Caitlin L.D. Hull

The Department of Justice (“DOJ”) has announced a new, “first-ever” Corporate Enforcement and Voluntary Self-Disclosure Policy (the “Policy” or “CEP”) for prosecuting corporate criminal conduct. Last year, DOJ announced it was “turning a new page” on white collar and corporate enforcement efforts. Fast forward to the present, DOJ is now seeking to proactively incentivize responsible corporate behavior through the Policy, while simultaneously acknowledging the public’s interest in rooting out fraud and corruption and the government’s stated interest in “swift criminal justice.” The CEP incentivizes companies to disclose misconduct to DOJ by minimizing uncertainty for companies that do so. DOJ’s stated goals in implementing the Policy are: (1) drive early, voluntary self-disclosure of criminal conduct, (2) promote timely and effective enforcement of criminal laws, including holding culpable individuals accountable, (3) reduce harm, (4) facilitate prompt remedial action, including requiring companies to compensate victims and address corporate deficiencies, (5) help ensure consistency across the DOJ, and (6) transparently describe the DOJ’s policies and decision-making.  Here’s What Companies and Organizations Need to Know: 1. DOJ Will Decline to Prosecute When Certain Factors are Met. Under the CEP, companies that meet the Division’s core requirements will receive a public declination of prosecution. The core requirements are: (1) Voluntarily self-disclosing misconduct; (2) Fully cooperating with a DOJ investigation; (3) Timely and appropriately remediating the misconduct; and (4) The issue presents no aggravating circumstances. To qualify as a “voluntary self-disclosure,” a company must make a good faith effort to disclose such misconduct to the appropriate DOJ department within a reasonable time after becoming aware of the misconduct. At the time of disclosure, the reported conduct must also be previously unknown by DOJ, and the company must not currently be under a pre-existing obligation to report conduct to DOJ or under an “imminent threat of… government investigation.” The CEP emphasizes that companies should disclose at the “earliest possible time,” even before an internal investigation is completed. Even if companies present “aggravating circumstances” that weigh against a presumptive declination under the CEP, the CEP encourages self-disclosure and cooperation. The CEP vaguely describes potential “aggravating circumstances” as including factors that impact “the nature and seriousness of the offense, egregiousness or pervasiveness of the misconduct within the company, severity of harm caused by the misconduct, or corporate recidivism, specifically, a criminal adjudication or resolution either within the last five years or otherwise based on similar misconduct by the entity engaged in the current misconduct.” Even when such circumstances are present, however, the CEP states that prosecutors have discretion to recommend a CEP declination based on “weighing the severity of [aggravating] circumstances and the company’s voluntary self-disclosure, cooperation and remediation.”  The CEP clarifies that a company receiving a declination will still be required by pay all disgorgement, forfeiture, restitution, or victim compensation payments resulting from any misconduct.  2. DOJ Prosecutors Have a Large Amount of Discretion.  The Policy also takes into account “near miss” voluntary self-disclosures and aggravating factors that do not result in declinations. Specifically, the CEP provides that lenient resolutions may still be appropriate where a company “fully cooperated and timely and appropriately remediated” but (1) did not meet the requirements for a voluntary self-disclosure and/or (2) present aggravating factors that warrant a criminal resolution. In these “near miss” circumstances, the CEP suggests that DOJ will provide a Non-Prosecution Agreement (“NPA”) for a term length of fewer than three years that does not require and independent compliance monitor and provides a reduction of at least 50% but not more than 75% off the low end of the U.S. Sentencing Guidelines (“U.S.S.G.”) fine range. Even in the event a company does not meet the requirements for a declination and does not qualify as a “near-miss” voluntary self-disclosure, the Policy indicates that DOJ maintains discretion to determine the appropriate resolution including form, term length, and compliance obligations. The DOJ also retains discretion to determine monetary penalties for corporate enforcement matters, but the Policy indicates that prosecutors cannot recommend a reduction of more than 50% reduction of the fine under the U.S.S.G. 3. National Security  The CEP underscores the expectation that companies proactively identify potential violations and engage with enforcement authorities when issues arise. This need is amplified in the national security space, where enforcement authorities pursue cases involving sensitive technology or companies or individuals who are targets of U.S. economic sanctions. Export violations can occur through compliance lapses but sometimes may also have elements of intentional or reckless activity.  The CEP makes clear that companies will be best positioned to mitigate enforcement consequences if they voluntarily disclose violations to and cooperate with the DOJ.  The CEP’s approach is similar to the 2024 DOJ National Security Division Enforcement Policy for Business Organizations, which already emphasized timely voluntary disclosures, cooperation, and remediation in the context of U.S. export controls and sanctions violations. The continuity highlights the DOJ’s commitment to push companies to identify and report violations of U.S. law. Robust compliance programs and internal controls are therefore critical not only for preventing violations but also for detecting them at an early stage, and to obtain mitigating credit for reporting them. Companies operating in export-controlled or sanctions-sensitive sectors should continue to build and invest in compliance programs capable of identifying potential breaches and facilitating timely internal reporting and disclosure.   Take-Aways The new Policy is a marked shift in tone even from DOJ’s prior corporate compliance guidelines. Just two years ago, DOJ initiated a pilot disclosure program meant to incentive corporate disclosure. This goes much further, offering the potential of a “public” declination in the event of disclosure absent aggravating circumstances. In the “carrot versus stick” analogy, DOJ is strongly emphasizing “carrot”-based incentives for self-disclosure, cooperation, and remediation.  Given DOJ’s focus on self-disclosure, companies should consider proactively reviewing and assessing their internal compliance programs—particularly whistleblower ethics hotlines. The Policy encourages self-disclosure at the “earliest possible time,” which may potentially include disclosure before an issue has been fully investigated. The sooner a company can learn about an issue, the sooner it can alert DOJ to any potential wrongdoing. If a company must self-disclose an issue, it should also be prepared to fully cooperate with the DOJ during the investigative or prosecutorial phases of a DOJ matter. The DOJ has indicated that it will likewise cooperate with companies to remediate wrongful conduct. Indeed, the head of the Criminal Division at DOJ, Matthew R. Galeotti has noted, “[w]e want to hear from you… Now is the time to report, remediate, and strengthen compliance to ensure American prosperity.”

According to public reporting, the White House recently proposed a Compact for Academic Excellence in Education (“Compact”) to nine universities, promising a closer relationship with the White House, preferential access to federal funds, and other benefits in exchange for aligning policies and practices with Administration priorities. The Compact outlines the various forms of legal and financial support the nine universities (and virtually all other research institutions, colleges, and universities) currently receive, including: Access to student loans, grant programs, and federal contracts; Funding for research directly or indirectly; Approval of student and other visas in connection with university matriculation and instruction; and Preferential treatment under the tax code. The proposed Compact provides that this framework of legal and financial support for the nine universities will continue subject to alignment with a set of Administration priorities.  Although the Compact was reportedly issued only to a select number of institutions,[1] it provides a warning for all institutions: “Institutions of higher education are free to develop models and values other than those below, if the institution elects to forego federal benefits.” What does the Compact require? The Compact outlines eight categories of requirements that “represent[ ] the priorities of the U.S. government in its engagements with universities”: 1. Equality in Admissions. The Compact forbids consideration of “sex, ethnicity, race, nationality, political views, sexual orientation, gender identity, religious associations, or proxies for any of those factors” in admissions and financial support decisions. Instead, decisions must be “based upon and evaluated against objective criteria published on the University’s website and available to all prospective applicants and members of the public. ”Undergraduate applicants must take a “widely-used standardize test[s]” or other “program-specific measures of accomplishment in the case of music, art, and other specialized programs of study.” Consideration of any subjective criteria, such as the traditional personal statement, could run afoul of these requirements. Finally, the Compact requires institutions to publicly publish anonymized data related to admitted and rejected students by race, national origin, and sex. 2. Marketplace of Ideas & Civil Discourse. The Compact requires revision of “governance structures” to ensure “institutional units that purposefully punish, belittle, and even spark violence against conservative ideas” are transformed or abolished. The Compact does not define “conservative ideas.” Signatories must also assess the institutions’ viewpoints, and publicly share the results of that self-assessment, prohibit a “heckler’s veto” at events (including through use of “lawful force”), and prohibit “support for entities designated by the U.S. government as terrorist organizations.” These requirements likely implicate First Amendment concerns, including by singling out “conservative ideas” for protection but not others. 3. Nondiscrimination in Faculty and Administrative Hiring. The Compact requires that signatories commit not to consider “sex, ethnicity, race, national origin, disability, or religion” in hiring decisions, and instead rely upon “meritocratic selection based on objective and measurable criteria.” 4. Institutional Neutrality. Employees, acting “in their capacity as university representatives,” must abstain from “actions or speech relating to societal and political events in cases in which external events have a direct impact upon the university.” The Compact does not define the parameters of this prohibition, including when a member of academic faculty is speaking in their personal capacity or as a “university representative.” 5. Student Learning. The Compact prohibits inflating or deflating grades “for any non-academic reason.” The Compact requires “public accountability mechanisms” that demonstrate “commitment to grade integrity, such as publishing grade distribution dashboards with multiyear trendlines, public statements that explain student outcomes and any unusual upward trends, and comparisons with peer institutions.” 6. Student Equality. Consistent with other executive actions, the Compact requires adoption of the Administration’s view on gender identity by “commit[ting] to defining and otherwise interpreting ‘male,’ ‘female,’ ‘woman,’ and ‘man’ according to reproductive function and biological processes,” and “requires single-sex spaces, such as bathrooms and locker rooms, and fair competition, such as in sports. ”The Compact does not address intersex individuals. In addition, the Compact prohibits “favor[ing] or disfavor[ing]” any student during the disciplinary process based on membership in a racial, ethnic, national, or religious group, or a group based on sex, sexual orientation, or gender identity. 7. Financial Responsibility. The Compact requires a tuition freeze for American students for five years, refunds to undergraduate students that drop out during their first academic term and public posting of statistics about graduates’ incomes by each academic program. Tuition for students pursuing hard sciences must be waived if the institution’s endowment exceeds $2 million per student, though exceptions may be made for students from “families of substantial means.” The Compact also requires full transfer credits from the Joint Service Transcript for military service members and veterans. 8. Foreign Entanglements. The Compact requires anti-money laundering and Know Your Customer programs, as well as foreign gift and contract disclosures. Admission of students from the Student Visa Exchange Program must be capped at 15% of the institution’s undergraduate student population, with a 5% cap for any one country. Notably, the proposed Compact provides the following exceptions: “a religious institution may maintain preferences for religious affiliation or belief in hiring and admissions, a single-sex institution may maintain sex-based preferences, and any institution may maintain preferences in admissions for American citizens.” How would the Compact be enforced? The Compact requires annual certifications of compliance and independent polling of faculty, students, and staff to measure compliance with the principles outlined in the Compact, with results to be publicly reported. The Department of Justice will review compliance with the Compact and an institution found to have “willfully or negligently” violated the Compact may result in a loss of access to “benefits” of the Compact for one year.  Repeat violations may result in loss of access for two years.  Further, the Compact requires that for any year in which a violation is found: (1) return of funds to the federal government; (2) return of any private contributions to the grantor upon the grantor’s request. What does this mean for other institutions of higher education? The Compact, for now, is an unexecuted proposal to nine universities.  But the Compact may be a roadmap for the Administration’s expectations of other institutions of higher education.  The Administration seems likely to continue to leverage access to federal funding to push colleges and universities to adhere to the Administration’s view of federal civil rights obligations and related authorities.  Institutions of higher education should review internal policies and develop response plans for potential future allegations of noncompliance with federal priorities. [1] The White House reportedly proposed the Compact to Brown University, Dartmouth College, Massachusetts Institute of Technology (“MIT”), the University of Arizona, the University of Pennsylvania, the University of Southern California, the University of Texas at Austin, the University of Virginia, and Vanderbilt University. MIT has already responded that it will not sign the Compact.