United States Attorney’s Offices Announce Voluntary Self-Disclosure Policy for Corporate Prosecutions

On February 22, 2023, the United States Department of Justice (“DOJ”) published a new Voluntary Self-Disclosure Policy applicable in all corporate prosecutions undertaken by United States Attorney’s Offices (“USAOs”).[1] The Policy stems from a memorandum issued by Deputy AG Lisa Monaco on September 15, 2022 summarizing revisions to certain DOJ corporate criminal enforcement policies.[2] In this memorandum, Deputy AG Monaco directed each DOJ component that prosecutes corporate crime to review its policies on corporate voluntary self-disclosure and draft a “formal, written Policy to incentivize such self-disclosure” if one does not already exist.[3] The Policy is effective immediately and applies to all 94 USAOs across the country.  The policy was announced by Damian Williams and Breon Peace, the United States Attorneys for the Southern and Eastern District of New York, respectively, who spearheaded the Policy’s development in their respective roles as Chair of the Attorney General’s Advisory Committee and Chair of the Attorney General’s Advisory Committee’s White Collar Fraud Subcommittee.[4]

The Policy sets forth the circumstances in which a company’s voluntary disclosure to a USAO about potential misconduct by its employees or agents qualifies as a formal voluntary self-disclosure (“VSD”), and announces the benefits that may flow to companies from making VSDs. To qualify as a VSD, the disclosure must be made prior to the alleged misconduct’s “being publicly disclosed or otherwise known to the government” or any “imminent threat of disclosure or government investigation.” Additionally, the company must make the disclosure “within a reasonably prompt time” after becoming aware of the misconduct. The VSD must also contain “all relevant facts concerning the misconduct that are known to the company at the time of the disclosure.” To receive credit, the company must have also “fully cooperated with the USAO” and “timely remediated the criminal conduct” by, at a minimum, agreeing to “pay all disgorgement, forfeiture, and restitution resulting from the misconduct.” In other words, a qualifying VSD, complete cooperation, and remediation are all required for a company to fully satisfy the requirements of the Policy and become eligible for its benefits.

The Policy suggests multiple benefits for companies that fully comply with its terms. First, a prosecuting USAO will not seek a guilty plea from a fully compliant company in the absence of an “aggravating factor.” Second, although a prosecuting USAO may impose criminal penalties on fully compliant companies even in the absence of aggravating factors, any such penalties may not exceed 50% of the low end of the applicable U.S. Sentencing Guidelines fine range. Third, if the prosecuting USAO finds that an aggravating factor exists, it may require a guilty plea notwithstanding the company’s compliance with the Policy, but it will still recommend a reduction of between 50% and 75% from the low end of the applicable Sentencing Guidelines fine range. Fourth, where a company fully complies with the Policy and demonstrates that it has “implemented and tested an effective compliance program,” the USAO will not impose an independent compliance monitor requirement.

The Policy is designed to address longstanding complaints about perceived inconsistency and opacity in the DOJ’s approach to corporate prosecutions, and, presumably, to discourage “forum shopping” by companies seeking to choose an Office to which to disclose misconduct.  But the extent to which the Policy affords clarity and predictability to corporate entities in practice, however, remains to be seen.  As an initial matter, a single USAO may approach the Policy’s enumerated requirements and factors differently in different contexts and at different points in time.  Certainly across 94 different USAOs, there will be differences of opinion and approach even to analogous situations.  A similar coordination issue will also be present each time a USAO conducts a joint corporate prosecution with another component of DOJ with independent prosecuting power (including certain Divisions at DOJ and the various sections within Main Justice’s Criminal Division), since each such component is also now revising or creating its own voluntary self-disclosure policies in accordance with Deputy Attorney General Monaco’s directive.  In these circumstances, the Policy permits USAOs to “apply any provision of an alternate VSD Policy in addition to, or in place of, any provision of this policy.”[5]

Several other key considerations in the Policy—many of which are inherently difficult to define with precision—are left to the prosecuting USAO’s discretion. These include:

• Whether a disclosure was timely. What constitutes a “reasonably prompt time” is to be determined at the sole discretion of the prosecuting USAO, with the burden of demonstrating timeliness on the company.
• The presence of an “aggravating factor” such that a USAO may still pursue a guilty plea despite a company’s VSDs. The list of aggravating factors spelled out in the Policy is, by its terms, nonexclusive, meaning that USAOs have the discretion to determine whether any other aggravating factors—as they define them—are present. Further, the examples provided include such amorphous considerations as whether the misconduct poses a “grave threat to national security, public health, or the environment,” is “deeply pervasive” at the company, or “involved” current executive management.[6]
• Criminal penalties and sentencing recommendations. The Policy leaves it to a USAO’s sole discretion whether to impose criminal penalties at all, and, if so, how significant a reduction from the low end of the Sentencing Guidelines fine range may apply.  As importantly, the Sentencing Guidelines themselves are ambiguous in many areas and endow USAOs with significant latitude in the range of penalties they can recommend to sentencing courts.  The Policy does not, in other words, address the lack of transparency that often accompanies the guideline calculations that are intended to serve as the starting point for determination of the applicable fine, much less the manner in which offices will determine variations from that starting point.
• Whether the company has “implemented and tested an effective compliance program”[7] such that the USAO will not impose a monitorship requirement on the company.

Given the broad prosecutorial discretion vested in various components of the DOJ, and the continued latitude allowed by the policy, it is difficult to anticipate the effects this Policy—and other corporate prosecution-related policies—will have in practice.  Any measure of the Policy’s actual effect on corporate resolutions, in other words, will be measured more by how the Policy is applied than how it is written.

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[1]        Press Release, Damian Williams and Breon Peace Announce New Voluntary Self-Disclosure Policy for United States Attorney’s Offices, DOJ (Feb. 22, 2023), https://www.justice.gov/usao-sdny/pr/damian-williams-and-breon-peace-announce-new-voluntary-self-disclosure-policy-united.

[2]        Memorandum from Deputy AG Lisa Monaco, DOJ (Sept. 15, 2022), https://www.justice.gov/opa/speech/file/1535301/download.

[3]        Id.

[4]        The Policy was prepared by a Corporate Criminal Enforcement Policy Working Group, which included the U.S. Attorneys from the Northern District of California, the District of Connecticut, the District of Hawaii, the District of New Jersey, the Eastern District of North Carolina, the Eastern District of Virginia, and the Western District of Virginia.  See Press Release, supra note 1.

[5]        United States Attorneys’ Offices’ Voluntary Self-Disclosure Policy at 2, DOJ, https://www.justice.gov/usao-sdny/press-release/file/1569411/download (last visited Feb. 24, 2023).

[6]        Id. at 4.

[7]        Id. at 5.