The U.S. Department of Justice (DOJ) on Wednesday issued a new Voluntary Self-Disclosure (VSD) Policy for United States Attorney’s Offices, effective immediately. “The policy details circumstances under which a company will be considered to have proactively and voluntarily self-disclosed misconduct by employees or agents, as well as the incentives associated with making such a disclosure.” The policy aims to make the USAO’s definition of VSD uniform across offices and clarify the requirements needed to receive disclosure credit.
The policy identifies three necessary components for any VSD. Specifically, it must be (1) voluntary, (2) timely and (3) both substantive and accompanied by actions. A disclosure is considered voluntary so long as there is not a preexisting obligation to disclose, such as a prior regulation, contract, or agreement. A disclosure is timely when it is made “prior to an imminent threat of disclosure or government investigation,” prior to the misconduct being known to the government and within a reasonably prompt time after the company is aware of the misconduct. However, the burden to prove timeliness rests on the company and the window of opportunity for disclosure may be limited. Finally, a disclosure is considered substantive when it includes all relevant facts that are known to the company at the time of the disclosure, including appropriate factual updates throughout the course of an internal investigation.
Not surprisingly, to incentivize self-disclosure, the benefits afforded to companies who self-disclose are significant. For example, when the aforementioned VSD standards are met, the USAO may choose not to impose a criminal penalty and, if it does impose such a penalty, it will not impose a criminal penalty that is greater than 50% below the low-end of the fine range in the U.S. Sentencing Guidelines. Additionally, absent aggravating factors, the USAO will not seek a guilty plea as long as the company (1) voluntarily self-disclosed in accordance with the criteria set forth above, (2) fully cooperated and (3) timely and appropriately remediated the criminal conduct based on the standards set forth in the Justice Manual and Department policy.
However, these benefits are not without limits and will not be doled out fully if the DOJ deems there to be aggravating factors at play — namely misconduct that: (1) poses a grave threat to national security, public health or the environment; (2) is deeply pervasive throughout the company; or (3) involved current executive management of the company. The policy states that despite aggravating factors, if a VSD is made, the USAO will recommend to the sentencing court a reduction of at least 50% and up to 75% off the low-end of the U.S. Sentencing Guidelines fine range and will not require appointment of a compliance monitor so long as an effective compliance program has been demonstrated, implemented and tested. But if an aggravating factor is found to exist, the full benefit of the voluntary disclosure is undercut. Notably, the existence of an aggravating factor is expressly not limited to the three described situations but could include a variety of unspecified circumstances, largely undermining the guise of benefits from a VSD.
DOJ’s Voluntary Self-Disclosure policy offers clarity into the Department’s expectations and standards for VSD. Because timeliness is a central component of the policy, it is in a company’s best interest to investigate immediately any alleged misconduct and thoughtfully analyze whether any “aggravating factors” or other potentially benefit-undermining facts exist. While the benefits the DOJ is offering to companies that engage proactively with prosecutors could be vast, companies need to be aware of the time constraints afforded and the emphasis put on timely disclosure, possibly even before any internal investigation is fully completed. In preparation to satisfy these demands, including timely disclosure and prompt remedial action, companies should take action now to implement and test an effective compliance program.
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