DOJ’s New Department-Wide Corporate Enforcement Policy Creates a Uniform Approach to Voluntary Self-Disclosure

Yesterday, the Department of Justice (DOJ) released department-wide corporate enforcement guidelines that apply to criminal matters across all divisions and U.S. Attorney’s Offices, except in antitrust matters. The new corporate enforcement policy (DOJ CEP) expressly supersedes all other office-specific policies, including notably, the guidelines rolled out by Southern District of New York (SDNY) U.S. Attorney Jay Clayton just weeks ago. Companies should take notice of the new requirements, which now apply whether you are reporting in New York, California, or anywhere in between.

Under the new DOJ CEP, corporate resolutions fall into one of three buckets:

• Declination: Under Part I of the DOJ CEP, a company that (1) voluntarily self-discloses misconduct to the appropriate DOJ component, (2) fully cooperates with DOJ’s investigation, (3) “timely and appropriately” remediates the misconduct, and (4) has no applicable aggravating circumstances is eligible for a declination. Even where there are aggravating circumstances, including corporate recidivism, prosecutors still have discretion to recommend a declination under the CEP. A company receiving a declination is required, though, to pay all restitution, disgorgement, and forfeiture.
• “Near Miss” Resolutions: Under Part II, a company that is ineligible for declination under Part I, may still be entitled to a favorable resolution by Non-Prosecution Agreement. A “near miss” can occur, for example, if a company fully cooperates and timely and appropriately remediates but reports to the wrong component or if there are aggravating factors present that would militate in favor of a criminal resolution. In these instances, companies may secure a Non-Prosecution Agreement with a term length of fewer than three years, avoid the requirement of an independent monitor, and receive a reduced fine.
• Other Resolutions: If a company is not eligible for either Part I or Part II, prosecutors maintain discretion under the CEP as to the resolution form, term, attendant obligations, and monetary penalty. DOJ will not recommend a fine reduced by more than 50% from the recommended amount under the U.S. Sentencing Guidelines.

Consistent with the Justice Manual’s provisions, corporate resolutions under the DOJ CEP must be approved by the respective Assistant Attorney General or U.S. Attorney, in coordination with the Office of the Deputy Attorney General. In addition, all declinations of prosecutions will be made public.

While the new DOJ CEP shares overarching principles with SDNY’s short-lived policy (e.g., seeking to reward companies for self-disclosing wrongdoing and removing some barriers to receiving a full declination of charges), it differs in some key respects, including the following.

• First, unlike SDNY’s policy, the DOJ CEP requires that disgorgement and forfeiture be paid across the board, even where companies receive a declination under Part I.
• Second, whereas the SDNY’s policy substantially narrowed what were considered “aggravating circumstances,” the DOJ CEP’s formulation includes “the nature and seriousness of the offense, egregiousness or pervasiveness of the misconduct within the company, severity of harm caused by the misconduct” and “corporate recidivism” — meaning a prior criminal adjudication or resolution in the last five years. While prosecutors are still able to recommend a declination where aggravating circumstances exist, the CEP requires weighing those circumstances against the company’s voluntary self-disclosure, cooperation, and remediation.
• Third, with respect to the timing of the self-disclosure, while the SDNY policy employed its own parameters for deeming a self-disclosure timely, the DOJ CEP relies on the Sentencing Guideline’s requirement that the self-report be “prior to an imminent threat of disclosure or government investigation.” U.S.S.G. § 8C2.5(g)(l).
• Finally, while both policies emphasize creating a more predictable path to declination, the DOJ CEP does not provide for SDNY’s buzzy “conditional declination” letters at the outset of the cooperation process.

Notwithstanding the whiplash from DOJ’s quick supplanting of SDNY’s policy, the new guidelines are aimed at increasing transparency and predictability in the corporate self-disclosure process. This should, according to DOJ, incentivize more companies to self-disclose misconduct. Of course, nothing in the new CEP suggests that DOJ will take a less active approach to white collar enforcement against individual defendants, including company executives. Indeed, DOJ’s press release calls for companies to come forward and “do the right thing” so that the department can “hold accountable the individual wrongdoers.” As a result of that and many other considerations, a company’s decision to self-report remains a fact-specific one.