DOJ Official Touts Early Impact of Criminal Disclosure Policy

It hasn’t taken long for the Department of Justice’s new self-disclosure policy to change company behavior when it comes to reporting potential criminal misconduct, according to the head of its Criminal Division.

Speaking at a conference last month, Assistant Attorney General Kenneth Polite Jr. said corporate disclosures have swelled since the policy went into effect. Earlier this year, DOJ announced it would apply leniency when companies voluntarily report instances of misconduct and cooperate with the agency to fix whatever underlying problems exist. Under the new guidelines, participating companies can mitigate penalties for misbehavior and even stave off criminal prosecution altogether.

Polite indicated that more efforts to highlight corporate enforcement are likely in the works. They include enhanced transparency related to the way the Criminal Division decides to bring corporate executives up on charges.

The changes came as part of a classic carrots-and-sticks approach by the Biden administration towards curbing white-collar crime. In terms of getting tough, DOJ has taken a more skeptical stance on probationary deals that enable companies to defer prosecution. Additionally, the Justice Department has prodded corporations to develop their own clawback policies for recapturing compensation awarded to executives involved in malfeasance.

Meanwhile, the benefits of self-reporting make up the rewards side of DOJ’s strategy. Besides encouraging self-reporting, Polite has said one objective of the policy is to make compliance departments more omni-present and interactive across corporations.

Spurred on by the Criminal Division’s strategy, other arms of the Justice Department have developed their own approaches to encourage voluntary reporting that largely mirror what it has put in place. They include the U.S. Attorneys’ Offices, the Consumer Protection Branch, the National Security Division, the Tax Division, and the Environment and Natural Resources Division. (Intelligize subscribers can access dozens of memos from law firms regarding the DOJ initiative via the Intelligize platform.)

Although the Criminal Division’s policy may encourage more self-reporting, it is worth considering what we can conclude about its end goal of discouraging corporate crime. For instance, does disclosing more malfeasance inside a corporation really discourage white-collar crime? We can’t make that claim without knowing what levels of undetected – or unreported – misconduct looked like prior to the policy’s implementation. And even now as more reports surface, we’re in the dark about how much misconduct is taking place; by definition, we can never know how much undetected malfeasance occurs.

As such, the new policy may play a part in producing more reports of criminal misconduct. DOJ may close more criminal cases because of it. But it is difficult to say if the policy is truly rooting out white-collar crime or simply giving corporations a way to improve their optics and better manage their own risk.