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Companies that disclose wrongdoing at companies they acquire will not face charges under a new U.S. Justice Department enforcement policy designed to address a “new era” of national security threats arising from corporate misconduct.
U.S. Deputy Attorney General Lisa Monaco will announce measures on Wednesday afternoon to provide a “safe harbor” for companies that self-disclose.
Under the policy, the Justice Department will not bring charges against an acquirer that voluntarily reports misconduct at a company it acquires within six months of closing, regardless of whether the illegal activity was discovered before or after the acquisition.
Companies that self-disclose must correct misconduct within a year after the deal closes, but the exact timeline depends on the discretion of prosecutors.
“We want to incentivize this kind of responsible corporate behavior,” Monaco told the Financial Times.
“We want to incentivize good companies, companies that have good, strong compliance records… to acquire companies that may have… a less robust compliance program that may actually have a history of misconduct,” she added road. “We don’t want to block these acquisitions.”
The measures are intended to give the Justice Department an opportunity to detect misconduct during the typical due diligence and integration processes in mergers and acquisitions, as Washington intensifies its focus on corporate misconduct that affects national security.
“We are in a new, more complex era where businesses, especially multinationals, face greater geopolitical risks,” Monaco said.
She said “national security risks are emerging in ways that we haven’t seen in the past” and are not limited to sanctions violations but are emerging in “many areas and many industries,” such as cryptocurrency or foreign countries seeking to target U.S. intellectual property.
“We have seen a real increase in the number of major corporate criminal resolutions involving our national security,” Monaco added.
One case involves British American Tobacco, which agreed in April to pay authorities $635 million after one of its subsidiaries admitted to selling tobacco products to North Korea in violation of U.S. sanctions. The U.S. Justice Department said at the time that the penalty, established under a deferred prosecution agreement, was the harshest penalty ever imposed for North Korea’s sanctions violations.
The Ministry of Justice’s policy will incorporate measures that have been implemented to date on a case-by-case basis.
Modeled on a 2008 advisory opinion issued to Halliburton Co., one of the world’s largest oilfield services providers, the U.S. Department of Justice disclosed possible wrongdoing at a British company it was seeking to acquire six months after the deal closed. Under British law, Halliburton was unable to complete due diligence before the transaction. The Justice Department agreed not to prosecute Halliburton if it disclosed any wrongdoing before the deadline.
“We are taking the Halliburton approach that was limited to specific cases and implemented only piecemeal within the specific confines of the Justice Department and extending it by making it consistent and predictable,” a senior Justice Department official said.
Since taking office in 2021, Monaco has been committed to promoting voluntary self-disclosure by companies as part of wider law enforcement reforms.
They also include considering historical misconduct during corporate investigations, prioritizing the pursuit of individual accountability for corporate crimes, and limiting the use of deferred prosecution agreements, which typically waive or delay criminal charges to allow a business to prove it can correct the wrongdoing—often in exchange for financial penalties.
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