In the span of 15 months, the U.S. Department of Justice (DOJ) and certain individual U.S. Attorney's Offices announced no less than six different voluntary self-disclosure or whistleblower policies and programs. See, e.g., Justice Manual § 9-47.120; Monaco, Lisa, "Policy Designed to Encourage Disclosure of Misconduct and Hold Individual Wrongdoers Accountable" (DOJ, Oct. 4, 2023); Press Release, "Policy Sets National Standard for Circumstances Under Which Companies May Receive Credit for Voluntarily Self-Disclosing Criminal Conduct, and Benefits of Self-Disclosure" (DOJ, Feb. 22, 2023).
With the proclamation of each policy or program, the DOJ and its component offices sent a clear message that they remain focused on corporate enforcement and want to incentivize companies and corporate insiders to self-report corporate malfeasance. Indeed, the message to companies is "[i]nvest in compliance now or your company may pay the price—a significant price—later." Monaco, Lisa, "Policy Designed to Encourage Disclosure of Misconduct and Hold Individual Wrongdoers Accountable" (DOJ, Oct. 4, 2023)
The most recent of these programs, the Criminal Division's Pilot Program on Voluntary Self-Disclosure for Individuals (the Pilot Program), was announced April 15, 2024, and took effect immediately. Unlike the majority of other DOJ programs, which focused on corporate self-disclosure, the Pilot Program is instead focused on the potential benefits to individuals who themselves are subject to exposure for criminal conduct involving a broader corporate or financial entity.
Specifically, the Pilot Program enables an individual who has criminal exposure to voluntarily disclose original information related to certain corporate crimes and meets a number of other criteria to obtain a Non-Prosecution Agreement (NPA) and avoid criminal charges. See DOJ, "The Criminal Division's Pilot Program on Voluntary Self-Disclosures for Individuals" (Apr. 15, 2024) (the April 15 Memo).
As the April 15 Memo acknowledges, credit for cooperation with a DOJ investigation, including potential for an NPA to be reached with prosecutors, is not new. In fact, the DOJ and other federal agencies have offered voluntary cooperation credit on a formal and informal basis in a number of areas for decades, with some policies (such as voluntary disclosure of criminal tax matters to the IRS) stretching back to the 1950s or earlier. See Michael M. Mustokoff & Jonathan Swichar, "To Disclose or Not to Disclose: There Should Be No Question", 13 HEALTH LAW. 28 (2001). While the potential for an NPA is not new in theory, it has been significantly disfavored in practice. See Justice Manual 9-27.600 et seq.
As any member of the defense bar is acutely aware, cooperators have often been required to admit all criminal conduct and plead guilty with the hope of a reduction in sentence based on "cooperation credit" but with no guarantee of a favorable outcome. The Pilot Program offers much more than mere "cooperation credit" or the promise of a motion by the prosecutors seeking a reduction in sentence based on "substantial assistance." See United States Sentencing Commission Guidelines § K1.1. The Pilot Program provides a clear and relatively transparent path to avoiding criminal charges entirely through an NPA.
The Pilot Program lists a number of criteria to qualify including, among other things, that:
- Disclosure must be voluntary—prior to any request or demand from the DOJ on the subject. If the DOJ or law enforcement has already made a request for information, it will likely be too late to qualify for the Pilot Program.
- Disclosure of original Any information disclosed must not be previously known to the DOJ. Of course, an individual cannot know what the DOJ does or does not know, and this criteria more than any other provides a risk of disqualification that cannot be fully evaluated.
- Disclosure must be truthful and complete, including as to the "complete extent" of the individual's own misconduct, and as to any other matters which the DOJ "may inquire." In other words, the disclosing individual must be prepared to be fully forthright about the subject matter at issue or any other matter that the DOJ might ask about.
- The individual must cooperate and be willing to provide substantial assistance, including full cooperation with the prosecution of the matter and, if requested, work "in a proactive manner" with law enforcement. Thus, the cooperating individual must be prepared to be called to participate in law enforcement surveillance or sting operations and to testify.
- The individual must disgorge any profits from the wrongdoing and pay restitution.
- The individual must not have certain other prior criminal conduct (e.g. violent conduct, prior felony conviction, prior conviction of fraudulent or dishonest conduct), cannot be the chief executive officer or chief financial officer or the organizer/leader of the scheme, and cannot be an elected or appointed foreign government official or a domestic government official of any kind. April 15 Memo at 2–3.
Critically, the Pilot Program is also only applicable for a narrow and specific set of potential white collar criminal matters, generally involving broader misconduct by financial institutions or companies, including:
- Violations by financial institutions (or insiders or agents) such as money laundering and fraud.
- Violations related to the integrity of financial markets by financial institutions, investment advisors, investment funds, or companies with fifty or more employees.
- Violations related to foreign corruption and bribery by, through, or related to companies.
- Violations related to health care fraud or kickbacks.
- Violations related to fraud against the United States in connection with federal contracting by companies with 50 or more employees.
- Violations related to bribes or kickbacks to domestic public officials by or through public or private companies.
Finally, and unsurprisingly, the Criminal Division provides itself an out, wrapping up the April 15 Memo with the note that it retains the right to offer an NPA, even when all criteria are not met in full.
For individuals with criminal exposure, the Pilot Program offers a potential resolution without any criminal charges. While the Pilot Program is not without risk—as noted above, any self-disclosure must be of original information and prior to any request or demand from the DOJ on the subject—the potential for an NPA may outweigh the risk for many individuals.
For companies, the Pilot Program may provide even greater incentive. The promise of an NPA provides significant motivation to individual corporate insiders to be the "first in the door." Companies should not want to be in a race to the DOJ against corporate insiders who have actively participated in corporate wrongdoing. Accordingly, companies should review their current compliance program to ensure that it provides for prompt investigation of allegations of misconduct and provides a process to evaluate potential malfeasance to determine if voluntary self-reporting is appropriate.
Originally Published by ALM Global, LLC
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