The VSD policy entitles a company that makes a VSD to “specific, concrete benefits,” regardless of the U.S. attorney’s office to which it makes the disclosure.
On February 22, 2023, the United States Department of Justice (DOJ) issued a voluntary self-disclosure (VSD) policy for corporate criminal enforcement to be used by all U.S. attorney’s offices nationwide. The VSD policy encourages companies to make such disclosures of misconduct early on to U.S. attorney’s offices by offering certain incentives for doing so. The policy, which went into effect immediately, is the first time that the DOJ has issued such a broad, uniform standard for corporate disclosures applicable to U.S. attorneys; however, it still leaves them with broad discretion in applying the policy. The VSD policy highlights the importance of effective corporate compliance programs.
Background
The VSD policy is the latest development in the DOJ’s concerted effort to encourage and facilitate voluntary corporate disclosures. On September 15, 2022, Deputy Attorney General Lisa Monaco issued a memo directing all DOJ components to review their policies on corporate VSD and to “clarify the benefits of promptly coming forward to self-report, so that the chief compliance officers, general counsels, and others can make the case in the boardroom that voluntary self-disclosure is a good business decision.” Subsequently, on January 17, 2023, Assistant Attorney General Kenneth A. Polite Jr. announced significant changes to the DOJ Criminal Division’s Corporate Enforcement Policy. Similar to the VSD policy, the Criminal Division’s changes included additional incentives for prompt self-disclosure such as reduced monetary penalties and expanded eligibility for declination from prosecution.
What Are the Benefits?
The VSD policy entitles a company that makes a VSD to “specific, concrete benefits,” regardless of the U.S. attorney’s office to which it makes the disclosure. The first benefit of a VSD is that if the company fully cooperates and timely and appropriately remediates the criminal conduct in addition to the VSD, the U.S. attorney will not seek a guilty plea absent aggravating factors (discussed below). The U.S. attorney’s office may instead seek declinations, deferred prosecution agreements or nonprosecution agreements. The second benefit of a VSD is that for a company that meets these requirements, the U.S. attorney will not impose a penalty greater than 50 percent below the low end of the sentencing guidelines fine range. This benefit will be available to disclosing companies even where the U.S. attorney’s office determines that a guilty plea is required. In those cases, the disclosing company may be entitled to as much as a 75 percent reduction off the low end of the guidelines range.
What Constitutes a VSD?
The VSD policy aims to provide companies with “uniform, transparent criteria” for what constitutes a VSD, but still leaves U.S. attorneys with significant discretion. Under the policy, the disclosure must be voluntary, timely and fully transparent―i.e., it “must include all relevant facts concerning the misconduct that are known to the company at the time of disclosure.”
To be considered voluntary, the disclosure must not be made pursuant to another reporting obligation of the company, e.g., as part of another regulatory requirement. To be timely, the disclosure must be made prior to (i) an imminent threat of the misconduct being revealed; (ii) the commencement of a government investigation; or (iii) the government learning of the misconduct or the misconduct being publicly known. In addition to being fully transparent, the disclosing company must also “move in a timely fashion to preserve, collect, and produce relevant documents and/or information, and provide timely factual updates” to the U.S. attorney’s office.
What Are Aggravating Factors?
Even if a company meets the criteria of the VSD policy, it could still face a guilty plea requirement if certain aggravating factors are present. The policy identifies the following as aggravating factors: (i) misconduct that “poses a grave threat to national security, public health, or the environment”; (ii) misconduct that is “deeply pervasive throughout the company”; or (iii) misconduct that “involved current executive management of the company.”
Conclusion
The new VSD policy is designed to provide companies with predictability, consistency and transparency, regardless of which U.S. attorney’s office is conducting the investigation. Nonetheless, the policy affords U.S. attorneys broad discretion in their assessment of any corporate self-disclosure. Businesses should invest in robust and effective compliance programs because such programs will help companies take advantage of the benefits of the VSD policy. Effective compliance programs can detect potential misconduct early, which can allow companies to avoid the aggravating factors described in the VSD policy and to assess the situation early in determining whether to voluntarily self-disclose potential misconduct. Companies should consult with experienced counsel to help them navigate this rapidly changing landscape.
For More Information
If you have any questions about this Alert, please contact Christopher H. Casey, Sean P. McConnell, Daniel G. Selznick, any of the attorneys in our White-Collar Criminal Defense, Corporate Investigations and Regulatory Compliance Group or the attorney in the firm with whom you are regularly in contact.
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