NDTX Implements New Voluntary Self-Disclosure (VSD) Policy

Press Release

The U.S. Attorney's Office for the Northern District of Texas announces its implementation of a newly revised national policy detailing the circumstances under which a company will be considered to have made a voluntary self-disclosure (VSD) of misconduct to the USAO, announced U.S. Attorney Leigha Simonton.

The Department-wide USAO VSD policy, which was initially announced in February 2023-but was expanded with the addition of the M&A Safe Harbor provisions in March 2024-aims to provide transparency and predictability to companies and the defense bar concerning the 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 voluntary self-disclosures are defined and credited by USAOs nationwide. It is also intended 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.

Under the policy, a company is considered to have made a VSD if it discloses misconduct by employees or agents before that misconduct is publicly reported or otherwise known to the government.[1] A company must also disclose all relevant facts known to the company about the misconduct to the USAO in a timely fashion and before any imminent threat of disclosure or government investigation.[2]

A company that 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 to 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 fine range, and not to 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 that 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% reduction, 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.

As noted in the March 7, 2024 revisions to the USAO VSD policy, the policy applies to misconduct uncovered in the context of M&A pre- and post-acquisition due diligence. See also JM 9-28.900 (the M&A Policy). An acquiring company that voluntarily discloses misconduct to the USAO pursuant to the M&A Policy and otherwise satisfies the requirements of the USAO VSD policy by fully cooperating, timely and appropriately remediating, and paying any applicable disgorgement/forfeiture and/or victim compensation payments/restitution will receive a presumption of a declination, even if aggravating factors existed as to the acquired company.

In cases where the USAO and another DOJ component are jointly prosecuting a company and/or jointly investigating the misconduct the company voluntarily self-reports pursuant to the VSD, the USAO will coordinate with or, if necessary, obtain approval from the DOJ component responsible-including, as appropriate, taking into consideration the VSD policy specific to that DOJ component-in considering a potential resolution.

Consistent with longstanding DOJ policy, the USAO will evaluate disclosures submitted pursuant to this policy to determine whether or to what extent coordination between the Criminal and Civil Divisions of the USAO is appropriate. See JM 1-12.000. To the extent a disclosure submitted pursuant to the USAO VSD policy involves misconduct that could serve as the basis for False Claims Act ("FCA") liability, the disclosure will be reviewed in accordance with the Guidelines for Taking Disclosure, Cooperation, and Remediation into Account in False Claims Matters issued by the Fraud Section of the Civil Division of the Department of Justice. See JM 4-4.112.

Since September 2023, the USAO-NDTX has resolved three matters involving potential violations of the False Claims Act based on conduct self-reported to the government. [3] In each of these matters, the government executed a settlement agreement releasing the reporting company from liability under the FCA and crediting the company for self-reporting the conduct consistent with section 4-4.112 of the Justice Manual.

Companies wishing to make a self-disclosure to the U.S. Attorney's Office for the Northern District of Texas may do so by email to: [email protected].

Updated November 1, 2024