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  • Writer's pictureThe San Juan Daily Star

Feds launch new voluntary self-disclosure policy for businesses

U.S. Attorney W. Stephen Muldrow

By The Star Staff

Federal prosecutors on Thursday implemented a new voluntary self-disclosure policy for businesses that will give them benefits if they disclose criminal conduct.

U.S. Attorney W. Stephen Muldrow announced that the United States Attorney’s Office for the District of Puerto Rico (USAO-PR) implemented the new U.S. Attorney’s Offices’ (USAO) Voluntary Self-Disclosure Policy (VSD), and the jU.S. Attorney’s Offices’ Monitor Selection for Corporate Criminal Enforcement Policy (the MS-CCE Policy) released it, so it became effective immediately.

The VSD Policy details the circumstances under which a company will be considered to have made a voluntary self-disclosure (VSD) of misconduct to the USAO, and provides transparency and predictability to companies and the defense bar concerning the concrete benefits and potential outcomes in cases where companies voluntarily self-disclose misconduct, fully cooperate and timely and appropriately remediate.

The goal of the VSD policy is to standardize how VSDs are defined and credited by USAOs nationwide and incentivize companies to maintain effective compliance programs capable of identifying misconduct to expeditiously and voluntarily disclose and remediate misconduct to cooperate fully with the government in corporate criminal investigations.

The VSD policy was developed under the Deputy Attorney General’s Sept. 15, 2022 memorandum, “Further Revisions to Corporate Criminal Enforcement Policies Following Discussions with Corporate Crime Advisory Group” (Monaco Memo), which directed each Department of Justice (DOJ) component that prosecutes corporate crime to review its policies on corporate voluntary self-disclosure and, if there was no formal written policy to incentivize self-disclosure, draft and publicly share such a policy.

Under the new VSD Policy, a company is considered to have made a VSD if it becomes aware of misconduct by employees or agents before that misconduct is publicly reported or otherwise known to the DOJ, and discloses all relevant facts known to the company about the misconduct to a USAO in a timely fashion before an imminent threat of disclosure or government investigation.

A company that voluntarily self-discloses as defined in the policy and fully meets the other requirements of the policy by -- in the absence of any aggravating factor -- fully cooperating and timely and appropriately remediating the criminal conduct (including agreeing to pay all disgorgement, forfeiture, and restitution resulting from the misconduct), will receive significant benefits, including that the USAO will not seek a guilty plea; may choose not to impose any criminal penalty, and in any event will not impose a criminal penalty that is greater than 50% below the low end of the U.S. Sentencing Guidelines (USSG) fine range; and will not seek the imposition of an independent compliance monitor if the company demonstrates that it has implemented and tested an effective compliance program.

The VSD Policy identifies three aggravating factors that may warrant a USAO seeking a guilty plea even if the other requirements of the VSD policy are met: (1) if the misconduct poses a grave threat to national security, public health or the environment; (2) if the misconduct is deeply pervasive throughout the company; or (3) if the misconduct involved current executive management of the company. The presence of an aggravating factor does not necessarily mean that a guilty plea will be required; instead, the USAO will assess the relevant facts and circumstances to determine the appropriate resolution. If a guilty plea is ultimately required, the company will still receive the other benefits under the VSD policy, including that the USAO will recommend a criminal penalty of at least a 50% and up to a 75% reduction off the low end of the USSG fine range, and that the USAO will not require the appointment of a monitor if the company has implemented and tested an effective compliance program.

In cases where a company is being jointly prosecuted by a USAO and another DOJ component, or where the misconduct reported by the company falls within the scope of conduct covered by VSD policies administered by other DOJ components, the USAO will coordinate with, or, if necessary, obtain approval from, the DOJ component responsible for the VSD Policy specific to the reported misconduct when considering a potential resolution. Consistent with relevant provisions of the Justice Manual and as allowable under alternate VSD policies, the USAO may choose to apply any provision of an alternate VSD policy in addition to, or in place of, any provision of its policy.

The Attorney General’s Advisory Committee (AGAC), under the leadership of U.S. Attorney for the Southern District of New York Damian Williams, requested that the White Collar Fraud Subcommittee of the AGAC, under the leadership of U.S. Attorney for the Eastern District of New York Breon Peace, develop policies in response to the Deputy AG’s memo. The VSD Policy announced Thursday was prepared by a corporate criminal enforcement policy working group composed of U.S. attorneys from geographically diverse districts, including U.S. Attorney Peace and seven others.

Assistant U.S. Attorney Amanda Riedel, the white collar crimes coordinator for the Executive Office for U.S. Attorneys, also participated in the development of the VSD Policy.

The MS-CCE Policy establishes the standards, policy, and procedures for the selection of monitors in criminal matters being handled by USAO-PR and apply to all determinations regarding whether a monitor is appropriate in specific criminal cases and to any deferred prosecution agreement, non-prosecution agreement, or plea agreement between the USAO and a company which requires the retention of a monitor. This policy provides a non-exhaustive list of factors to be evaluated by prosecutors in assessing the need for the imposition of a monitor on a case-by-case basis. In general, the USAO should favor the imposition of a monitor where there is a demonstrated need for, and clear benefit to be derived from, a monitorship.

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