On February 22, 2023, the United States Department of Justice (DOJ) continued to revise its policies on corporate criminal enforcement. This newest revision encourages companies to self-report criminal conduct in exchange for a promise of leniency. The revised policy, known as the United States Attorneys' Offices’ Voluntary Self-Disclosure Policy (VSD Policy), is effective immediately.
In January of 2023, the DOJ’s Criminal Division implemented its Corporate Enforcement Policy (CEP) to guide federal prosecutors in charging and resolving violations of federal criminal law. The VSD Policy, likewise, provides guidance to federal prosecutors in each of the 93 United States Attorneys' Offices (USAO) throughout the country. In particular, the VSD Policy sets a national standard for identifying when a company will be considered to have made a voluntary self-disclosure of misconduct to an individual USAO.
The VSD Policy is intended to provide transparency and predictability to companies and defense counsel engaged with a USAO—regardless of the district—about the benefits and outcomes in cases where companies (1) voluntarily self-disclose corporate criminal misconduct, (2) fully cooperate with the government, and (3) timely and appropriately remediate. By standardizing how voluntary self-disclosures are defined and credited by USAOs nationwide, the VSD Policy is designed to incentivize companies to maintain effective compliance programs and self-report illegal conduct.
Background of DOJ Corporate Criminal Enforcement Overhaul
In September of 2022, Deputy Attorney General Lisa Monaco issued a memorandum directing the DOJ to take a tougher stance in enforcing corporate crime and bolster the DOJ’s voluntary self-disclosure policies (Monaco Memo). The memorandum also directed DOJ components to draft and publish written, formal policies incentivizing self-disclosure.
In January 2023, the Criminal Division revamped its CEP in response to the Monaco Memo. The revised CEP provides greater incentives for companies to report their own misconduct to federal prosecutors and cooperate in DOJ investigations in exchange for possible declination and large reductions in the amount of potential fines. Many of the CEP’s principles also appear in the VSD Policy. Companies should be aware of the details of both the CEP and the VSD Policy.
VSD Policy and Benefits
Under the VSD Policy, a USAO will not seek a guilty plea, absent aggravating factor(s), where a company has (1) voluntarily self-disclosed; (2) fully cooperated; and (3) timely and appropriately remediated the criminal conduct. Potential resolutions for companies include declination, a non-prosecution agreement, or a deferred prosecution agreement.
The VSD Policy identifies three (3) aggravating factors that may warrant a USAO seeking a guilty plea, including misconduct that:
- Poses a grave threat to national security, public health, or the environment.
- Is deeply pervasive throughout the company.
- Involves current executive management of the company.
The presence of aggravating factors does not necessarily mean that a guilty plea will be required; rather, the USAO will assess the relevant facts and circumstances to determine the appropriate resolution.
A USAO may choose not to impose a criminal penalty even in the presence of aggravating factors, but if a penalty is imposed that penalty will not be greater than 50% below the low end of the U.S. Sentencing Guidelines fine range. Nor will the USAO seek imposition of an independent compliance monitor if a company voluntarily discloses the conduct and timely remediates, if the company also demonstrates it has implemented and tested an effective compliance program.
In cases where a company is being jointly prosecuted by a USAO and another DOJ component (e.g., Criminal Division, National Security Division, Consumer Protection Branch), or where the misconduct falls within the scope of conduct covered by voluntary self-disclosure policies administered by another DOJ component (e.g., CEP), the USAO will coordinate with the other DOJ component and may choose to apply the alternate voluntary self-disclosure policy’s provisions.
Comparison with Criminal Division’s Corporate Enforcement Policy
While each of the Criminal Division’s CEP and the VSD Policy applicable to USAOs seeks to encourage voluntary self-disclosure and remediation in return for leniency, there are differences in nuance and emphasis that companies and their counsel should keep in mind.
The CEP sets forth that there is a presumption that a company will receive a declination if aggravating factors are not present and the company voluntarily self-discloses, cooperates, and timely remediates. The VSD Policy makes no such promise. Rather the USAO under these circumstances will not seek a guilty plea and will instead consider resolutions that could include a declination as well as a non-prosecution agreement or a deferred prosecution agreement.
The CEP and the VSD Policy also address how the presence of aggravating factors will affect a resolution. However, the CEP and the VSD Policy cite different aggravating factors. Both policies identify pervasiveness of the conduct throughout the company and involvement of executive management. The CEP additionally cites the realization of significant profit as a result of the misconduct and criminal recidivism, while the VSD Policy cites conduct that poses a grave threat to national security, public health, or the environment. Importantly, the CEP notes that the presence of these aggravating factors undercuts the presumption of a declination. The VSD Policy, on the other hand, states that the presence of such factors may warrant the USAO seeking a guilty plea. The variations in phrasing of these two provisions may ultimately prove to be a distinction without a difference.
The policies also differ with respect to whether leniency is accorded to companies that do not self-disclose misconduct, but nonetheless fully cooperate with the government and remediate any criminal conduct. The CEP explicitly states that under such circumstances the Criminal Division will recommend a reduction of up to 50% off the low end of the Sentencing Guidelines fine range for a non-recidivist. For a recidivist, the Criminal Division would recommend a similar 50% reduction, but the reduction would not be off the low end of the fine range. The New VSD Policy applicable to the USAOs, however, is completely silent on this point, and does not address how—or if—the policy provides leniency to companies that cooperate and remediate but did not voluntarily disclose.
Finally, the VSD Policy does not explicitly accord recidivists the benefits of self-disclosure and cooperation. The CEP states that where a company voluntarily self-discloses, fully cooperates, and remediates, the Criminal Division will generally not require a guilty plea—including for recidivists—absent multiple or egregious aggravating circumstances. And, as noted above, a recidivist is eligible for a 50% fine reduction even in the absence of self-disclosure, as long as other cooperation and remediation requirements are met. While it is possible that individual USAOs may accord recidivists similar leniency, nothing in the VSD Policy addresses this issue.
While these differences are, in some cases, minor, they demonstrate how the points or emphasis in the two policies differ.
The VSD Policy is the latest example of the DOJ’s ongoing effort to incentivize companies to self-disclose their criminal misconduct by promising more predictable outcomes. And, in instituting a policy that applies equally to USAOs, the DOJ seeks to achieve consistent treatment of companies no matter where that company operates in the country.
Companies should consult with outside counsel to develop and maintain effective compliance programs that are capable of identifying misconduct. If and when companies become aware of criminal conduct, they should work with counsel to ensure such conduct is timely remediated and should strongly consider whether voluntary disclosure is an appropriate course of action. Notably, a company’s decision to not disclose may be viewed quite differently by the DOJ in the aftermath of the CEP and VSD Policy.
Companies considering voluntary self-disclosure to the government should also closely examine the CEP and the VSD Policy to determine whether the application of one over the other is likely to lead to a more favorable outcome. As the VSD Policy states, the government has a certain amount of discretion to apply other leniency policies in addition to or in place of the VSD Policy.
While both the VSD Policy and the CEP offer guidance to companies that uncover criminal conduct, it is not clear the extent to which the principles set forth in the policies would apply to civil investigations, such as civil enforcement of the False Claims Act (FCA). Each USAO is subject to the VSD Policy, but while these offices frequently investigate FCA violations, the VSD Policy on its face applies to “criminal” conduct. As enforcement actions subject to the policy begin and the DOJ continues to incentivize self-disclosure and cooperation, the DOJ may provide clarity about whether, and to what extent, these principles apply in the context of a civil investigation.