The U.S. Department of Justice (DOJ) recently released its first-ever DOJ-wide Corporate Enforcement and Voluntary Self-Disclosure Policy (CEP) for criminal cases, designed to incentivize companies to come forward when misconduct occurs, cooperate with DOJ’s investigation and remediate the conduct. The CEP seeks to provide predictability to companies and their attorneys, as it applies to all corporate criminal cases across DOJ (aside from those relating to antitrust) and supersedes all component-specific and U.S. Attorney’s Office-specific corporate enforcement policies that are currently in place.
According to a DOJ press release issued with the new CEP, “[i]incentivizing corporate self-disclosures — while still permitting prosecutions in appropriate circumstances — allows [DOJ] to quickly pursue culpable individuals, secure justice for victims, and deter white-collar crime, all while not unduly burdening American businesses.”
The CEP is broken down into three parts:
Part I: Declination Under the CEP
Under the CEP, DOJ will decline to prosecute a company for criminal conduct when all of the following factors are met:
- The company voluntarily self-discloses the misconduct to the appropriate DOJ criminal component,
- The company fully cooperates with DOJ’s investigation,
- The company timely and appropriately remediates the misconduct, and
- There are no “aggravating circumstances related to the nature and seriousness of the offense, egregiousness or pervasiveness of the misconduct within the company, severity of harm caused by the misconduct, or corporate recidivism, specifically, a criminal adjudication or resolution either within the last five years or otherwise based on similar misconduct by the entity engaged in the current misconduct.”
If aggravating circumstances exist, prosecutors still have discretion to decline to prosecute after weighing the severity of the circumstances, the voluntary self-disclosure, cooperation and remediation. Under the CEP, all declinations to prosecute will require the company to pay all disgorgement/forfeiture as well as restitution/victim compensation resulting from the misconduct.
Part II: “Near Miss” Voluntary Self-Disclosures or Aggravating Factors Warranting Resolutions
If a company fully cooperates and timely and appropriately remediates the conduct, but does not meet the requirements for a declination under Part I of the CEP solely because it did not qualify as a voluntary self-disclosure (despite the company’s good faith self-reporting) and/or because it had aggravating factors warranting a criminal resolution, DOJ will:
- Provide a Non-Prosecution Agreement, absent particularly egregious or multiple aggravating circumstances,
- Allow a term length of fewer than three years,
- Not require an independent compliance monitor, and
- Provide a reduction of at least 50% but not more than 75% off of the low end of the U.S. Sentencing Guidelines (U.S.S.G.) fine range.
Part III: Resolutions in Other Cases
If a company is not eligible under either Part I or Part II of the CEP, prosecutors still maintain discretion to determine an appropriate resolution, including, for example, as to term length, monetary penalties and compliance-based obligations. Monetary penalties under CEP Part III resolutions, however, are limited to no more than 50% off of the fine determined under the U.S.S.G. While the specific percentage will be determined at the discretion of the prosecutor, the CEP provides a presumption that the low end of the U.S.S.G range will be used for companies that fully cooperate and timely and appropriately remediate (otherwise, the starting point in the range will be based on the particular facts and circumstances of the case).
The CEP also contains a helpful flow chart, illustrating the circumstances in which each Part of the CEP will apply. It also contains valuable definitions, notes and comments that add insight and guidance as to how DOJ defines what constitutes a “voluntary self-disclosure,” “full cooperation,” and “timely and appropriate remediation.”
What this Means for Businesses
The new DOJ-wide CEP provides a blueprint for businesses to consider when faced with investigating and reporting suspected criminal wrongdoing. The CEP also emphasizes the importance of a company acting as a good corporate citizen, investing in an effective compliance program, making early self-disclosure of criminal misconduct, meaningfully cooperating with law enforcement, and working in good faith to correct wrongdoing.
Companies should be alert to the CEP when faced with allegations of potential corporate criminal conduct. Still, whether, when and how to utilize the CEP is a decision that should be made in cooperation with experienced counsel.
If you need assistance with self-disclosure, or have related questions, Harris Beach Murtha’s Government Compliance and Investigations Practice Group can help. Please reach out to Terrance P. Flynn at (716) 200-5120 and tflynn@harrisbeachmurtha.com; attorney Peter M. Hoffman at (516) 880-8112 and phoffman@harrisbeachmurtha.com; attorney Roy W. Breitenbach at (516) 880-8378 and rbreitenbach@harrisbeachmurtha.com; or the Harris Beach Murtha attorney with whom you most frequently work.
This alert is not a substitute for advice of counsel on specific legal issues.
Harris Beach Murtha’s lawyers and consultants practice from offices throughout Connecticut in Bantam, Hartford, New Haven and Stamford; New York State in Albany, Binghamton, Buffalo, Ithaca, New York City, Niagara Falls, Rochester, Saratoga Springs, Syracuse, Long Island and White Plains; as well as in Boston, Massachusetts, and Newark, New Jersey.