Top Justice Department officials have long said companies reap "meaningful" benefits from voluntary disclosure. If federal prosecutors really want to convince companies and encourage self-reporting, a change in enforcement policy is needed, says one former U.S. Deputy Attorney General.

Whether companies reap real benefit from self-reporting violations, particularly in the area of Foreign Corrupt Practices Act enforcement, where cases involving voluntary disclosures have resulted in guilty pleas, huge fines, and other penalties, has been the subject of much debate among the corporate and legal communities.

A DoJ policy establishing a presumption against criminal prosecution of companies that voluntarily disclose wrongdoing would end that debate and benefit both the government and companies, says George Terwilliger, head of the global white-collar practice in the law firm White & Case and a former Deputy AG.

As FCPA enforcement has soared, enforcement officials have pushed the message that self-disclosure is rewarded. For instance, during remarks at Compliance Week's annual conference in May, DoJ Criminal Division Assistant Attorney General Lanny Breuer said companies that voluntarily disclose criminal conduct will receive "meaningful credit" for doing so.

Companies and their counsel, however, are often skeptical that the benefit of a voluntary disclosure justifies the costs, particularly when a company isn't under government investigation.

Current DoJ policies don't provide any certain benefit that a company can point to as a result of voluntarily disclosing a potential criminal violation, says Terwilliger.

"More companies would self-disclose if enforcement authorities established more clear and certain benefits for doing so," says Terwilliger, who detailed his proposal in June 23 remarks at an anti-corruption conference in Washington D.C.

The Justice Department declined to comment.

Noting that the U.S. Attorney's Manual Principles of Federal Prosecution of Business Organizations only suggest that "timely and voluntary" disclosure of criminal conduct "may" be a relevant factor in resolving a criminal matter for an organization, Terwilliger says the "opportunity to receive ‘meaningful credit' is too much promise and too little policy."

He says a policy that provides presumption against criminal prosecution or disposition for companies that voluntarily disclose wrongdoing and cooperate with the government—for example, by providing the results of an internal investigation and/or cooperating with an additional government investigation—would help the government meet its enforcement objectives of increased internal policing and voluntary disclosures.

Terwilliger notes that prosecutors have little to lose by instituting such a policy, since they can set the eligibility criteria, including factors that would render the presumption of non-criminal disposition inoperative in unusual circumstances.

"It's a promise to go in a certain direction, not a guarantee you'll end up there," he tells Compliance Week.

Eligibility criteria could include requiring that the company in question has a compliance program that meets basic criteria, isn't a repeat offender, has conducted a reasonably thorough preliminary internal investigation, and has acted to preserve relevant records and other material.

The DoJ would have to provide forbearance from some fines for voluntarily disclosed violations, by establishing a formula to determine the fine or range that should be imposed for violations, with some standard discount or scale of discounts to account for voluntary disclosure and other factors, such as the extent and costs of internal investigations.

Terwilliger notes that a civil disposition or a non-prosecution agreement could be entered on a court's docket and subject to judicial supervision, including, in certain cases, the use of court-appointed monitors. There could also be a provision to allow the government to seek recovery of some or all deferred penalty amounts for transgressions post-dating the disposition agreement.

Terwilliger notes that the idea isn't unprecedented. The DoJ Antitrust Division has an amnesty program that immunizes a company for criminal wrongdoing if it's the first to self-disclose the wrongdoing and meets other requirements. The Department of Defense, Department of Health and Human Services, and the U.S. Coast Guard also have policies incentivizing self-disclosure.

The full text of his remarks is available here.

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