U.S. attorney offices across the country have published a new, uniform policy for voluntary self-disclosure for corporate misconduct. The policy is largely in line with what the brass at the Justice Department have been talking about for months, although compliance officers should give the new policy a read anyway to avoid any surprises.
The policy was announced Wednesday by Damian Williams and Breon Peace, U.S. attorneys for the Southern and the Eastern districts of New York, respectively. Those two play important roles on the Attorney General’s Advisory Committee, which acts as a conduit between the Justice Department and the 93 U.S. attorneys; and they played key roles in developing the Voluntary Self-Disclosure Policy — which apparently will now be known as the VSD Policy, because we can never have enough acronyms in this line of work.
The new policy “sets a nationwide standard for how U.S. attorneys’ offices will determine whether a company has made a voluntary self-disclosure; and makes transparent the specific, tangible benefits to a company for making a voluntary self-disclosure, fully cooperating, and remediating the criminal conduct,” Peace said in a prepared statement. “As a result, no matter where in the country a company operates, it can rely on receiving the same treatment and benefits for voluntarily self-disclosing criminal conduct to a U.S. attorney’s office.”
The broader picture here is that when a company makes a voluntary self-disclosure of misconduct, the path to a more favorable resolution of the case — smaller monetary penalties, no compliance monitor, avoiding a guilty plea — gets much easier. All of it, however, starts with the voluntary self-disclosure.
To that end, the new VSD policy spelled out three criteria it expects companies to meet.
First, the disclosure must actually be voluntary. A disclosure will not be considered voluntary when the company has a preexisting obligation to disclose, such as pursuant to regulation or a prior Justice Department resolution.
Second, The disclosure must be timely. That is, the company must come clean about its misconduct prior to some other imminent threat of disclosure or government investigation, such as someone tipping off Radical Compliance and us publishing the allegation first. The new policy only defines timely as “within a reasonably prompt time after the company becoming aware of the misconduct,” and the burden is on the company to demonstrate timeliness.
Third, the disclosure must be as complete as possible within that “timely” expectation. Specifically, the policy says the company’s disclosure “must include all relevant facts concerning the misconduct that are known to the company at the time of the disclosure.” The government does understand that a company might not know all relevant facts when it reports the misconduct. In that case, the policy says, a company should make clear that its disclosure “is based upon a preliminary investigation or assessment of information, but it should nonetheless provide a fulsome disclosure of the relevant facts known to it at the time.”
One bonus detail: “Should the company conduct an internal investigation, the [U.S. attorney’s office] expects appropriate factual updates as that investigation progresses.” That’s notable, since critics increasingly say the Justice Department is trying to strong-arm corporate legal teams into doing its investigations for the department as an end-run around individual defendants’ constitutional protections.
The Benefits of Voluntary Self-Disclosure
As we’ve noted in previous posts, the Justice Department is mounting a charm offensive to encourage voluntary self-disclosure, offering numerous breaks for companies that confess, cooperate, and remediate. The breaks included in the U.S. attorneys’ VSD policy are essentially the same as those outlined by the Criminal Division and by deputy attorney general Lisa Monaco last year.
For a company that voluntarily self-discloses, cooperates in the ensuing investigation, and remediates the internal control failures that allowed the misconduct; and there are no aggravating factors involved in the misconduct — U.S. attorneys will not seek a guilty plea as part of the resolution.
Even for companies whose cases do include aggravating factors, they too might be able to secure a declination to prosecute, if they meet the criteria of the VSD and follow up with cooperation and remediation. No promises, the policy states, but “The [U.S. attorney] will assess the relevant facts and circumstances to determine the appropriate resolution.”
Companies that meet the standards of the VSD program can also avoid the imposition of a compliance monitor if the company demonstrates at the time of resolution that it has implemented and tested an effective compliance program. Again, however, “Decisions about the need for a monitor will be made on a case-by-case basis and at the sole discretion of the [U.S. attorney].”
All in all, nothing in this new policy from the U.S. attorneys should surprise compliance officers. We should also remember that for most of you, your biggest nightmare is a Foreign Corrupt Practices Act violation; and prosecution of those cases still resides with the Criminal Division in Washington, D.C. rather than local U.S. attorneys.
The most practical upshot of today’s news is that it brings more uniformity to prosecution of other corporate misconduct offenses: procurement fraud, environmental violations, and so forth. Will companies still try to do forum-shopping based on which partners at your outside counsel firms went to law school with what federal prosecutors in various jurisdictions? Of course.
But the standards for how a company should respond to allegations of wrongdoing, and how it interacts with prosecutors who investigate such allegations — that’s going to be more uniform no matter which U.S. attorney you call, and the compliance function is going to play an important role before, during, and after your company picks up the phone.