The Department of Justice (DOJ) is introducing a Mergers & Acquisitions Safe Harbor policy. Unveiled by Deputy Attorney General Lisa O. Monaco at a Society of Corporate Compliance and Ethics event on October 4th, the policy seeks to encourage proactive, voluntary disclosures of potential criminal misconduct by acquiring companies.
Under the new policy, the DOJ will likely decline to prosecute firms that voluntarily highlight criminal misconduct and work to fully remedy the issues within a year. This pertains specifically to incidents that are discovered and reported within six months following the closing date of an M&A transaction.
There are several important aspects to this announcement. The DOJ is unmistakably giving corporations an incentive for self-disclosure. By doing so, acquiring businesses are being encouraged to take on the mantle of responsibility of discovering and addressing acts of criminal misconduct. Moreover, assumedly only companies that tend to the full remediation of any misconduct within the one-year timeframe are likely to benefit from the Safe Harbor provisions.
Further elaboration and clarity on the specifics of this new policy, particularly on how the DOJ will determine if self-disclosed misconduct has been sufficiently remediated, will no doubt be anticipated by legal professionals working in M&A.
It must be emphasized that the policy will ‘presumptively’ refuse to prosecute disclosed misconduct. As a result, corporate entities should still exercise careful consideration and legal counsel when dealing with any potential misconduct that may require disclosure. Affected entities would be well-advised to consult with their legal teams on how this new policy may affect their planning and due diligence practices for future M&A activities.