Companies that discover potential misconduct can now point to a single DOJ-wide framework governing self-disclosure. Stinson attorneys Bernadette Sargeant, Reginald Harris and Alexandra Stanley explain how the new policy works and why the time to build voluntary disclosure infrastructure is before it’s needed. In March, the Department of Justice (DOJ) issued a landmark corporate enforcement and voluntary self-disclosure policy (CEP), establishing a unified approach for federal prosecutors evaluating corporate self-disclosure, cooperation, and remediation. This groundbreaking policy, applicable to all corporate matters except criminal antitrust proceedings, replaces the previously fragmented landscape of differing policies across various DOJ components and U.S. Attorneys’ Offices with a standardized set of rules.
The CEP represents a significant evolution in the DOJ’s approach to corporate crime, aiming to incentivize companies to proactively report wrongdoing and cooperate with investigations. Prior to this policy, companies navigating potential misconduct faced an often confusing and inconsistent system, where the benefits of self-disclosure could vary significantly depending on the specific office handling the matter. The introduction of a single, department-wide framework is designed to provide greater clarity and predictability for businesses operating under the scrutiny of federal law enforcement.
Just nine days after the CEP’s release, the DOJ announced the first resolution under this new policy, declining to prosecute French medical device company Balt SAS. This declination stemmed from allegations of violations of the Foreign Corrupt Practices Act (FCPA), though two individuals were separately indicted for their alleged roles in the bribery scheme. According to the DOJ’s statement, Balt SAS proactively identified the misconduct through its own internal investigation and elected to self-report before the investigation was fully concluded. This swift action by Balt SAS served as an immediate, real-world demonstration of the CEP’s potential benefits.
The combined impact of the CEP and the Balt SAS declination is poised to reshape how companies approach internal investigations. To effectively leverage the advantages offered by the CEP in the event that wrongdoing is discovered, companies must establish investigation protocols that inherently account for the possibility of self-reporting from the initial stages. This includes training teams to recognize the specific types of findings that warrant an accelerated disclosure decision and engaging legal counsel early enough in the process to safeguard both attorney-client privilege and strategic flexibility.
The CEP Framework: A Three-Tiered Approach to Corporate Accountability
Federal prosecutors have historically acknowledged the value of voluntary disclosure and cooperation, as evidenced in guidelines such as the U.S. Sentencing Commission (USSC) § 8C2.5(g). However, the practical application of these principles often lacked uniformity across different DOJ offices. The CEP aims to rectify this by implementing a clear, three-tier framework for evaluating corporate conduct:
Tier I: Full Declination for Proactive Compliance
Under Part I of the CEP, a company that voluntarily self-discloses misconduct, fully cooperates with the DOJ’s investigation, and undertakes timely and effective remediation will generally be offered a declination to prosecute. This is contingent upon the absence of any aggravating circumstances. While criminal prosecution may be avoided, the company will still be required to disgorge any ill-gotten gains and pay restitution to victims. This tier represents the most favorable outcome for companies demonstrating exceptional commitment to corporate integrity.
Tier II: Enhanced Benefits for Substantial Compliance
Part II of the CEP addresses companies that have made good-faith efforts to self-report but may not have met the stringent requirements for full voluntary self-disclosure, or those facing certain aggravating circumstances. In such cases, companies may be eligible for a non-prosecution agreement (NPA) with a term of fewer than three years. Crucially, these companies may also be spared the imposition of a compliance monitor, a significant cost and operational burden. Furthermore, they can expect a substantial fine reduction, typically ranging from 50% to 75% off the lower end of the applicable sentencing guidelines fine range. This tier offers a significant incentive for companies that actively engage with the DOJ, even if their initial reporting or cooperation falls slightly short of the highest standard.
Tier III: Discretionary Resolutions with Capped Reductions
Under Part III of the CEP, prosecutors retain considerable discretion in determining the resolution for companies that do not qualify for the more favorable terms of Tiers I or II. While penalty reductions are still possible, they are capped at a maximum of 50%. This tier underscores that while the CEP provides a structured approach, prosecutorial discretion remains a critical element in the DOJ’s decision-making process.
Intersection with Whistleblower Programs
A critical aspect of the CEP is its integration with the DOJ’s existing corporate whistleblower awards pilot program. If a whistleblower reports misconduct both internally to the company and externally to the DOJ, the company can still qualify for a declination under the CEP. However, this eligibility is subject to a strict condition: the company must self-report the misconduct to the DOJ within 120 days of the internal report. Any delay beyond this timeframe risks jeopardizing the company’s opportunity to secure the most favorable treatment under the policy. This provision highlights the DOJ’s intent to incentivize companies to foster robust internal reporting mechanisms while simultaneously ensuring that external reporting channels are also respected.
Internal Investigations: The Crucial Catalyst for Proactive Disclosure
The resolution involving Balt SAS offers a compelling case study in how the CEP is intended to function in practice. Balt SAS initiated its self-disclosure while its internal investigation was still in progress. This aligns directly with the CEP’s directive to self-disclose "at the earliest possible time, even when a company has not yet completed an internal investigation." Following its disclosure, Balt SAS demonstrated full cooperation by providing all known relevant facts, identifying the individuals involved in the alleged misconduct, and implementing timely remedial actions. These actions included disciplinary measures against responsible employees, termination of problematic business relationships, and enhancements to its compliance program. The DOJ’s assessment found no aggravating circumstances, leading to the declination.
Simultaneously, the DOJ pursued criminal charges against two individuals associated with Balt SAS. This parallel action serves as a clear message: while the company may benefit from leniency through self-disclosure and cooperation, individual accountability for criminal conduct remains a priority. Assistant Attorney General A. Tysen Duva emphasized this point, stating that the resolution "demonstrates the value of voluntarily self-reporting wrongdoing to the Department of Justice."
The Balt SAS case underscores the CEP’s emphasis on promptness and cooperation. However, for companies to act with such speed and decisiveness, the necessary infrastructure must be firmly in place beforehand. This necessitates having comprehensive compliance plans and established procedures to effectively respond to concerns, whether they arise from hotline complaints, internal reporting channels, audits, or other sources.
When a potential issue emerges, a prudent company will need to conduct its own thorough investigation, supported by counsel, whether internal or external. While the CEP frames internal investigations as optional ("if the company chooses to conduct one"), they are, in practice, the primary mechanism by which a company determines the extent of wrongdoing, decides whether and when to self-report, gathers the factual basis to satisfy the CEP’s cooperation requirements, and positions its legal counsel to advocate effectively on its behalf.
Structuring Investigations for Maximum Cooperation
Investigations must be strategically structured from their inception to support what the CEP defines as full cooperation. This entails a proactive approach to disclosing relevant facts, attributing those facts to specific sources rather than providing a generalized narrative, identifying responsible individuals, and facilitating rolling disclosures as the investigation progresses. Furthermore, companies must ensure thorough document preservation, including materials located internationally, and make employees readily available for interviews. The CEP’s cooperation standard demands more than passive responsiveness; it actively rewards companies that anticipate and address the government’s inquiries proactively.
Remediation: A Parallel Process
Remedial measures should not be deferred until an investigation concludes. Companies are encouraged to initiate remedial actions concurrently with the investigation’s progress. This can include conducting root-cause analyses, implementing enhancements to the compliance program, and taking appropriate disciplinary action against responsible employees. Such proactive demonstrations of good faith can significantly position a company for the most favorable possible outcome under the CEP.
Strategic Considerations for Disclosure Decisions
Every investigation presents unique circumstances, and the decision to self-report requires careful and informed judgment. However, certain findings during an investigation should strongly influence the inclination towards disclosure. The most compelling factor is credible evidence of criminal conduct, particularly involving bribery, fraud, or corruption that could fall under federal statutes.
The risk of being preempted by an external report also carries significant weight. With the DOJ’s corporate whistleblower awards pilot program now in effect, employees and other insiders have financial incentives to report misconduct directly to the department. Once a whistleblower has submitted an internal report, the company typically has a limited window of 120 days to self-report to the DOJ and maintain its eligibility for a declination. Delays in this critical period can have substantial financial and legal consequences.
When an investigation identifies specific individuals who engaged in wrongdoing, self-reporting allows the company to demonstrate that it is not attempting to shield culpable parties. This consideration was clearly a factor in the Balt SAS resolution. Similarly, if there is a realistic possibility that the misconduct could be independently discovered through regulatory audits, media reporting, civil litigation, or other channels, the CEP’s requirement for disclosure to occur before "an imminent threat of disclosure or government investigation" makes timely action imperative.
Moreover, the CEP’s broader Part II reduction range—offering a reduction of 50% to 75% off the low end of the sentencing guidelines fine range—suggests that the DOJ intends to grant credit in a wider array of situations than previous policies may have allowed. This makes self-reporting a valuable strategic option even in cases that are not unequivocally clear-cut. Additionally, because the CEP does not supersede prosecutors’ traditional discretion under the "Principles of Federal Prosecution of Business Organizations," internal investigations conducted by counsel can also provide companies with avenues to advocate their positions effectively.
Conclusion: Investing in Proactive Compliance
The resolution in the Balt SAS case serves as a powerful illustration of the substantial benefits companies can realize by investing in robust compliance infrastructure and approaching internal investigations as a strategic function, rather than merely a reactive measure. Under the newly established Corporate Enforcement Policy, the incentives for voluntary self-disclosure are more clearly defined and more consistently applied than ever before. The time for companies to build and refine this essential capability is unequivocally now, ensuring they are well-prepared to navigate potential misconduct with clarity, confidence, and a strategic advantage.
