US prosecutors sweeten deal for companies disclosing criminal activity

Companies that disclose suspected criminal activity to US federal prosecutors could receive up to a 75 per cent reduction in penalties, as the justice department seeks to sweeten the incentives for co-operation.

The department’s corporate enforcement policy had previously recommended a maximum penalty reduction of 50 per cent in the event of a company coming forward in a timely manner and offering to assist with an investigation.

In a speech on Tuesday, assistant attorney-general Kenneth Polite said that the government would recommend the higher discount, unless the company concerned was a repeat offender. The DoJ would also generally not require the corporation itself to plead guilty, he said.

“When a company has uncovered criminal misconduct in its operations, the clearest path to avoiding a guilty plea or an indictment is voluntary self-disclosure,” he said.

“The policy is sending an undeniable message: come forward, co-operate, and remediate,” Polite added. “We are going to be closely examining how companies discipline bad actors and reward the good ones.”

The remarks by Polite build on policy reform spearheaded by deputy US attorney-general Lisa Monaco, who has pledged to take a tougher stance on corporate wrongdoing.

Monaco in September announced guidelines as part of a stricter corporate enforcement regime, which included measures to incentivise self-disclosure by setting up schemes aimed at boosting this practice in every DoJ unit prosecuting corporate crime.

In his speech Polite pointed to recent cases in which the DoJ has stopped short of prosecuting companies that came forward with disclosures, such as the French aircraft manufacturer Safran, which reported historic bribes made to a Chinese consultant by a recently acquired subsidiary.

Companies that do not voluntarily self-disclose but still “fully co-operate and timely and appropriately remediate” can also expect a 50 per cent reduction in penalties, Polite said. That is double the amount previously offered by prosecutors before the administration of Joe Biden took office.

Under the revised guidelines, Polite said, prosecutors may consider declining to bring charges as the “appropriate outcome . . . even if aggravating circumstances are present”, as long as companies voluntarily self-disclose immediately upon discovering misconduct, have an “effective” compliance programme in place, and engage in “extraordinary” co-operation and remediation.

US prosecutors have historically been urged to pursue criminal convictions against individuals within corporations over companies themselves, which have deeper pockets and are often able to price-in potential fines.

The update from Polite is the latest tweak to a policy first made permanent under the administration of Donald Trump in 2017 that promised to reward voluntary disclosures of compliance lapses.

As of the end of last year, the DoJ had declined to prosecute 16 companies investigated for violations of the Foreign Corrupt Practices Act, an anti-bribery law. They were deemed to have fully co-operated with prosecutors.