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DOJ Introduces Extensive Policy Revisions

James R. Wyrsch

DOJ Introduces Extensive Policy Revisions
Andrii Lysenko via Getty Images

On September 15, 2022, the U.S. Justice Department issued a memorandum from Deputy Attorney General Lisa Monaco, which involved “Further Revisions to Corporate Enforcement Policies Following Discussions with Corporate Crime Advisory Group.” On the same date, she delivered remarks on corporate criminal enforcement. These revisions are extensive (totaling 15 pages) and need to be reviewed and understood by lawyers advising corporations on criminal matters.

One of the Monaco “Revisions” dealt with voluntary self-disclosure. In the memorandum, Monaco stated: “I am directing each Department of Justice component that prosecutes corporate crime to review its policies on corporate voluntary self-disclosure, and if the component lacks a formal, written policy to incentivize such delf-disclosure, it must draft and publicly share such a policy.” Monaco further directed what the policy should contain.

On February 22, 2023, a group within the Department of Justice issued a “United States Attorney’s Offices Voluntary Self-Disclosure Policy” (VSD). The policy set forth “standards of voluntary disclosure” as follows:

A. Standards of Voluntary Self-Disclosure

Decisions about whether a disclosure constitutes a VSD will be made by the USAO based on a careful assessment of the circumstances of the disclosure on a case-by-case basis and at the sole discretion of the USAO. The USAO will require that a disclosure meet each of the following standards for it to constitute a VSD under this policy:

1. Voluntary: VSDs only occur when the disclosure of misconduct is made voluntarily by the company. A disclosure will not be deemed a VSD under the policy where there is a preexisting obligation to disclose, such as pursuant to regulation, contract or a prior Department resolution (e.g., non-prosecution agreement or deferred prosecution agreement).

2. Timing of the Disclosure: A disclosure will only be deemed a VSD when the disclosure is made to the USAO:

a. “prior to an imminent threat of disclosure of government investigation,” U.S.S.G. §8C2.5(g)(1);
b.  prior to the misconduct being publicly disclosed or otherwise known to the government; and
c. within a reasonably prompt time after the company becoming aware of the misconduct, with the burden being on the company to demonstrate timeliness.

3. Substance of the Disclosure and Accompanying Actions: For a disclosure to be deemed a VSD under this policy, the disclosure must include all relevant facts concerning the misconduct that are known to the company at the time of the disclosure.

The USAO recognizes that a company may not be in a position to know all relevant facts at the time of a VSD because the company disclosed reasonably promptly after becoming aware of the misconduct. Therefore, a company should make clear that its disclosure is based upon a preliminary investigation or assessment of information, but it should nonetheless provide a fulsome disclosure of the relevant facts known to it at the time.

The USAO further expects that the company will move in a timely fashion to preserve, collect, and produce relevant document and/or information, and provide timely factual updates to the USAO. Should the company conduct an internal investigation, the USAO expects appropriate factual updates as that investigation progresses. See JM §9-28.700.

On March 2, 2023, Monaco delivered remarks at the American Bar Association National Institute on White Collar Crime and set forth a pilot program that “involves innovative approaches to compensation and the use of clawbacks.” In her remarks, she stated that the program has “two parts:”

First, every corporate resolution involving the Criminal Division will now include a requirement that the resolving company develop compliance-promoting criteria within its compensation and bonus system. …

Second, under the pilot program, the Criminal Division will provide fine reductions to companies who seek to claw back compensation from corporate wrongdoers.

On March 3, 2023, the Justice Department published “The Criminal Division’s Pilot Program Regarding Compensation Incentives and Clawbacks.”

Attorneys who represent corporations should be fully familiar with the Justice Department’s new policies. These policies might possibly be summarized and inserted into law firms’ websites, as a number of firms have already done so. It is particularly important that white-collar crime attorneys make these guidelines known to corporations who are involved in government contracts. In any event, attorneys may want to advise companies to insert provisions reflecting these new Justice Department policies into their compliance programs.