DOJ is pushing hard for voluntary disclosures and urging companies to take advantage  of its Voluntary Disclosure Program.  The carrot is significant — a declination in exchange for cooperation, remediation and disgorgement.

We often hear about the benefits of voluntary disclosure involving FCPA case.  But the program extends to other crimes — fraud being a significant area.

In a significant fraud case, Proterial Cable America, formerly Hitachi Cable America Inc. (“Hitachi Cable”), for wire fraud and conspiracy. 

From around 2006 to 2022, Hitachi Cable engaged in fraudulent conduct relating to various safety requirements.  In particular, Hitachi Cable misrepresented to customers that motorcycle brake hose assemblies it sold met federal safety performance standards; however, Hitachi Cable knew that the brake hose assemblies did not meet certain safety performance standards. 

The DOJ investigation uncovered evidence that employees of Hitachi Cable’s Automotive Division regularly tested brake hose assemblies manufactured for motorcycles for compliance with Federal Motor Vehicle Safety Standards, 49

C.F.R. § 571.106, Standard No. 106 (“FMVSS 106”), a regulatory standard administered by the National Highway Traffic Safety Administration. Hitachi Cable’s testing identified failing test results with respect to certain performance standards required by FMVSS 106.

Knowing about these test failures, Hitachi Cable employees made false, fraudulent, and misleading material representations to customers—Motorcycle Company #1, Brake System Assembler #1, and Brake System Assembler #2—namely, that the brake hose assemblies complied with FMVSS 106. As a result of the scheme, Hitachi Cable obtained approximately $15.1 million in illicit profits through its sales of the noncompliant brake hose assemblies.

DOJ issued a declination based on the following: (1) the voluntary and timely self-disclosure of the misconduct by Hitachi Cable (now Proterial Cable) and its corporate parent (now Proterial, Ltd.) — specifically, the Company (1) disclosed the issue to DOJ within weeks of an employee raising the issue during an internal audit; (2) Hitachi Cable’s full and proactive cooperation in this matter (including its provision of all known relevant facts about the misconduct, including information about all of the individuals involved in the misconduct) and agreement to continue to cooperate with any ongoing Fraud Section investigations and any prosecution that has resulted or might result in the future; (3) the nature and seriousness of the offense; (4) Hitachi Cable’s timely and appropriate remediation, including terminating employees involved in the misconduct and substantially improving its compliance program and internal controls through, among other things, significant investment in designing, implementing, and testing a risk-based and sustainable compliance program; and (5) Hitachi Cable’s agreement to disgorge illicit profits. 

Hitachi Cable agreed to pay a total amount of $15,126,204, but received a credit of because it already paid $6,017,008 to Brake System Assembler #1 and Brake System Assembler #2. Hitachi Cable agreed to pay the remainder $9,109,196 to Motorcycle Company #1, and provide proof to DOJ within 90 days.