Companies that self-report, cooperate on crimes may avoid prosecution

The Justice Department unveiled its first-ever department-wide corporate enforcement policy for criminal matters, creating uniform guidance for how companies are treated when they voluntarily disclose wrongdoing, cooperate with investigators and remediate misconduct.

The Corporate Enforcement and Voluntary Self-Disclosure Policy applies to all corporate criminal cases handled by the department except antitrust matters and replaces existing component-specific and U.S. Attorney’s Office policies that previously governed corporate enforcement decisions, according to the Justice Department.

The policy establishes a tiered framework for resolving corporate criminal cases based on how companies respond after discovering misconduct.

Under the most favorable track, the department will decline to prosecute a company if it voluntarily self-discloses the wrongdoing to the appropriate Justice Department criminal component, fully cooperates with investigators and timely and appropriately remediates the misconduct, provided there are no aggravating circumstances, the policy states.

Even when aggravating circumstances are present, prosecutors may still recommend a declination based on the specific facts of the case.

Aggravating circumstances can include the nature and seriousness of the offense, the egregiousness or pervasiveness of misconduct within the company, the severity of harm caused and the company’s history of criminal or regulatory violations.

Companies that receive a declination must still pay disgorgement, forfeiture and restitution or victim compensation, and the department will publicly disclose the resolutions.

Companies that do not qualify for a declination — either because their disclosure does not meet the definition of voluntary self-disclosure or because aggravating circumstances are present — may still receive substantial benefits under a second tier of the policy.

In those cases, prosecutors generally will offer a non-prosecution agreement lasting fewer than three years, will not require an independent compliance monitor and will recommend a reduction of between 50% and 75% off the low end of the fine range under the federal sentencing guidelines, according to the policy.

Companies that are not eligible for either of the first two tiers face broader prosecutorial discretion. In those cases, any reduction in fines generally will be capped at 50% off the sentencing guidelines range, and prosecutors will determine the appropriate form and length of any resolution.

The policy defines voluntary self-disclosure as reporting misconduct before the department becomes aware of it, when the company has no preexisting obligation to report the conduct, before any imminent threat of government investigation and within a reasonably prompt time after learning of the misconduct.

The policy also includes a whistleblower-related provision allowing companies to remain eligible for declination if they report misconduct within 120 days of receiving an internal whistleblower complaint, even if an employee first alerted the government.