Earlier this month, the Department of Justice (DOJ) announced revisions to the Corporate Enforcement and Self Disclosure Policy (CEP). Under the new policy, announced by DOJ Criminal Division Head Matthew Galeotti, companies now have increased incentives to self-disclose illegal or fraudulent behavior in exchange for a reduction or elimination of prosecution for those activities. Under the new policy, companies that choose to take advantage of this program will not be required to enter into criminal resolutions when they:
- Voluntarily self-disclose misconduct,
- Fully cooperate with the government,
- Take timely steps to remediate the issue, and
- Have no aggravating circumstances.
Even with aggravating circumstances, a company may still qualify for declination of prosecution under the policy based on its cooperation and remediation. Additionally, when a company chooses to delay disclosure or discloses when the government is already aware of misconduct (where such disclosure is made in good faith), non-prosecution agreements are still available with up to a 75% reduction in criminal fines.
The government will also reduce its use of compliance monitoring programs to ensure that companies are only placed in such programs when the value of the monitoring (considering the seriousness of the conduct, risk of recurrence, and other factors) outweighs the burden on the company to complete such monitoring. These changes to the CEP take into account that most investigations lead to a resolution. The hope is that by incentivizing companies to disclose early and cooperate fully, the government and companies will save resources that would otherwise be expended on costly investigations.
Clients considering self-disclosure should still be cautious that they are not reporting individuals or activities that have not been properly investigated internally first. False or misleading information shared with the government, even if believed to be true at the time it is reported, may lead to additional liability to the company based on damages to the individual(s) reported. Companies should ensure that legal counsel has reviewed any potential disclosure and the underlying evidence prior to sharing it with the government and should guard against being overzealous in reporting activities that are unlikely to lead to a criminal or civil investigation, even if discovered by the government.
The DOJ’s changes to the CEP appear to be a positive step toward enhancing efficiency in investigations and have the potential to provide companies with greater certainty that self-disclosure will be in their best interest; however, companies should still proceed cautiously.
