DOJ Launches Pilot Program on Voluntary Self-Disclosure

The Criminal Division of the Department of Justice ("DOJ") launched a pilot program on voluntary self-disclosure for individuals ("VSD" or "Pilot Program"). The Pilot Program offers non-prosecution agreements ("NPAs") to individuals who voluntarily disclose certain types of corporate criminal conduct.

According to the DOJ memorandum, the Pilot Program will (i) incentivize individuals to disclose alleged misconduct by offering greater assurance that it will not prosecute, (ii) provide more transparency into who is eligible for relief and (iii) prompt companies to ensure that their compliance programs promote comprehensive internal reporting of known, suspected or attempted misconduct.

The reported misconduct must pertain to the following types of financial, healthcare and white-collar crimes:

• violations by financial institutions, their insiders or agents as to schemes involving money laundering, registration of money transmitting businesses, fraud and compliance with financial institution regulation;
• violations related to integrity of financial markets by (i) financial institutions, investment advisors or investment funds, (ii) public companies or private companies with 50 or more employees or (3) any insiders or agents of any such entities;
• violations related to foreign corruption and bribery by public or private companies, including violations of the Foreign Corrupt Practices Act, violations of the Foreign Extortion Prevention Act and violations of money laundering statutes;
• violations related to health care fraud or illegal health care kickbacks committed by public companies or private companies with 50 or more employees;
• violations related to fraud or deception against the United States in connection with federally funded contracting (not including health care or health care kickbacks,) by public or private companies with 50 or more employees; and
• violations committed by public or private companies related to the payment of bribes or kickbacks to domestic public officials.

In a Norton Rose Fulbright Memorandum, lawyers noted that the Pilot Program excludes a wide range of conduct including those that involve "substantial patient harm" (which implicates health care offenses), CEOs and CFOs and their "equivalents" (which seems designed to exclude the leaders of corporate entities) and, potentially, tax offenses and sanctions matters for which the Criminal Division is not the sole prosecuting component. The lawyers stated that the Pilot Program also excludes schemes in which the individual was the alleged "leader/organizer," (likely to require considerable fact development by counsel before any individual can decide whether to participate in the program).

The lawyers further stated that, while the Pilot Program offers that a "reporting individual will receive an NPA," it nonetheless affords prosecutors a great deal of discretion about whether they meet the Pilot Program’s criteria. The lawyers recommended that companies "should heed the warning implicit in the VSD and ensure their compliance programs, including whistleblower procedures, are designed to maximize the chances that misconduct will be prevented and/or reported internally before the problem grows."