Implications of the U.S. DOJ's Corporate Voluntary Self-Disclosure Policy

The VSD Policy

Purpose of the VSD Policy — Consistent with DOJ pronouncements in September 2022 and January 2023, the purpose of the VSD Policy is a simple one: to incentivize companies to timely disclose misconduct by its employees or agents to DOJ. According to the VSD Policy, “Companies that voluntarily self-disclose misconduct to the USAO pursuant to this policy will receive resolutions under more favorable terms than if the government had learned of the misconduct through other means.” Prompt self-disclosures of information will be considered favorably even if the government may already have been aware of the misconduct through other means.

Applicable Standard — The VSD Policy requires the pertinent USAO to engage in a case-by-case analysis to determine whether a disclosure qualifies as a voluntary self-disclosure. While the decision is at the sole discretion of the USAO, the VSD Policy lays out foundational principles governing its application:

1.  Voluntary — Self-disclosures are credited only when they are truly voluntary (i.e., a disclosure made pursuant to a preexisting obligation, such as a regulation or contract, will not qualify).
2. Timing — All three of the following timeliness criteria are credited:
   
   a. The disclosure is made “prior to an imminent threat of disclosure or government investigation,” U.S.S.G. § 8C2.5(g)(1);
   b. The disclosure is made prior to public disclosure of the misconduct or to when the misconduct is otherwise known to the government; and
   c. The disclosure is made within a reasonably prompt time after the company becomes aware of the misconduct.
3. Substance of the Disclosure — The disclosure must include all relevant facts concerning the misconduct that the company is aware of at the time. A disclosing company is permitted to make clear that the disclosure is based on a preliminary investigation or assessment of information. In the event that the company conducts an internal investigation, it will be expected to provide factual updates.

Benefits of Meeting the VSD Standard — The benefits of meeting the VSD standard can be substantial.

Absent aggravating factors, the USAO will not seek a guilty plea when the company has (1) voluntarily self-disclosed in accordance with the criteria set forth above, (2) fully cooperated, and (3) timely and appropriately remediated the criminal conduct. In addition, when a company meets the applicable standard, the USAO may choose to seek a lower criminal penalty or decline all criminal penalties. The company would still be required to pay all disgorgement, forfeiture, and restitution resulting from the misconduct.

When aggravating factors exist that lead the government to require a guilty plea, such as current executive management’s involvement in the misconduct, the USAO may recommend at least a 50% to 75% reduction to the low end of the U.S. Sentencing Guidelines and may also decline to require appointment of a monitor if the company has a sufficient compliance program.

Key Takeaways

The VSD Policy raises a number of important takeaways for companies:

• Move quickly. If a company becomes aware of possible misconduct, it is in the company’s interest to move quickly to investigate. That may involve engaging outside counsel expeditiously to begin an internal investigation.

• Any disclosure must include all relevant facts known at the time. If a company discloses, it should be careful to disclose all relevant facts known at the time. The VSD Policy anticipates, and permits for the reality, that a company may learn additional facts after its disclosure. However, the failure to be comprehensive regarding known facts at the time of disclosure may disqualify a company from meeting the voluntary self-disclosure standard.

Timely preservation, collection, and production of evidence is key. As discussed in Sidley’s prior Update, DOJ and this VSD Policy continue to emphasize that a company must preserve, collect, and produce documents and evidence in a timely manner to reap the benefits of the VSD Policy.