04/29/2024 | Press release | Distributed by Public on 04/30/2024 11:16
04.29.2024
|
Updates
The Criminal Division of the U.S. Department of Justice (DOJ) announced a Pilot Program on Voluntary Self-Disclosures for Individuals (Pilot Program) on April 15, 2024. Under the new policy, individuals who were involved in certain types of corporate criminal misconduct, who voluntarily disclose that conduct to the Criminal Division, and who meet certain other criteria will be eligible to receive a non-prosecution agreement (NPA). This pilot program has the potential to change in-house counsel's decision-making on whether and when to voluntarily disclose corporate misconduct by incentivizing employees who participated in the misconduct to be first in the door at DOJ.
Overview of the Pilot Program on Voluntary Self-Disclosure for Individuals
The Pilot Program-along with DOJ's existing corporate voluntary self-disclosure program and pending whistleblower reward program-is aimed at enabling the Criminal Division to better identify and prosecute corporate crime. It does so by offering a meaningful "carrot" to individuals who participated in corporate crime in exchange for their voluntary disclosure of information that enables DOJ to pursue other wrongdoers.
Under the Pilot Program, the Criminal Division will enter into an NPA with any individual who voluntarily self-discloses to the Criminal Division original information about certain criminal misconduct, provided the following conditions are met:
Finally, only certain individuals are eligible for an NPA under the Pilot Program. Specifically, the program is not available to:
How the Pilot Program Changes the Analysis for Corporate Self-Disclosure
The Pilot Program offers individuals involved in corporate criminal misconduct a meaningful incentive to self-disclose their actions. However, it also puts employees in direct competition with their employers to be "first in the door" at DOJ, because both the employee and the company must be able to provide DOJ with original information about corporate misconduct in order to avail themselves of the full benefits of self-disclosure (whether under the Pilot Program or DOJ's corporate voluntary self-disclosure program, respectively).
Consider a scenario in which a company, having received a report of misconduct through its internal ethics hotline, initiates an internal investigation to evaluate whether the allegations have any merit before deciding whether to voluntarily self-disclose to DOJ. As an initial investigative step, the company schedules interviews with those accused of wrongdoing. If the allegations are true, the employee witnesses-on notice that the company is investigating their actions and could potentially turn them over to DOJ in the future-now have an incentive to voluntarily self-disclose their conduct to the Criminal Division before their employer completes its investigation. From the company's perspective, then, the Pilot Program increases the risk that another source will alert DOJ to the misconduct before the company has a chance to evaluate whether self-disclosure is warranted.
The number of voluntary self-disclosures by corporations has dropped in recent years as more and more in-house legal teams conclude that the cost savings from taking the time to "pressure test" allegations before determining whether to self-disclose to DOJ outweighs the risk of another party alerting DOJ to the allegations before the company does, therefore losing the benefits of voluntary self-disclosure. The new Pilot Program is poised to shift the pendulum back in the other direction, and a blog post earlier this week from Principal Deputy Assistant Attorney General Nicole M. Argentieri makes clear that this shift was intentional. In her April 22 post, Argentieri wrote, "We understand that when companies are deciding whether to make a voluntary self-disclosure, they assess not only the benefits of self-reporting laid out in our Corporate Enforcement Policy, but also the risk that the department will learn about the misconduct from other sources. [With this pilot program, t]he department is upping the ante in that calculus by increasing the incentives for individuals to come forward."
Takeaway
The key information for in-house counsel is that the Criminal Division's Pilot Program on Voluntary Self-Disclosure for Individuals will require companies to carefully reassess their procedures for determining whether and when to self-disclose potential corporate wrongdoing to DOJ and, potentially, to further expedite the decision of whether self-disclosure is warranted.
© 2024 Perkins Coie LLP