The US Department of Justice (DOJ) has introduced its first department-wide Corporate Enforcement and Voluntary Self-Disclosure Policy, marking a significant change in how federal prosecutors approach corporate crime.
Announced on March 10, the policy applies to most DOJ criminal divisions and US attorney’s offices, with the exception of antitrust cases. The goal is to create a consistent framework for how prosecutors evaluate corporate misconduct and how companies can receive credit for voluntarily disclosing wrongdoing, cooperating with investigations and fixing the underlying problems.
For corporate boards, general counsel and compliance leaders, the policy reinforces the importance of early reporting and strong compliance systems. It also raises important questions about how companies should respond when potential criminal misconduct is identified.
In the past, companies faced a range of different disclosure policies depending on which DOJ division was involved in a case. The new policy replaces those separate approaches with a single framework. According to the DOJ, the aim is to promote ‘uniformity, predictability and fairness’ in corporate criminal enforcement.
Non-prosecution agreements…
The policy largely follows the structure that has guided DOJ corporate enforcement in recent years. Companies that voluntarily disclose misconduct to the DOJ, fully cooperate with investigators and promptly remediate the issue will generally receive a declination, meaning prosecutors decline to bring charges, if there are no major aggravating factors.
Even when aggravating factors exist, prosecutors may still decide not to bring charges depending on the company’s cooperation and remediation efforts. Companies that do not fully meet the voluntary disclosure standard may still receive a non-prosecution agreement and reduced penalties.
According to Reuters (paywall), the new policy also addresses concerns about inconsistent treatment across DOJ divisions. By applying the same disclosure framework across most of the agency, the DOJ is seeking to give companies clearer expectations about how cooperation will be evaluated.
The policy continues the DOJ’s broader effort to encourage companies to report misconduct before the government discovers it. Companies that proactively disclose previously unknown criminal conduct and cooperate fully may avoid prosecution entirely, although they may still need to pay restitution or return any illicit gains.
…and a reduction in penalties
Where the government already knows about misconduct, companies that cooperate and remediate can still receive significant reductions in penalties. Fine reductions can range between 50 and 75 percent.
The DOJ has presented the policy to encourage responsible corporate behavior while ensuring accountability. As deputy attorney general Todd Blanche stated: ‘Well-intentioned businesses know that, across the department, they will be rewarded when they self-disclose wrongdoing, cooperate with our investigations and remediate the misconduct.’
For corporate leadership, the policy highlights the importance of strong compliance programs and quick internal investigations. Boards and general counsel must be able to assess potential misconduct quickly and determine whether voluntary disclosure to the DOJ may be necessary.
The policy also makes clear that disclosure generally must be made directly to the DOJ to qualify for credit. Reporting misconduct only to civil regulators or other government agencies will usually not meet the voluntary disclosure standard under the policy.
This increases the importance of internal reporting systems. Companies need processes that allow employees to raise concerns early and ensure those issues reach the legal and compliance teams that can evaluate the potential risks.
A focus on board responsibility
For boards, the policy reinforces their responsibility to oversee compliance and risk management. Prosecutors increasingly look at whether companies had effective compliance systems in place to detect and address misconduct. The new policy places even greater emphasis on how companies respond once potential wrongdoing is discovered.
The introduction of a single, department-wide policy may make it easier for companies to evaluate enforcement risk. With clearer rules across most DOJ divisions, companies and their advisers may find it easier to assess the benefits of voluntary disclosure.
At the same time, the policy highlights the importance of speed. Companies must act quickly once potential misconduct is identified. Delays in internal investigations or hesitation about disclosure may reduce the chances of receiving the most favorable outcome.
For general counsel, the key challenge will often be timing. Companies must decide when an internal investigation has uncovered enough information to justify voluntary disclosure while still moving quickly enough to qualify for credit.
As the DOJ continues to emphasize voluntary disclosure and corporate cooperation, boards and legal leaders may increasingly find themselves confronting a familiar but difficult decision: When misconduct surfaces, how quickly should a company bring the government into the room?