DOJ Policy Updates Incentivize Corporate Enforcement and Voluntary Self-Disclosure

In a recent address to the Securities Industry and Financial Markets Association’s Anti-Money Laundering and Financial Crimes Conference, Matthew R. Galeotti, Head of the Department of Justice Criminal Division (DOJ or Division), announced the DOJ’s new white collar enforcement plan. We outline key changes below, including significantly enhanced incentives for voluntary self-disclosure and cooperation with the government.

Changes to the CEP

The DOJ has revised the Corporate Enforcement and Voluntary Self-Disclosure Policy (CEP) because, as Galeotti explained, the CEP has become “unwieldy and hard to navigate.” The revised CEP is designed to be streamlined and easy to follow, while also providing more significant and tangible benefits to those that voluntarily self-disclose misconduct to the DOJ. Perhaps the biggest change is that the DOJ “will decline to prosecute a company for criminal conduct” when:

• The company voluntarily self-disclosed the misconduct to the Criminal Division
• The company fully cooperated with the Criminal Division’s investigation
• The company timely and appropriately remediated the misconduct
• 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 criminal adjudication or resolution within the last five years based on similar misconduct by the entity engaged in the current misconduct

And even companies with aggravating circumstances may still benefit from the revised CEP as “prosecutors retain the discretion to nonetheless recommend a CEP declination based on weighing the severity of those circumstances and the company’s cooperation and remediation.” Moreover, the revised CEP provides relief for “near miss” self-disclosures. These are scenarios where a company “fully cooperated and timely and appropriated remediated” but is nonetheless ineligible for the declination described above, solely because either (1) its good-faith self-reporting did not technically qualify as a “voluntary self-disclosure,” which is a term of art, or (2) the company had aggravating factors that warrant a criminal resolution. For these “near miss” cases, the Division shall nonetheless:

1. Provide an NPA — absent particularly egregious or multiple aggravating circumstances
2. Allow a term length of fewer than three years
3. Not require an independent compliance monitor
4. Provide a reduction of 75% off the low end of the U.S. Sentencing Guidelines (U.S.S.G.) fine range

Finally, if a company is not eligible for the voluntary self-disclosure incentives described above because it met “some but not all” of the four factors required for declination, “prosecutors maintain discretion to determine the appropriate resolution including form, term length, compliance obligations, and monetary penalty.” Under the CEP, the company will not receive, nor will the Division recommend to a sentencing court, a reduction of more than 50% off the fine provided for under the U.S.S.G. Regardless, prosecutors retain discretion to determine the specific percentage reduction, but “there will be a presumption that the reduction will be taken from the low end of the U.S.S.G. range for companies that fully cooperate and timely and appropriately remediate.”

Monitors

The DOJ has also revised its corporate monitor selection policy. According to Galeotti, “[t]he top line value criterion is that the benefits of the monitor should outweigh its costs, both monetary costs, as well as burdens on the business’s operations.” To ensure this balance, Galeotti instructed prosecutors to consider the following in deciding whether a monitor is appropriate:  (1) the nature and seriousness of the conduct and the risk that it will happen again, focusing chiefly on the harms to Americans and American business; (2) the availability of other effective independent/regulatory government oversight; (3) the efficacy of the company’s compliance program and culture of compliance at the time of resolution; (4) the maturity of the company’s controls and ability of the company to rest and update its compliance program. If, after considering the above, a monitor is deemed necessary, the DOJ will now impose a fee cap, approve budgets for all workplans and require biannual meetings between the government, the company and the monitor.

Whistleblower Awards

The DOJ has also expanded its list of priority areas for whistleblower tips. These new priorities include: (1) procurement and federal program fraud; (2) trade, tariff and customs fraud; (3) violations of federal immigration law; and (4) violations involving sanctions, material support for foreign terrorist organizations or those that facilitate cartels and TCOs, including money laundering, narcotics and Controlled Substances Act violations. 

For any questions regarding CEP developments and how these policies may affect your businesses, please contact Co-Chair of our White Collar Defense and Investigations Group Ryan L. O’Neill at 201.857.6769, Co-Chair Gerard M. Karam at 570.507.5840 or the Stevens & Lee attorney with whom you regularly work.