DOJ’s Updated Voluntary Self-Disclosure Policy

In March 2023, the Environmental Crimes Section (ECS) of the U.S. Department of Justice (DOJ) Environment and Natural Resources Division (ENRD) issued revisions to its Voluntary Self-Disclosure (VSD) Policy. The revisions set forth:

• Standards for what constitutes a VSD of misconduct to the ECS,
• A description of benefits ECS prosecutors will confer on companies that complete the VSD process, and
• Exception criteria that may limit the scope of VSD benefits in certain cases.

Companies that voluntarily disclose under the VSD receive more favorable resolution terms from the DOJ than those whose misconduct is discovered through other means.

“The VSD Policy is intended to encourage self-auditing, self-policing, and voluntary self-disclosure of criminal conduct by companies by indicating that these activities are viewed as mitigating factors in ECS’s exercise of criminal environmental enforcement discretion,” the policy states. “Voluntary self-disclosures and meaningful cooperation assist the government to conserve resources, conduct more expeditious investigations, and hold responsible individuals accountable.”

Standards of VSD

1. Voluntary: VSDs only occur when the disclosure of misconduct is made voluntarily by a company about misconduct not previously known by or required to be reported to the government.
2. Timing of disclosure: A disclosure will only be deemed a VSD when the disclosure is made to the department before an imminent threat of disclosure or government investigation; before the misconduct is publicly disclosed or otherwise known to the government; and promptly after the company becomes aware of the misconduct, with the burden being on the company to demonstrate timeliness.
3. Disclosure made to the department: In order to qualify as a VSD under this policy, disclosure must be made directly to the ECS and/or the U.S. Attorney’s Office in the district where the misconduct occurred.
4. Method of discovery: This policy seeks to award and encourage corporations that have comprehensive and meaningful ethics and compliance programs that discover and report noncompliance in a timely manner. Accordingly, violations discovered and disclosed to the ECS as a result of such a program will be afforded significant benefit.
5. Substance of the disclosure and accompanying actions: For a disclosure to be deemed a VSD under this policy, the disclosure must include all relevant facts concerning the misconduct and the individuals involved who are known to the company at the time of the disclosure. The ECS recognizes that a company may not be in a position to know all relevant facts at the time of a VSD, especially when only preliminary investigative efforts have been possible. In such circumstances, a company should make clear that its disclosure is based on a preliminary investigation or assessment of information.
6. Acquisitions: In cases when a previously unrelated company acquires another company and voluntarily and timely self-discloses misconduct as to the acquired entity, it may seek the benefit of VSD status under this policy.  The acquiring company must fully and completely cooperate against individuals, as well as disclose information that shows whether the violations were discovered by the management of either entity before the acquisition, whether the violations were discovered or disclosed during the acquisition process, and whether this discovery was reflected in the terms of the purchase and sales agreement.

Aggravating and disqualifying factors

The following aggravating factors may invalidate any protections from prosecution under the VSD. If the criminal conduct:

1. Posed a threat of serious adverse impact to the environment, public health and safety, worker safety, wildlife, or natural resources;
2. Involved knowing endangerment of, serious injury to, or death of any individual;
3. Was deeply pervasive throughout the company;
4. Involved concealment or obstruction of justice by senior management of the company;
5. Was followed by a lack of full cooperation; or
6. Was followed by a lack of timely and appropriate remediation.

Takeaways

Industry sectors facing significant environmental regulations may wish to consider issues such as:

• Robust internal compliance programs, which can be the key to risk mitigation for criminal exposure.
• “[T]he new VSD Policy adds another layer of complexity on the question of whether to self-disclose to DOJ potential criminal violations, particularly when DOJ has already issued several new policies that may overlap and in some cases differ,” a Sidley Austin LLP article says.
• “[T]he applicability of the VSD Policy can be difficult to determine when the line between civil violations and criminal charges can be gray for a particular issue, particularly where federal environmental statutes may impose lesser mens rea standards, such as criminal liability for ‘negligent’ discharges and releases,” Sidley Austin advises.
• Additionally, it is important to keep in mind that ECS prosecutors have some discretion in determining consequences. VSDs and cooperation in investigations can provide more favorable resolutions.