Top New York federal prosecutors on Wednesday unveiled a new effort to encourage companies to voluntarily disclose wrongdoing to U.S. attorneys.
Under the new policy, which is effective immediately, companies that self-report misconduct will receive more lenient treatment than if prosecutors discover the misconduct through whistleblowers or of their own accord. Damian Williams and Breon Peace, the U.S. attorneys in Manhattan and Brooklyn, respectively, announced the policy. Both of their offices are key hubs for federal prosecutions of white-collar crime.
The benefits of voluntary disclosure will include reduced criminal financial penalties — or potentially none at all — as well as the possibility that a U.S. attorney’s office will decline to prosecute. When companies self-report, prosecutors say they can better police corporate conduct and gain possible evidence to charge individuals who may have been involved. U.S. attorneys have previously offered some forms of leniency on an informal basis.
In some cases, prosecutors could still seek a guilty plea even if a company discloses certain conduct. These include if the misconduct is pervasive, involves current executive management or poses a threat to national security, public health or the environment.
The policy comes in response to a September memo by U.S. Deputy Attorney General Lisa Monaco that required Justice Department branches that prosecute corporate crime to draft formal policies to motivate self-disclosure. The Justice Department’s criminal division last month released its own similar policy for the cases it handles.
Department officials said two recent cases illustrated the punishments that companies can incur when they don’t voluntarily self-disclose misconduct.
In one, a U.S. investing division of Allianz SE pleaded guilty to securities fraud last May and agreed to pay about $6 billion in penalties and restitution to investors.
Allianz and its subsidiary fully cooperated with the investigation, Mr. Williams, the Manhattan U.S. attorney, said when announcing the plea, but he also said that wasn’t the same thing as self-reporting. “Cooperation after a fraud has already been caught by the government is not a get-out-of-jail-free card,” he said.
An Allianz spokeswoman declined to comment. When the charges were announced, Allianz pointed to Justice Department findings that the criminal misconduct was limited to a handful of individuals no longer at the company.
In another case, the U.S. attorney’s office in Brooklyn last October announced that French cement firm Lafarge SA pleaded guilty to providing material support to foreign terrorist organizations for paying Islamic State to protect a cement facility in Syria. Lafarge agreed to pay about $778 million in financial penalties.
“Neither of the defendants nor the successor company self-reported the conduct that we have investigated, nor did they fully cooperate in our investigation,” Mr. Peace, the U.S. attorney, said at the time.
Holcim Ltd., which acquired Lafarge after the conduct occurred, previously said that none of the conduct involved Holcim or any Lafarge operations in the U.S. A Holcim spokesman on Wednesday referred to the company’s prior statement.