SDTX implements voluntary self-disclosure and monitorship selection policies

HOUSTON – The U.S. Attorney’s Office for the Southern District of Texas (USAO-SDTX) has implemented a new national policy which details the circumstances under which a company will be considered to have made a voluntary self-disclosure (VSD) of misconduct to a USAO, announced U.S. Attorney Alamdar S. Hamdani.

The policy, which is effective immediately, aims to provide transparency and predictability to companies and the defense bar concerning the concrete benefits and potential outcomes in cases where companies voluntarily self-disclose misconduct, fully cooperate and timely and appropriately remediate.

The goal of the policy is to standardize how VSDs are defined and credited by USAOs nationwide. It also hopes to incentivize companies to maintain effective compliance programs capable of identifying misconduct, to expeditiously and voluntarily disclose and remediate misconduct and to cooperate fully with the government in corporate criminal investigations.

The SDTX also implemented a selection policy for independent corporate monitors, who can be an effective resource in assessing a company’s compliance with the terms of a corporate criminal resolution and reducing the risk of repeat misconduct and compliance lapses.

The policy lays out a detailed, mandatory selection process that culminates in U.S. Attorney approval for the appointment of any monitor. In general, the SDTX will favor the imposition of a monitor where there is a demonstrated need for, and clear benefit to be derived from, a monitorship, such as when a company’s compliance program and controls are untested, ineffective, inadequately resourced or not fully implemented at the time of a resolution. This is particularly true if the investigation reveals a compliance program is deficient or inadequate in numerous or significant respects. Conversely, where a company’s compliance program and controls are demonstrated to be tested, effective, adequately resourced and fully implemented at the time of a resolution, a monitor may not be necessary. The scope of any monitorship will be appropriately tailored to address the specific concerns of each individual company.

Under the new VSD policy, a company is considered to have made a VSD if it becomes aware of misconduct by employees or agents before that misconduct is publicly reported or otherwise known to the DOJ. A company must also disclose all relevant facts known to the company about the misconduct to a USAO in a timely fashion prior to an imminent threat of disclosure or government investigation.

A company who voluntarily self-discloses, as defined in the policy, and fully meets the other requirements of the policy by fully cooperating, timely and appropriately remediating the criminal conduct and paying appropriate penalties will receive significant benefits. These include that the USAO may choose not seek a guilty plea, not to impose any criminal penalty and/or not to impose a criminal penalty that is greater than 50% below the low end of the U.S. Sentencing Guidelines (USSG) fine range and will not seek the imposition of an independent compliance monitor if the company demonstrates that it has implemented and tested an effective compliance program.

The policy identifies three aggravating factors which may warrant a USAO seeking a guilty plea even if the other requirements of the VSD policy are met. These include if the misconduct poses a grave threat to national security, public health or the environment; if the misconduct is deeply pervasive throughout the company; or if the misconduct involved current executive management of the company. The presence of an aggravating factor does not necessarily mean that a guilty plea will be required. Instead, the USAO will assess the relevant facts and circumstances to determine the appropriate resolution. If a guilty plea is ultimately required, the company will still receive the other benefits under the VSD policy. The USAO will recommend a criminal penalty of at least a 50%, and up to a 75%, reduction off the low end of the USSG fine range and will not require the appointment of a monitor if the company has implemented and tested an effective compliance program.

In cases where a USAO and another DOJ are jointly prosecuting a company or where the misconduct the company reports falls within the scope of conduct the VSD covers, the USAO will coordinate with or, if necessary, obtain approval from the DOJ component responsible for the VSD policy specific to the reported misconduct when considering a potential resolution.

These policies were prepared by the Corporate Criminal Enforcement Policy Working Group, a group of United States Attorneys from geographically diverse districts throughout the USAO community, at the request of the Attorney General’s Advisory Committee and its White Collar Fraud Subcommittee.