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In mid-April, the DOJ launched a Pilot Program on Voluntary Self-Disclosure for Individuals — the latest in a string of sweeping DOJ policy changes aimed at encouraging voluntary disclosure of misconduct and holding the real “bad guys” accountable. We’ve previously covered those developments here, on CompensationStandards.com and on DealLawyers.com. Here are related DOJ announcements since early 2023, as a reminder:

– The voluntary self-disclosure policy for corporations
– The pilot program on compensation incentives and clawbacks
– The M&A voluntary self-disclosure safe harbor
– The pilot whistleblower rewards program

While aimed at individual reporting, this latest pilot program is still focused on corporate wrongdoing. This DLA Piper alert addresses what GCs and compliance officers need to know and notes that this can be “an additional tool at their disposal to encourage their companies to invest in the development of trusted reporting channels and other compliance controls that prevent and detect misconduct – and allow the company to address, remediate, and disclose the misconduct, if appropriate – before an individual is incentivized to make reports outside of the company.”

DOJ’s message to companies is clear: Investing in building a culture of trust that rewards ethical behavior, and penalizes those who break the rules, is paramount. Further, if employees do not trust that their concerns will be taken seriously, addressed appropriately, and valued by the company, they may bring their concerns elsewhere – and the individual, not the company, will receive the benefit of the disclosure. These “sticks” also require companies to ensure they carefully assess when it may be appropriate to avail themselves of the DOJ’s incentives to come forward before their employees do.

If an individual engaged in misconduct but discloses and cooperates, they may receive a Non-Prosecution Agreement if certain criteria, detailed in the alert, are met. CEOs & CFOs do not qualify, and the Pilot Program will initially only apply to disclosures involving certain types of criminal conduct involving corporations:

1. Violations by financial institutions, their insiders, or agents, including money laundering, anti-money laundering, registration of money transmitting businesses, fraud statutes, and fraud against or compliance with financial institution regulators
2. Violations related to the integrity of financial markets undertaken by financial institutions, investment advisors, or investment funds by or through public companies or private companies with 50 or more employees, or by any insiders or agents of such entities
3. Violations by or through public or private companies related to foreign corruption and bribery, including violations of the Foreign Corrupt Practices Act, Foreign Extortion Prevention Act, and money laundering statutes
4. Violations by or through public or private companies with 50 or more employees related to healthcare fraud or illegal healthcare kickbacks committed
5. Violations by or through public or private companies with 50 or more employees related to fraud against, or deception of, the US in connection with federal contracts, and
6. Violations committed by or through public or private companies related to the payment or bribes or kickbacks to domestic public officials.

The alert concludes with action items for companies to consider beginning with reviewing existing compliance policies and procedures.

We’re posting this and related resources in our “Compliance Programs” Practice Area.

– Meredith Ervine