The Environmental Crimes Section (ECS) of the U.S. Department of Justice (DOJ) Environment and Natural Resources Division (ENRD) issued revisions to its Voluntary Self-Disclosure (VSD) Policy on March 2, 2023, revising ECS’s earlier disclosure policy dating from 1991. The new VSD Policy highlights the importance of robust environmental compliance programs. Specifically, the VSD Policy explains how ECS intends to encourage self-auditing, self-policing, and voluntary self-disclosure of potential criminal conduct by affording credit for voluntary self-disclosure of potential criminal environmental violations and exercising its prosecutorial discretion in deciding whether to pursue an environmental criminal case.
The new policy follows several new DOJ policies and announcements on corporate enforcement, including self-disclosure. The Deputy Attorney General in September 2022 issued a memorandum that instructed each DOJ component that prosecutes corporate crime to review its policies on corporate voluntary self-disclosure. DOJ’s Criminal Division in January 2023 announced a new Corporate Enforcement and Voluntary Self-Disclosure Policy, which Sidley covered in detail here. This was expanded with a United States Attorneys’ Offices Voluntary Self-Disclosure Policy issued in February 2023. Notably, criminal investigations coordinated or led by ECS may look to its new VSD Policy in the first instance, not necessarily policies issued by other DOJ components.
Potential Benefits of Disclosure. The VSD Policy provides that where the standards below are met and where there are not aggravating or disqualifying factors (as explained below), ECS will not seek a guilty plea, provided that the disclosing company has fully cooperated with DOJ and remediated the misconduct. Additionally, ECS will not require the imposition of an independent compliance monitor if those factors are met plus the company shows that it has an effective compliance program. If any aggravating or disqualifying factors are present, ECS may pursue a guilty plea but may reduce the number and type of charges or recommend a lenient sanction.
Standards for Disclosure. The VSD Policy enumerates six criteria that must be met in order to receive credit.
Aggravating and Disqualifying Factors. The VSD Policy lists factors that may warrant either a guilty plea or prosecution notwithstanding a disclosure:
Practical Considerations. The VSD Policy raises several issues that companies, boards, and investors may wish to consider for industry sectors facing significant environmental regulation. Here are a few of those issues.
For potential civil violations, the Environmental Protection Agency maintains a policy on Incentives for Self-Policing: Discovery, Disclosure, Correction and Prevention of Violations, which aims to encourage self-disclosure of civil violations, as discussed in this recent Sidley blog post.
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