DOJ Revisits its Corporate Criminal Enforcement Policy Offering Companies Additional Incentives to Self-Disclose, Cooperate, and Remediate

By James P. Melendres, Aloke S. Chakravarty, and Diamond J. Zambrano

On January 17, 2023, Assistant Attorney General (“AAG”) Kevin Polite announced revisions to the Department of Justice’s (“DOJ”) Corporate Enforcement Policy (“CEP”), which will apply to all corporate criminal matters.¹ The changes offer additional incentives for companies that voluntarily self-disclose misconduct, provide extraordinary cooperation, and remediate. The revised CEP also provides revised incentives for companies that do not voluntarily self-disclose, but provide extraordinary cooperation and remediation.

The incentives available to a company will depend largely on whether the company voluntarily self-discloses misconduct: 

• Companies that voluntarily self-disclose misconduct, provide extraordinary cooperation, and remediate may receive a declination if certain criteria are met, even when aggravating circumstances are present. If a company otherwise cannot meet the criteria, the company may still receive at least 50% and up to 75% off the low end of the U.S. Sentencing Guidelines range (except in the case of a criminal recidivist). Moreover, the DOJ will generally not require a corporate guilty plea, even for criminal recidivists.
• Companies that fail to voluntarily self-disclose misconduct, but provide extraordinary cooperation and remediate will only qualify for up to a 50% reduction off the low end of the U.S. Sentencing Guidelines range.

CEP Revisions 

Key changes to the CEP are outlined below: 

• Prosecutors may grant declinations even when aggravating factors are present. Under the prior version of the CEP, companies that voluntarily self-disclosed, fully cooperated, and remediated were presumed to receive a declination, unless certain aggravating circumstances were present. In other words, an aggravating factor would prevent a company from obtaining a declination. The AAG acknowledged that “in many situations, companies that have identified potential wrongdoing and are weighing whether to self-disclose the conduct to the Department will be concerned that an aggravating factor may prevent a company from obtaining a declination. And that concern may have led companies and their outside counsel to conclude, under the previous version of the CEP, that it is more prudent not to disclose the conduct.”²

However, prosecutors may now determine that a declination is appropriate—even when aggravated factors are present—if the company can show:

1. Immediate Voluntary Self-Disclosure – A voluntary self-disclosure must be made immediately upon the company becoming aware of the allegation of misconduct;
2. An Effective Compliance Program – At the time of the misconduct and the disclosure, the company must have had an effective compliance program and system of internal accounting controls in place that enabled the identification of the misconduct and led to the company’s voluntary self-disclosure; and
3. Extraordinary Cooperation & Remediation – The company must provide extraordinary cooperation with the department’s investigation and undertake extraordinary remediation.

DOJ will expect companies seeking a declination in the face of aggravating factors to earn such an outcome by taking “extraordinary measures before, during, and after a Criminal Division investigation.”³

• Prosecutors may recommend, at least 50% and up to 75% off the low end of the sentencing guidelines range for companies that voluntarily self-disclose, provide extraordinary cooperation, and remediation, but otherwise do dot qualify for a declination. The revised CEP provides for a maximum reduction of 75% off the low end of the Sentencing Guidelines, a significant increase from the 50% maximum under the previous CEP. The reduction will not apply in cases of criminal recidivists, and prosecutors will still have discretion to determine the starting point within the Sentencing Guidelines range. Prosecutors generally will not require a guilty plea in this circumstance (including for criminal recidivists). 
• Prosecutors may recommend, a maximum reduction of 50% off the low end of the sentencing guideline range for companies that fail to voluntarily self-disclose, but otherwise provide extraordinary cooperation and remediation. The revised CEP also provides greater incentives for companies that do not voluntarily self-disclose but provide extraordinary cooperation and remediate. Prosecutors will now have the ability to recommend up to 50% reduction off the low end of the Sentencing Guidelines range, which is twice the maximum amount of reduction available under the prior version of the CEP.

“Extraordinary” vs. “Full” Cooperation 

In his remarks, the AAG provided some guidance on the difference between “extraordinary” and “full” cooperation.⁴ According to the AAG the degree of cooperation will inform the government’s approach to assessing extraordinary cooperators.⁵ To receive credit for extraordinary cooperation, companies will have to go above and beyond the criteria for full cooperation outlined in the CEP, which include:  

1. Timely disclosure of all non-privileged facts relevant to the wrongdoing at issue; 
2. Proactive cooperation, rather than reactive; that is, the company must timely disclose all facts that are relevant to the investigation, even when not specifically asked to do so; Timely voluntary preservation, collection, and disclosure of relevant documents and information relating to their provenance;
3. De-confliction of witness interviews and other investigative steps that a company intends to take as part of its internal investigation to prevent the company’s investigation from conflicting or interfering with the Criminal Division’s investigation; and
4. Subject to individual Fifth Amendment rights, making company officers and employees who possess relevant information available for interviews by the Criminal Division.⁶

Immediacy, consistency, degree, and impact will be key concepts in evaluating the degree of a company’s cooperation.
 
KEY TAKEAWAYS 

• Individual accountability remains the DOJ’s first priority.  Companies that uncover wrongdoing can expect the DOJ to scrutinize the company’s response, including how bad actors were disciplined.
• The revised CEP provides more incentives and options for companies who uncover criminal wrongdoing. Companies and outside counsel will have to weigh the potential incentives of voluntary self-disclosure against the risk of increased criminal exposure and penalties, and specifically whether a declination is likely given the nature of the disclosure.
• “The revisions,” the AAG explained, “make clear that there will be very different outcomes for companies that do not self-disclose, meaningfully cooperate with our investigations, or remediate.”