The Department of Justice (DOJ) has recently announced revisions to its Criminal Division’s Corporate Enforcement Policy to provide incentives for corporations to self-report wrongdoing. (Eligible) Self-reporting companies will receive a discount of at least 50% and up to 75% of the low-end of the fine range in certain circumstances.
Corporate Wrongdoing Covered By The New Incentives
The new incentives will apply to all corporate criminal matters handled by the Criminal Division. This includes (but is not limited to):
- Money laundering; and
- Foreign Corrupt Practices Act cases.
The Range of Incentives Offered by the DOJ
As outlined above, the DOJ will recommend a reduction of 50%-75% off the low-end of the sentencing guidelines range to eligible companies that self-report. The previous incentives were capped at 50%, so this is a significant increase to the incentive package offered.
In addition to the savings on the fines, the DOJ will also not require a corporate guilty plea where no aggravating circumstances exist. Mr Polite mentioned that multiple or particularly egregious aggravating circumstances might result in the DOJ proceeding with a prosecution, however.
Companies that do not voluntarily self-disclose but fully cooperate and remediate will be eligible for a reduction of up to 50% of the low-end of the fine range, too. However, Mr Polite (the Assistant Attorney General who delivered remarks about the incentives) noted:
“This is not a race to the bottom. A reduction of 50% will not be the new norm; it will be reserved for companies that truly distinguish themselves and demonstrate extraordinary cooperation and remediation.” – Assistant Attorney General Kenneth A. Polite
Criteria to Receive the Corporate Self-Reporting Incentives
To access these incentives, a company must be able to demonstrate that it has met the three following criteria:
- The voluntary self-disclosure was made immediately upon the company becoming aware of the allegation of misconduct.
- The existence of an effective compliance program and a system of internal accounting controls. The program and control must ‘[enable] the identification of the misconduct and [lead] to the company’s voluntary self-disclosure.’
- Cooperation with the DOJ’s investigation and the subsequent remediation must both be ‘extraordinary’.
Key Takeaways For US Companies
1. Companies must have effective and efficient compliance programs which include the following:
- Multiple channels for employees to report concerns. These should be easily accessible, and their availability should be widely published;
- A culture of non-retaliation or discrimination against employees that report concerns; and
- Documented procedures to investigate potential wrongdoing. (We covered workplace investigations here.
2. Ultimately, the decision to self-report or not is one of balancing risk with your risk tolerance. There is a chance that the DOJ (and the public) may never discover your wrongdoing and you may be comfortable sitting with that risk. Or, more likely, you’re comfortable sitting with that risk to a certain dollar figure – at which point the potential for a 75% discount may become more appealing.
3. The largest discounts will be offered only to those companies that can show their cooperation was ‘extraordinary’. Whether a corporation’s cooperation was extraordinary will hinge on the ‘immediacy, consistency, degree, and impact’ of that cooperation. Companies must be ready to move quickly to take full advantage of the incentives.
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