On Feb. 22, 2023, U.S. Attorneys’ Offices throughout the country adopted a new policy that incentivizes corporate voluntary self-disclosure of misconduct. Deputy Attorney General Lisa Monaco’s Sept. 15, 2022 memorandum (“Monaco Memo”) instructed all DOJ sections to review their policies incentivizing corporate voluntary self-disclosure or, if no formal written policy existed, to draft and publish such policies. The U.S. Attorneys’ Offices’ new, uniform policy fulfilled the Monaco Memo’s directive.
The policy breaks new ground by clarifying the standards that U.S. Attorneys’ Offices will use in analyzing voluntary self-disclosures and the benefits it will offer to corporations making such disclosures. The policy is also broadly consistent with other DOJ sections’ voluntary self-disclosure policies. We have previously written more extensively about updates to the Criminal Division’s treatment of voluntary self-disclosures and the Antitrust Division’s longstanding leniency program, which are both consistent with the updated US. Attorneys’ Offices’ policy.
Standards of Voluntary Self-Disclosure
While the Monaco Memo provided “core principles” regarding voluntary self-disclosure, it was short on specificity about what voluntary self-disclosures would be accepted by DOJ. The new U.S. Attorneys’ Offices’ policy attempts to flesh out those details.
First, the policy clarifies that to receive maximum benefit from the U.S. Attorneys’ Offices the self-disclosure must truly be voluntary. The U.S. Attorneys’ Offices interpret this to mean that a disclosure will not satisfy the policy “where there is a preexisting obligation to disclose, such as pursuant to regulation, contract, or a prior Department resolution (e.g., non-prosecution agreement or deferred prosecution agreement).” This limitation will have important implications for the application of this policy for many corporations—and especially those that contract with the government or have other circumstances that already require self-reporting of violations of law.
Second, the policy clarifies that the voluntary self-disclosure must be made “within a reasonably prompt time after the company becom[es] aware of the misconduct.” Additionally, the disclosure must be made before an “imminent threat” of disclosure or government investigation and before the misconduct being publicly disclosed or otherwise known to the government. While this guidance emphasizes the need for timely, voluntary self-disclosure, multiple questions will remain for companies, including, for example, what “reasonably prompt” means under the circumstances, when exactly a company “becom[es] aware of the misconduct” of its employees, and how much the company should investigate before making a voluntary self-disclosure.
Third, the policy clarifies that the voluntary self-disclosure “must include all relevant facts concerning the misconduct that are known to the company at the time of the disclosure.” This is a high standard, and one that prevents companies from only self-disclosing in part. The U.S. Attorneys’ Offices acknowledge, however, that a company may self-disclose based on its then-existing knowledge, even before its internal investigation is complete.
Incentives for Meeting the Standards for Voluntary Self-Disclosure
The U.S. Attorneys’ Offices’ policy also clarifies the incentives for companies that self-disclose.
The policy states that “[a]bsent the presence of an aggravating factor,” the U.S. Attorneys’ Offices “will not seek a guilty plea” if the company has (a) voluntarily self-disclosed under the standards set out above, (b) “fully cooperated,” and (c) “timely and appropriately remediated the criminal conduct.”
The policy identifies some—but not all—of the “aggravating factors” that can prevent a company that voluntarily self-discloses from fully benefitting from the policy. Misconduct is aggravated if it “poses a grave threat to national security, public health, or the environment;” “is deeply pervasive throughout the company;” or “involved current executive management of the company.” The policy is explicit that these are examples of aggravating factors and not an exhaustive recitation. It remains to be seen what other factors U.S. Attorneys’ Offices consider to be aggravating.
The policy also provides more guidance on what it means for a company to have “timely and appropriately remediated the criminal conduct.” The policy indicates that companies will need to pay “all disgorgement, forfeiture, and restitution resulting from the misconduct at issue” to benefit from the policy. This remediation could have expensive implications, and companies and the U.S. Attorneys’ Offices may come to different views on the amount and type of remediation owed.
However, if a U.S. Attorney’s Office considers these requirements to have been met—i.e., if the voluntary self-disclosure meets the standards, the company fully cooperates, and the company appropriately remediates—there are significant benefits. In such a case, the Office “may choose not to impose a criminal penalty” at all. If a criminal penalty is imposed, the U.S. Attorneys’ Offices “will not impose a criminal penalty that is greater than 50% below the low end of the U.S. Sentencing Guidelines fine range.”
Even where an aggravating factor is present, a company “that has voluntarily self-disclosed, fully cooperated, and timely and appropriately remediated the criminal conduct” could still receive significant benefits. In particular, the policy indicates that a U.S. Attorney’s Office will “accord or recommend to a sentencing court, at least 50% and up to a 75% reduction off the low end of the U.S. Sentencing Guidelines fine range.”
Additionally, companies that voluntary self-disclose and timely and appropriately remediate the criminal conduct will not be required to have independent compliance monitors “if the company demonstrates at the time of resolution that it has implemented and tested an effective compliance program.”
In short, the policy states that U.S. Attorneys’ Offices throughout the country will consider voluntary self-disclosures “favorably” and clarifies the standards applicable to those self-disclosures. McGuireWoods lawyers have extensive experience navigating voluntary self-disclosures on behalf of clients in various industries and contexts. If you have questions about the impact of the policy, or the breadth and capabilities of our practice, please reach out to your McGuireWoods contact or the firm’s Government Investigations and White Collar Litigation and Antitrust and Commercial Litigation lawyers.