Companies often face difficult choices when it comes to deciding on whether to disclose corporate misconduct to the government.  Over the years, more counsel have embraced the idea of sitting tight after uncovering and remediating misconduct (unless the company is subject to mandatory disclosure requirements).

Admittedly, I have been aware of situations where that strategy was appropriate.  The likelihood of detection was low and the company had fully remediated the compliance deficiencies to ensure it would not happen again.  In situations where the misconduct is limited to one country or a single product line, this can be the right call.

With the Trump Administration, DOJ has embraced a new corporate enforcement policy that reiterates DOJ’s encouragement of corporate voluntary disclosures.  This approach has been justified as a way to encourage companies to come forward, assist in the prosecution of culpable individuals, and earn a declination with disgorgement. 

In reviewing some of the criminal and False Claims Act prosecutions by the Trump DOJ, the tilt toward voluntary disclosures appears to be changing to the benefit of companies that choose to disclose.  Do not get me wrong — this is a perceptible change, not a significant — but one that should be weighed.  DOJ is sending a message and it is one that benefits corporations that disclose misconduct.  I expect that more companies will lean toward voluntary disclosures.

One other note — if DOJ ever discounts or eliminates the disgorgement requirement, that would have another significant impact on corporate disclosures.  That would not be a crazy revision because it has been done before.  Under former SEC Enforcement Director Stanley Sporkin, companies that self-disclosed were given free pass in the early days of corporate enforcement.

DOJ’s revisions to its corporate enforcement policy pushed the limits — and provided a clear path to a declination with proper regard for cooperation and remediation.  This same approach was applied in a False Claims Act case in which DOJ awarded a company for its disclosure, cooperation and remediation.

In the White Deer and Unicat criminal sanctions prosecution, White Deer fully cooperated after it discovered Unicat’s continuing Iran business after the closing.  With White Deer’s cooperation, DOJ prosecuted Unicat’s CEO for his role in leading the sanctions violation scheme.  By handling the case this way, DOJ reinforced its corporate enforcement policy and its often-stated approach to merger and acquisitions which encourage post-closing audits and disclosure if violations are uncovered.

Given DOJ’s commitment, it is important to follow through in good faith to earn the benefits offered under DOJ’s policies.  A voluntary disclosure should be timely; cooperation requires full cooperation and not piecemeal efforts, and a remediation plan must entail accountability and addressing compliance program deficiencies.

DOJ has several examples to show the white collar bar to demonstrate its commitment to encouraging companies to come forward and disclose misconduct.  Defense counsel have to present this revised approach to clients when relevant, and companies are likely to lean into voluntary disclosures when the decision is close.