DOJ Revises Corporate Compliance Emphasizing Voluntary Self-Disclosure

In September of this year, the Criminal Division of the United States Department of Justice (DOJ) modified the Evaluation of Corporate Compliance Programs (ECCP). Among other things, the DOJ incentivized corporations to utilize the little-known voluntary disclosure (self-reporting) process after discovering a violation of US law, including US export regulations.

Self-reporting must follow procedural guidelines to ensure that all the relevant facts regarding the violation are presented, that the law violated is clearly stated in the reporting document, and that remedial conduct coupled with a program to avoid future violations is in place at the “perpetrator” company.

However, the most crucial self-reporting requirement is that the disclosure document is filed with the appropriate US government agency: criminal with DOJ, export-related with either the Office of Foreign Assets Control (OFAC) or the US Department of Commerce, Bureau of Industry and Security (BIS).

Note that many US export violations carry criminal penalties if advanced knowledge of the violation (scienter) can be circumstantially or directly proved. In particular, a referral to DOJ will happen if the perpetrator is complicit in a scheme to avoid US export regulations.

On a case-by-case basis, the DOJ will assess the benefits of self-reporting from a company (perpetrator) viewpoint compared to the risk to the public if the misconduct is reported first by a disgruntled employee, competitor, or other whistleblower. If leniency is expected by the company, the DOJ wants to learn of corporate misconduct from the perpetrator, not from its investigation that sucks up DOJ time and money or from whistleblowers who may know of the wrongdoing long after its occurrence and related harm to the public.

DOJ created the Whistleblower Awards Pilot Program to increase the opportunity for whistleblowers to come forward as soon as they learn of corporate misconduct. As a company incentive, the Program has provided perks to companies that self-report. Suppose a company voluntarily self-reports its misconduct to DOJ within 120 days after it received a whistleblower complaint. In that case, the company may be eligible for a presumption of mitigation of a penalty or absolute declination so long as the report comes to the DOJ before the DOJ contacts the company violator.

If you learn of misconduct regarding a US export law violation, contact the DOJ if it appears to be criminal, the OFAC if it seems to be some form of transactional export violation, or, at the very least, BIS if it appears to be a violation of the Department of Commerce Export Administration Regulations.

In the event of a violation of US export law brought to the US Government’s attention by a whistleblower or internal Government investigation, a chance at mitigation or declination, as mentioned earlier, is best served if:

1. The violating company has a compliance program at the time of the violation.
2. That this compliance program is part of the company’s corporate structure and is adequately funded with adequate personnel relative to the company’s size.
3. As part of that compliance program, a rapid-fire assessment of the violation and its effect on consumers and customers can be accomplished.
4. The compliance program includes a chain of reporting, adequately posted in a conspicuous place at the company and in the employee handbook.

If a whistleblower reports a violation or if the DOJ, OFAC, or BIS becomes aware of a violation on its own before it is reported, 1-4 above will advance the company’s case for mitigation, leniency, or outright declination by the applicable US Government agency.