May 5, 2016

By: Douglas K. Rosenblum

On Thursday, April 28, 2016 Assistant Attorney General Leslie Caldwell addressed the American Bar Association’s Institute on Internal Corporate Investigations regarding the Department of Justice’s Voluntary Disclosure Program.  In a room full of defense attorneys, this pilot program was surely received with some skepticism.  This new initiative is aimed to encourage corporate counsel to report potential wrongdoing under the Foreign Corrupt Practices Act.  The Department assumes that counsel will have conducted an internal investigation and implemented remedial procedures when it received notice of potential violations.  But instead of shelving the report of the investigation in the hopes that the government never finds out, the Voluntary Disclosure Program provides an incentive for prompt disclosure.

The prize for a company participating in this program could be fines cut in half from the lowest amount recommended by the federal sentencing guidelines, as well as a dispensation from hiring an expensive compliance monitor.  Assistant Attorney General Caldwell was clear to point out that reporting potential violations on the eve of a government investigation is not sufficient.  However, the government will not punish companies for failing to report potential violations that were unknown – for example, if a whistleblower reported directly to the government without notifying the company first.

The defense bar has been on guard following the so-called Yates Memo written by Deputy Attorney General Sally Quillian Yates directing the government’s civil and criminal attorneys to pursue individuals and discouraging corporate settlements in exchange for immunity for executives.  How does a company self-disclose and cooperate fully knowing the government would like to prosecute individual executives?  How is a company to cooperate while maintaining the sanctity of the attorney-client privilege?  Assistant Attorney General Caldwell acknowledged these issues during her remarks.  And although she was not in a position to propose specific solutions, Assistant Attorney General Caldwell credited the defense bar and its skilled attorneys with the capacity to structure cooperation in a way that does not waive the privilege.

Given the relatively recent publication of the Yates Memo and introduction of the Voluntary Disclosure Program, only time will tell how successful counsel will be in negotiating this new terrain.

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