On February 22, 2023, the U.S. Department of Justice’s (DOJ) United States Attorneys’ Offices (USAO) announced a new Voluntary Self-Disclosure Policy that went into immediate effect. The purpose of the new policy is to create a standard for how voluntary self-disclosures (VSDs) are defined and credited by the USAO nationwide. In announcing the policy, the U.S. Attorney for the Eastern District of New York, Breon Peace, stated that companies self-reporting criminal misconduct “will have far better and more predicable outcomes under this policy.” The policy sets forth the criteria to qualify as a VSD and the benefits of doing so.
Standards to be Considered a VSD
- Voluntary – The USAO will only consider a report to be a qualifying VSD when disclosure is voluntary. If there is a separate, preexisting obligation to disclose (e., regulation, contractual obligation, prior DOJ resolution, etc.), then the report will not qualify for the policy’s benefits.
- Timely – A VSD will be considered timely where it is prior to an imminent threat of disclosure or government investigation; prior to the misconduct being publicly disclosed; and within a reasonably prompt time after the company becomes aware of the misconduct. The company bears the burden of demonstrating that its disclosure is timely.
- Substance – For a disclosure to be deemed a qualifying VSD, the disclosing company must include all relevant facts concerning the misconduct known at the time of the disclosure.
The policy also notes that although a self-report may not fully comply with the qualifications to be deemed a VSD or where aggravating factors exist, the USAO will still assess the facts and circumstances of each incident on a case-by-case basis to determine if some benefits may still be appropriate.
Benefits of VSD
If a company’s self-report to the USAO is deemed a qualifying VSD, it fully cooperates with any investigation by USAO or DOJ, and it remediates the misconduct (including disgorgement, forfeiture, and restitution where appropriate), the reporting companies will receive the following benefits:
- No Guilty Plea – In the absence of aggravating factors, the USAO will not seek a guilty plea, but instead resolution may entail declinations, non-prosecution agreements, or deferred prosecution agreements.
- No or Lower Criminal Penalties – If all criteria is met, the USAO may choose not to impose any criminal penalty, but where warranted, such penalties will not be greater than 50% below the low end of the U.S. Sentencing Guidelines.
- No Independent Monitor – If the company demonstrates at the time of resolution that it has implemented and tested an effective compliance program, then the resolution will not include the imposition of an independent compliance monitor.
The goal of the new VSD policy is to incentivize companies to maintain effective compliance programs that identify, remedy, and report internal misconduct. Yet, the DOJ – not the company – will determine whether a report qualifies for the potential benefits of the VSD policy. This highlights the need to: (1) develop and maintain robust compliance policies and procedures; (2) work closely with outside counsel to determine the pros and cons of early self-reporting; and (3) act quickly if voluntary disclosure is warranted.
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