US DOJ Issues New Policy on Voluntary Self-Disclosure and Environmental Crime | Insights

Potential Benefits of Disclosure. VSD policy states that where the standards below are met and there are no aggravating or disqualifying factors (as explained below), ECS will not seek an admission of guilt, provided the disclosing company has fully cooperated with DOJ and has remedied the misconduct. In addition, ECS does not require an independent compliance monitor to be established if these factors are met and the company demonstrates that it has an effective compliance program. If aggravating or disqualifying factors are present, ECS may enter a guilty plea, but may reduce the number and type of charges or recommend a lenient sentence.

Disclosure Standards. The VSD policy lists six criteria that must be met in order to receive credit.

1. voluntarily. The disclosure must be made voluntarily by the Company and must not otherwise be reported to the government or by any other party (e.g., whistleblower).
2. Time of day. The disclosure must be made prior to an imminent threat of disclosure or government investigation, before the misconduct is otherwise disclosed or otherwise known to the government, and immediately.
3. Disclosure made to DOJ. Disclosure must be made to ECS and/or to the US Attorney’s Office in the district where the misconduct occurred. A disclosure to another government agency, such as a federal regulatory agency or state government, would not be sufficient, except that a disclosure to ECS within seven days of disclosure to another government agency is considered concurrent.
4. Method of discovery. The VSD policy favors disclosures through a company’s internal ethics and compliance programs, giving them a “significant advantage.”
5. Content of Disclosure. The disclosure must include all relevant facts regarding the misconduct and the individuals involved, as known at the time of disclosure. ECS expects companies to make a disclosure when it has sufficient information based on a preliminary investigation or assessment, with timely factual updates.
6. Acquisitions. An acquiring company may make a disclosure for an acquired entity under the VSD policy, provided that the company fully cooperates and makes a full disclosure regarding the transaction.

Aggravating and Disqualifying Factors. The VSD policy lists factors that may warrant a guilty plea or prosecution despite a disclosure:

1. Environmental impact. The misconduct posed a threat of serious adverse consequences to public health or the environment.
2. threat. The misconduct involved knowledge of danger, serious injury or death to a person.
3. penetrating. The misconduct was pervasive across the company, taking into account, among other things, the duration of the misconduct, the number of possible violations and the number of people involved.
4. Concealment. The misconduct involved an attempt by senior management to cover up the misconduct or obstruct justice.
5. Lack of cooperation. The misconduct was followed by a lack of full cooperation, which requires all persons materially involved in the misconduct to be identified and all pertinent facts to be provided to DOJ.
6. Restore failed. The misconduct was followed by a lack of timely or appropriate remedial action, including remediation of environmental damage, remission of financial gain, restitution of any casualties and possible disciplinary action against responsible personnel.

Practical considerations. The VSD policy raises several issues that companies, boards of directors, and investors may want to consider for industry sectors affected by significant environmental regulations. Here are a few of those problems.

• First, the VSD policy emphasizes the importance of robust compliance programs as a risk mitigation measure for exposure to criminals, including an adequate corporate structure to proactively detect and remediate potential non-compliance. In a recent podcast, Todd Kim, the Deputy Attorney General for ENRD, addressed some of these issues.
• Second, the new VSD policy adds another layer of complexity to whether potential criminal violations themselves should be disclosed to DOJ, especially when DOJ has already issued several new policies that may overlap and in some cases differ.
• Third, the applicability of VSD policies can be difficult to determine when the line between civil offenses and criminal charges can be gray on certain issues, especially when federal environmental statutes may impose less stringent rules man rea standards, such as criminal liability for “negligent” discharges and releases.

For potential civil violations, the Environmental Protection Agency maintains a policy Self-monitoring incentives: discovery, disclosure, correction and prevention of violationswhich aims to encourage self-disclosure of civil violations, as discussed in this recent one Sidley blog post.