In October 2023, the U.S. Department of Justice (DOJ) unveiled a department-wide Safe Harbor Policy (the Policy) for voluntary self-disclosures made in the context of merger and acquisition transactions. In announcing the Policy, Deputy Attorney General Lisa O. Monaco stated a simple goal: "[G]ood companies — those that invest in strong compliance programs—will not be penalized for lawfully acquiring companies when they do their due diligence and discover and self-disclose misconduct."
The Policy professes to grant a presumption of a declination to companies that promptly and voluntarily disclose criminal misconduct discovered during an arms-length M&A transaction, but there are certain criteria for securing its benefits:
Misconduct disclosed under the Policy will not be factored in to any future recidivist analysis for the acquiring company.
Meeting the tight timelines to qualify for declination under the Policy requires proactive, comprehensive diligence pre-closing and swift integration of an acquired company into the acquirer's compliance program post-closing. Developing a robust integration plan, including compliance training and establishing reporting channels for compliance-related issues, can help position an acquirer to identify misconduct where diligence was limited during the acquisition process.
Although the Policy is intended to be implemented consistently across all DOJ departments, each component is empowered to tailor the Policy to achieve its individual enforcement mandate. As with any voluntary self-disclosure, companies should carefully weigh with counsel the risks and uncertainty regarding application of the Policy against the potential benefits of disclosure.
Day Pitney Cybersecurity, Healthcare and Technology (C.H.A.T.) Newsletter – February 2024
Copyright © 2024 Day Pitney LLP, all rights reserved.