In late February, the United States Attorneys for the Southern and Eastern Districts of New York announced a new “Voluntary Self-Disclosure Policy” (VSD Policy), effective immediately, that applies to all United States Attorney’s Offices (USAOs). A result of the “Monaco Memo” – a September 15, 2022 memorandum titled “Further Revisions to Corporate Criminal Enforcement Policies Following Discussions with Corporate Crime Advisory Group” – the VSD Policy was ultimately drafted by a Corporate Criminal Enforcement Policy Working Group made up of U.S. Attorneys from around the country, including U.S. Attorney for the Eastern District of North Carolina, Michael F. Easley, Jr.
The VSD Policy is intended to make the self-disclosure process more transparent, which DOJ hopes will encourage corporate accountability, reduce the number of years-long government investigations, and incentivize voluntary self-disclosures. Under the VSD Policy, the government learns of corporate misconduct through preemptive self-disclosure and can swiftly investigate and prosecute the disclosing corporation on a fast track. Per DOJ, the VSD Policy incentivizes self-disclosure by providing a corporation with increased predictability as to the potential resolutions resulting from disclosed misconduct, regardless of which jurisdiction and which USAO handles the prosecution.
How to Comply with the VSD Policy:
In order to receive the benefits of voluntarily self-disclosing misconduct under the terms of the VSD Policy, a corporation must:
- Be aware of misconduct by its employees or agents;
- Possess such knowledge before it is publicly reported or available to the DOJ;
- Voluntarily disclose “all relevant facts” known to the corporation about the misconduct to the relevant USAO in a “reasonably prompt time” after becoming aware of the misconduct; and
- Make such voluntary disclosure before there is an imminent threat of disclosure or government investigation.
The prosecuting USAO will determine on a case-by-case basis whether the disclosing corporation complied with these requirements and should receive the benefits of the VSD Policy. The USAO will consider the corporation’s conduct during the investigation and pre-indictment period when making this determination. As a result, a corporation may not receive the benefits of the VSD Policy unless it fully cooperates with the USAO and timely and appropriately remediates any misconduct (which may include paying restitution, forfeiting assets, and/or paying all disgorgement).
While a corporation does not receive the benefits of the VSD Policy if it delays disclosure until after a government investigation is underway, it is often in the corporation’s interest to voluntarily self-disclose misconduct even if the corporation suspects that the government may already be aware of it. The VSD Policy permits USAOs to consider such untimely self-disclosures “favorably,” even if the corporation does not satisfy all requirements of the VSD Policy. Likewise, if a corporation voluntarily self-discloses prior to obtaining all relevant information, the corporation is still encouraged to disclose the misconduct and may inform the government that the information disclosed is based on a preliminary investigation. If the corporation continues to investigate following self-disclosure, it should provide ongoing updates to the government.
Benefits of Complying with the VSD Policy:
If the prosecuting USAO determines that a corporation fully complied with the VSD Policy, the corporation is eligible to receive the following benefits:
- Assurance that the USAO will not seek a guilty plea against the corporation (assuming certain aggravating factors do not apply);
- The USAO has authority to waive seeking any criminal penalty against the corporation; however, if the USAO opts to seek a criminal penalty, it will not impose a criminal penalty that is greater than 50% below the low end of the United States Sentencing Guidelines (USSG) fine range; and
- The USAO will not impose an independent compliance monitor if the corporation has sufficiently demonstrated that it has implemented and tested its own effective compliance program.
Effect of Aggravating Factors on Final Resolution:
Notwithstanding the above, the prosecuting USAO has the discretion to seek a guilty plea if any of the three aggravating factors apply:
- The misconduct poses a grave threat to national security, public health, or the environment;
- The misconduct is so prolific that it is considered to be deeply pervasive throughout the corporation; or
- The misconduct involves the corporation’s current executive management.
Even if one or more aggravating factor applies, the USAO is not required to seek a guilty plea under the VSD Policy. If the prosecuting USAO decides to pursue a guilty plea due to an aggravating factor(s), the corporation is not barred from receiving the other benefits available under the VSD Policy.
Corporations stand to benefit under the VSD Policy, which standardizes the self-disclosure process and should result in more uniform exposure for corporate misconduct across all 94 federal districts.
However, corporations will have to determine whether to voluntarily self-disclose misconduct without the benefit of knowing what information the government already possesses or if there is an ongoing government investigation. As a result, the VSD Policy encourages voluntary self-disclosure as soon as the corporation learns of misconduct, which may not be practical or advisable in all circumstances.
The provisions regarding limiting a corporation’s potential criminal penalty to no more than 50% of the low-end range of fines set by the USSG are significant. If a corporation proactively self-discloses and complies fully with the VSD Policy, the prosecuting USAO has the authority to decline to impose any criminal penalty. However, if a corporation complies fully with the VSD Policy but the USAO opts to pursue a criminal penalty under the VSD Policy, the corporation stands to receive substantial benefit under the VSD Policy by avoiding 50% or more of the fines provided under the USSG, which may amount to a savings of hundreds of millions of dollars.
While the VSD Policy does offer increased transparency for corporations voluntarily self-disclosing misconduct, corporations need to understand and consider the risks and benefits of making such disclosures and the timing thereof before contacting the government.