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| Matthew Galeotti announced changes to how the DOJ will handle companies that self-report misconduct among employees. Mandel Ngan; J. David Ake/Getty Images; Alyssa Powell |
The US Department of Justice (DOJ) has rolled out stronger incentives for corporations to report internal misconduct, offering unprecedented guarantees of leniency for those who cooperate.
In June, Matthew Galeotti, head of the DOJ’s criminal division, announced that companies meeting self-reporting requirements will now receive formal declination letters binding commitments not to prosecute if they act swiftly, assist federal investigators, and resolve the misconduct internally.
Previously, under earlier administrations, there was only a presumption of a declination, leaving open the possibility of prosecution. This shift from “may” to “will” removes uncertainty, according to Lisa Zornberg, a former federal prosecutor and partner at Morvillo Abramowitz.
Galeotti said the revisions to the Corporate Enforcement and Voluntary Self-Disclosure Policy (CEP) are designed to help the DOJ detect white collar crimes that might otherwise go unnoticed, hold individual wrongdoers accountable, and encourage companies to strengthen compliance programs.
Why self-reporting is a complex decision
To secure a declination, companies must provide detailed cooperation, often supplying evidence to pursue charges against employees involved in fraud, bribery, regulatory violations, or other corporate crimes.
“They’re taking a narrower view of when corporations need to be prosecuted, and focusing instead on the individuals,” Zornberg explained.
Still, deciding when and how to self-report is rarely straightforward. Corporations may face uncertainty over the nature of the misconduct, the potential interest of prosecutors, or the possibility of whistleblower disclosures. Acting too early or too late carries strategic risks.
As Zornberg put it, “Deciding whether and when to self-report is not off the rack, it’s couture.”
Former Deputy Attorney General Rod Rosenstein noted that companies also have fiduciary duties to weigh shareholder interests. Choosing to remain silent and handle issues internally could avoid government attention until statutes of limitations expire, but carries risks if regulators learn of the wrongdoing through other channels.
Even without criminal charges, disclosures could lead to shareholder lawsuits, class actions, or foreign regulatory probes. “For companies that have engaged in wrongdoing, there’s always a cost-benefit analysis,” Rosenstein said.
Balancing lighter enforcement with bigger incentives
The second Trump administration has been viewed as taking a lighter touch on white collar enforcement. Rosenstein said the expanded self-reporting policy helps offset that perception by giving companies a larger “carrot” to come forward.
Under the revised CEP, even companies that don’t fully meet the conditions for a declination may still receive a non-prosecution agreement and reduced penalties if they self-report promptly and cooperate.
Rosenstein emphasized that the change continues a bipartisan, decades-long trend of encouraging corporate self-policing to uncover in-house criminal activity.
Focusing on individuals, not destroying companies
The DOJ has increasingly targeted individual executives and employees rather than entire corporations a strategy meant to avoid the collateral damage of corporate convictions.
Prosecuting an entire company can wipe out jobs and harm stakeholders who had no role in the misconduct. Zornberg cited the case of Arthur Andersen, the accounting giant convicted in 2002 for its role in the Enron scandal. The Supreme Court overturned the conviction three years later, but the firm had already collapsed, costing tens of thousands of jobs.
From a prosecutor’s perspective, “If there are individuals who engaged in criminal conduct that harmed investors, the environment, or others those individuals should be held accountable,” Zornberg said.
