether to self-disclose the misconduct to the federal government. In an attempt to help nudge companies towards cooperation, the U.S. Department of Justice (DOJ) recently unveiled several new policies to further incentivize voluntary and timely self-disclosure.

On January 17, 2023, Assistant Attorney General for the DOJ’s Criminal Division Kenneth A. Polite, Jr. delivered a speech at the Georgetown University Law Center announcing changes to the Criminal Division’s Corporate Enforcement Policy (CEP). In his speech, Polite presented companies with a path to avoid prosecution and offered enhanced reductions in fines, providing companies with new considerations when deciding whether to self-disclose and cooperate. The new CEP revisions are just the latest in a series of corporate enforcement policy updates and reflect the DOJ’s balancing of an aggressive enforcement stance with additional carrots for companies who self-disclose, cooperate, and remediate.

CEP Background

The development of the CEP began in April 2016 with the institution of the Foreign Corrupt Practices Act (FCPA) Pilot Program. This one-year trial was designed to provide transparency for corporations wrestling with whether to self-disclose wrongdoing and provided, for the first time, clear incentives to companies who self-disclosed. The following year, in November 2017, the DOJ formally adopted the pilot program, with minor changes, as the FCPA Corporate Enforcement Program. The CEP made clear that, absent aggravating circumstances, the DOJ would likely decline to prosecute a company if it voluntarily self-disclosed its misconduct, fully cooperated with the DOJ’s investigation, and timely and appropriately remediated. By March 2018, the DOJ expanded the CEP to encompass all corporate crimes.

Last fall, in September 2022, Deputy Attorney General Lisa Monaco reinforced the DOJ’s commitment to the CEP while also announcing additional guidance on the DOJ’s position on corporate enforcement. The key takeaways, which we discussed here, include the DOJ’s continued focus on individual prosecutions, its consideration of a corporation’s criminal history when determining the appropriate resolution of a corporate investigation, and clarity regarding incentives to self-disclose.

Key CEP Revisions

1. Expanding eligibility for declinations when aggravating circumstances are present

Before the latest revision to the CEP, the existence of aggravating circumstances, such as the involvement of senior executives, significant profit from the misconduct, and pervasive misconduct throughout the company, was a crucial variable that companies faced when deciding whether to voluntarily self-disclose. Previously, even a cooperating, self-disclosing company would risk losing cooperation credit if the DOJ later determined that one of several enumerated aggravating circumstances existed. This risk muddied the waters for companies deciding whether to self-disclose and delayed the reporting process as they weighed the costs and benefits.

Polite’s speech might change this calculus. Under the revised CEP, prosecutors may now decline to prosecute even if aggravating circumstances are present if a company can demonstrate that it has met the following three factors:

• the company immediately and voluntary self-discloses;
• the company has an effective compliance program and internal controls that identified the misconduct and led to the company’s voluntary self-disclosure; and
• the company provides “extraordinary” cooperation and undertakes “extraordinary” remediation.

Although this might give more benefits to companies, it is not clear yet how much Polite's speech will actually change outcomes. In the past, even though the CEP carved out cases with aggravating factors from its benefits, in reality, DOJ recognized the advantages of conferring the CEP's benefits on companies that self-disclosed even in cases with aggravating factors. For example, companies whose senior executives were involved in the misconduct, including a CEO, a president, and even a general counsel—who was not only a senior executive, but also a gatekeeper with a key role in the company's compliance function—received CEP declinations.

It appears unclear whether this change will actually lead companies in cases with aggravating factors to materially different outcomes. Whereas, in the past a company would have received a declination under the previous version of the CEP for a "prompt" self-disclosure, now it must show that its self-disclosure was "immediate." Instead of just showing that it remediated during its investigation, it now will have to demonstrate that its remediation was "extraordinary" and that its compliance program was effective at the time of the misconduct. And instead of "full" cooperation, the company will have to demonstrate "extraordinary" cooperation, a higher, undefined standard. This change in language definitely spells out clearer incentives for companies interested in cooperating, but whether these incentives are new, or simply a codification of prior DOJ policy is unclear.

2. Increased cooperation credit for voluntary self-disclosures, full cooperation, and timely and appropriate remediation that do not result in a declination

Polite also addressed concerns about situations where, despite a company self-disclosing, cooperating, and remediating, the DOJ decides a criminal resolution is necessary. In those scenarios, corporations are wary that their transparency will lead to harsher punishments, which are calculated using the U.S. Sentencing Guidelines and take into consideration factors like the nature and seriousness of the offense, the corporation’s remedial efforts, and the amount of the profit.

Polite reassured companies that if they self-disclose, fully cooperate, and timely and appropriately remediate, the DOJ will still recommend a reduction of 50 percent to 75 percent from the low end of the U.S. Sentencing Guidelines fine range. For companies with prior resolutions, the reduction would not be from the low end of the U.S. Sentencing Guidelines fine range, but instead, prosecutors have the discretion to determine the starting point for the fine amount.

In these circumstances, Polite also indicated that absent egregious aggravating factors, the DOJ will generally not require a guilty plea—this also applies to recidivist companies.

3. Increased cooperation credit for companies that do not voluntarily self-disclose but still fully cooperate and timely and appropriately remediate

Deciding whether to proactively contact the DOJ when wrestling with evidence of misconduct is an incredibly complex decision for corporations. Sometimes, whether for business reasons or other reasons, companies will choose not to self-disclose. For those facing that situation, Polite’s speech contained good news as well.

For companies that do not voluntarily self-disclose but nonetheless still demonstrate full cooperation as well as timely and appropriate remediation, the DOJ will recommend up to a 50 percent reduction off of the low end of the U.S. Sentencing Guidelines fine range. This is a 25 percent increase in reduction from the prior policy. Polite indicated that while this reduction applies to recidivist companies, it will likely not be from the low end of the fine range.

Key Takeaways

Polite’s speech reflects the DOJ’s continued focus on incentivizing companies to invest in compliance programs. The new changes provide even more attractive incentives for companies to own up to their misconduct. Consistent with the DOJ’s prior guidance and updates, Polite’s message is that companies that have effective compliance programs and take cooperation seriously can earn more favorable resolutions.

While the changes to the CEP provide concrete incentives and clarity for companies considering whether to self-disclose, they also raise questions. Namely, Polite’s declaration that “we know ‘extraordinary cooperation’ when we see it” leaves companies wondering just what cooperation qualifies as “extraordinary.”

In light of the newly announced revisions, companies should closely review their compliance programs and internal controls to ensure that they are effectively detecting, preventing, and remediating misconduct. They should also take time to analyze the risks and additional benefits of self-disclosure and weigh them against business considerations to better understand the self-disclosure decision. And, should a company decide to self-disclose, it must analyze how best to cooperate so that the DOJ sees its efforts as extraordinary rather than “run of the mill,” as Polite said in his speech. This calculus is complicated, given the potential collateral consequences to the company and its shareholders, and should not be handled lightly.