On February 22, 2023, United States Attorneys for the Southern and Eastern District of New York announced a new, nationwide United States Attorneys’ Offices Voluntary Self-Disclosure (“VSD”) Policy. The policy applies to all United States Attorney’s Offices and is effective immediately. The implementation of the policy follows Deputy Attorney General Monaco’s September 15, 2022 memorandum instructing each component of the Department of Justice that prosecutes corporate crime to review, or draft and publicly share its policies on corporate voluntary self-disclosure and Assistant Attorney General Kenneth A. Polite, Jr’s remarks on revisions to the Criminal Division’s Corporate Enforcement Policy. The VSD policy incentivizes companies to voluntarily disclose misconduct and offers significant benefits for timely disclosure.
Voluntary Self-Disclosure Standards
In order to receive any benefits under the VSD policy, a company must (1) voluntarily self-disclose the misconduct; (2) fully cooperate with the government’s investigation; and (3) timely remediate the criminal conduct (e.g., pay all disgorgement, forfeiture, and restitution).
In order for the disclosure to be considered a voluntary self-disclosure under the policy, three factors must be met. First, the disclosure has to be voluntary—the company cannot have a preexisting obligation to disclose the conduct pursuant to law or a prior resolution with DOJ. Second, the disclosure must be timely. The disclosure must be made before the misconduct is public, known by DOJ, or even under “an imminent threat of disclosure.” The company will also be required to demonstrate that the disclosure was made “within a reasonably prompt time” after discovery of the misconduct. Third, the company must disclose all relevant facts concerning the misconduct that are known to the company at the time of disclosure. As part of this requirement, the company will be expected to preserve, collect, and produce relevant documents and information and provide timely updates to the USAO. The decision on whether a disclosure meets the requirements outlined in the VSD policy will be within the sole discretion of the USAO.
Voluntary Self-Disclosure Benefits
The benefits received in return for voluntarily self-disclosing depends on the existence of aggravating factors. The VSD policy includes a non-exhaustive list of aggravating factors that could affect the benefits a company receives. The examples include misconduct that (1) poses a grave threat to national security, public health, or the environment; (2) is deeply pervasive throughout the company; or (3) involves current executive management of the company.
In the absence of any aggravating factors, the policy dictates that the USAO will not seek a guilty plea. Additionally, the USAO will not impose a criminal penalty that is greater than 50% below the low-end of the U.S. Sentencing Guidelines fine range and could choose not to impose a criminal penalty at all.
If the presence of one or more aggravating factors warrants a guilty plea from a company who has otherwise complied with the requirements of the VSD policy, the USAO will recommend a sentence that includes a 50-75% reduction off the low-end of the U.S. Sentencing Guidelines fine range. The policy notes that the presence of an aggravating factor does not necessarily mean that a guilty plea will be required, adding that the USAO will assess the relevant circumstances to determine the appropriate resolution.
Under either scenario, the VSD policy seeks to reward companies with a robust compliance program. The policy notes that if the company demonstrates that it has implemented and tested an effective compliance program, the USAO will not require a compliance monitor.
DOJ has long rewarded companies for implementing robust compliance practices, self-reporting misconduct, and cooperating with the government’s investigation. However, prior to this policy, DOJ did not have uniform voluntary self-disclosure rules for all United States Attorney’s Offices. The VSD policy now provides uniform, transparent metrics tied to specific benefits that address the uncertainty that can accompany cooperating with USAO-led investigations. Companies with robust compliance programs, regardless of their history of misconduct, now understand that they have a real opportunity at a better outcome. Companies should continue to closely examine the systems they have in place for detecting and reporting misconduct to ensure they will be able to comply with the VSD policy should such an incident arise.