U.S. Justice Department rolls out policy to coax companies to report wrongdoing

By Chris Prentice

(Reuters) -U.S. federal prosecutors will have greater leeway to decline to prosecute companies that self-report criminal matters and cooperate with government investigations, the Justice Department said on Tuesday.

The policy aims to boost incentives for companies to disclose any misconduct they uncover to authorities, Assistant Attorney General Kenneth Polite said at Georgetown University.

Polite's remarks mark a further softening of tone from the Biden administration's more aggressive stance with Corporate America initially outlined in October 2021 and detailed in more balanced terms in September 2022.

"This demonstrates that the Department is looking to strike a balance between ‘tough on corporate crime’ rhetoric and giving companies a reason to disclose conduct," said former prosecutor Justin Weitz, now a partner with Morgan, Lewis & Bockius LLP.

Previous use of such so-called declinations applied in foreign corruption matters and prosecutors was limited when there were aggravating circumstances, such as the involvement of key executives and a significant profit from the wrongdoing.

Now the policy will apply to a greater variety of white collar matters, and the Justice Department can decide against prosecuting even under such aggravating circumstances if companies meet certain guidelines.

The guidelines include the immediate disclosure of issues when they are uncovered, and "extraordinary" cooperation and remediation, Polite said.

Even if a criminal resolution is warranted, companies can earn discounts of 50% to 75% off the low end of prosecutors' sentencing guidelines for penalties. But Polite cautioned that steep discounts would not be the norm.

"Each and every company starts at zero cooperation credit," Polite said. "This is not a race to the bottom."

Some have said that even the tougher rhetoric under Biden does not go far enough to address corporate misconduct.

"The DOJ is right to incentivize and reward companies for self-reporting. The key is getting the balance of carrots and sticks right," said Dennis Kelleher, the president and CEO of Better Markets nonprofit.

"Individuals must be meaningfully and personally prosecuted in every case."

(Reporting by Chris Prentice; Editing by Jonathan Oatis and Howard Goller)