In February 2023, the U.S. Department of Justice (“DOJ”) issued a new policy on corporate self-disclosure that incentives the disclosure of criminal conduct to DOJ.  The policy sets forth the criteria for what constitutes a ”Voluntary Self-Disclosure” (“VSD”) and also lists the potential benefits for voluntary disclosure.  

The policy lists three criteria for a disclosure to constitute a VSD.  First, the disclosure must be voluntary; disclosure cannot be otherwise required under statute or regulation. This requirement likely rules out many environmental crimes, because sources are often required by law to disclose deviations. However, the DOJ also explained that, even if the disclosure does not meet the VSD requirements, self-disclosure will be viewed favorably. Second, the VSD must be made before an imminent threat of disclosure or government investigation, before the misconduct is publicly disclosed, and within a reasonable time after the company becomes aware of the misconduct. Third, the VSD must include all relevant facts about the misconduct known by the company at the time, even if the company is conducting a preliminary investigation. If the investigation into the misconduct is ongoing, the company would need to update the DOJ on its findings.

If the VSD requirements are met, the company fully cooperates, and the company timely completes appropriate remediation, the DOJ will reduce the criminal penalties associated with the disclosed misconduct. Unless the misconduct poses a “grave threat” to national security, public health, environment; the misconduct is pervasive throughout the company; or the misconduct involved current executive management, the DOJ will not seek a guilty plea. Additionally, regardless of whether a guilty plea is entered, the DOJ will not impose a criminal penalty more than 50% below the low end of the sentencing guidelines. If no guilty plea is entered, the DOJ may choose not to pursue criminal penalties. If an aggravating factor exists, and a guilty plea is entered, the DOJ will seek a penalty between 75% and 50% below the low end of the sentencing guidelines.  Finally, if a company meets the criteria for the DOJ’s self-disclosure policy and demonstrates that it has implemented and tested an effective compliance program, the company will not be required to have an independent compliance monitor.

In the civil context, for over two decades, the U.S. Environmental Protection Agency (“EPA”) has implemented an Audit Policy, which allows companies who conduct systematic audits and determine that they are not in compliance with an environmental statute, to disclose the non-conformance to the EPA, to either reduce or forego a civil penalty.  DOJ’s new VSD policy is another tool that companies can now utilize when evaluating how to handle potential corporate misconduct.

About the Author...

Emily von Qualen
Liskow & Lewis

Written on behalf of the Environmental Law Committee