For the first time, there is a nationwide Voluntary Self-Disclosure Program applicable to any corporate misconduct prosecutable by a US Attorney. As detailed below, companies that make a qualifying Voluntary Self-Disclosure (VSD) are eligible for “resolutions under more favorable terms than if the government had learned of the misconduct through other means” – in other words, a criminal guilty plea could be avoided in exchange for a VSD.
To qualify as a VSD, the disclosure must be:
Voluntary. There must not be a pre-existing obligation to disclose pursuant to regulation, contract or prior DOJ resolution (e.g., a non-prosecution agreement).
Prompt. The disclosure must be prior to an “imminent threat” of disclosure or investigation; prior to the misconduct being public or otherwise known to the government; within a “reasonably prompt time” after the company becomes aware of the misconduct.
Substantive. The disclosure must include “all relevant facts” known to the company at the time of the disclosure, even if the internal investigation is in a preliminary stage. As new facts become known, they should be reported as the investigation unfolds.
In exchange for a VSD, the Department will not seek a guilty plea so long as:
The company “fully cooperated” with the DOJ. The terms of cooperation, including how long and to what degree cooperation is required, are not specified.
The company “timely and appropriately remediated” the conduct. Remediation includes the payment of “all restitution” to victims.
There are no aggravating factors, i.e., the conduct did not present a grave threat to national health or safety; the conduct was not “deeply pervasive” throughout the company and did not involve “current executive management.” Whether the knowledge of a corporate executive constitutes their “involvement” is not specified.
In the event of an aggravating factor, a guilty plea is not required automatically, but the DOJ will “assess the relevant facts” to determine an “appropriate resolution” on a case-by-case basis.
In the end, where the VSD is deemed satisfactory, the criminal resolution “could include a declination, non-prosecution agreement, or deferred prosecution” in lieu of a guilty plea. In the event the Department does choose to impose a criminal penalty, it “will not impose a criminal penalty that is greater than 50% below the low end of the U.S. Sentencing Guidelines fine range.”
Finally, if, by the time of the resolution, the company has implemented an “effective compliance program,” the Department will not require the imposition of a monitor. These decisions are to be made on a case-by-case basis in the USAO’s sole discretion.
As a concept and seemingly in practice, the Program shares many similarities with the DOJ Antitrust Division Leniency Policy and Procedures, under which antitrust lawyers have been operating for years, perfecting the art of timely self-disclosure and appropriate cooperation with the Department for companies that choose to self-disclose antitrust felonies. As a result, we as antitrust practitioners could bring unique experience to companies weighing the costs and benefits of participating in the new VSD Program for non-antitrust crimes and, if companies do self-disclose, how to participate and advocate within the Program effectively.
As we’ve learned with respect to antitrust leniency, there are many aspects of self-disclosure worthy of close consideration, such as the payment of restitution as a condition to qualifying for the Program and the benefits (verses the costs) of a self-disclosure system where the absence of a guilty plea is not guaranteed. The possibility of follow-on civil actions is another important factor to be considered as a potential consequence of self-reporting that could result in huge exposure from lawsuits brought by individuals and class-action plaintiffs. The financial costs and business burdens of long-term cooperation in a federal investigation should not be ignored either. At bottom, the decision to self-disclose is a complex one that should be made with eyes wide open as to all the possible ramifications both good and bad.