SDNY vs. DOJ: Competing Corporate Enforcement Policies

According to Global Investigations Review at the New York University School of Law’s annual Program on Corporate Compliance and Enforcement, Clayton stated that the SDNY program was still in place, his office was encouraging businesses to make submissions under it, and that the office would continue to incentivize companies to come forward voluntarily. 

Clayton’s remarks were noteworthy given that, one month earlier, the DOJ announced that the department-wide policy replaced any office-specific policies. When announced, the DOJ stated that the policy would provide “predictability for companies and their counsel.” Clayton’s comments conflicted with the DOJ’s announcement that its corporate enforcement policy superseded “all component-specific or U.S. Attorney’s Office-specific corporate enforcement policies currently in effect.” 

DOJ’s Corporate Enforcement and Voluntary Self-Disclosure Policy

On March 10, the DOJ announced its first uniform Corporate Enforcement and Voluntary Self-Disclosure Policy (DOJ CEP), applicable to all corporate criminal matters except criminal antitrust cases. AFS previously discussed and summarized the department’s policy. 

The DOJ CEP expressly states that it “supersed[es] all component-specific or U.S. Attorney’s Office-specific corporate enforcement policies currently in effect.” Building on the prior Criminal Division CEP, the policy establishes a three-part framework: 

• Part I. Declination: The DOJ will presumptively decline prosecution when a company voluntarily self-discloses to the appropriate DOJ criminal component, fully cooperates, timely remediates, and has no disqualifying aggravating circumstances. 

• Part II. “Near Miss”: Companies that cooperate and remediate but narrowly miss the declination standard may receive a non-prosecution agreement, a term of fewer than three years, no monitor, and a fine reduction of 50-75% off the low end of the US Sentencing Guidelines range. 

• Part III. Other Resolutions: Prosecutors retain full discretion over the resolution form, term, and monetary penalty, with a maximum fine reduction of 50%. 

The DOJ CEP also requires that all corporate resolutions be approved by the relevant Assistant Attorney General or US Attorney in coordination with the Office of the Deputy Attorney General and the Criminal Division. 

SDNY’s Corporate Enforcement Policy

On February 24, roughly two weeks before the DOJ CEP policy was announced, US Attorney Clayton’s office issued its own updated voluntary corporate self-disclosure program focused specifically on fraud and financial misconduct affecting market integrity. The SDNY program provides that the office will decline prosecution when four factors are satisfied: 

1. Illegal activity is eligible to be reported (e.g., fraud or financial misconduct). 

2. Company timely and voluntarily self-discloses the illegal activity to SDNY.

3. Company commits to full cooperation. 

4. Company commits to remediating the illegal activity, including by making restitution to victims. 

The SDNY program offers qualifying companies a conditional declination letter “within two to three weeks” of making a self-report, providing early certainty regarding the likely outcome of an investigation. The SDNY policy states that it will not seek criminal fines or forfeiture from companies that receive a declination, requiring only restitution to injured parties. It also guarantees that no monitor will be imposed. 

Notably, the SDNY program explicitly states that the seriousness of the offense, the pervasiveness of misconduct, the severity of harm, past criminal adjudications, and involvement of senior leaders will not be treated as aggravating or disqualifying circumstances. Companies that fail to self-report face a strong presumption that the resolution will take the form of a guilty plea, a deferred prosecution agreement, or a non-prosecution agreement accompanied by a statement of facts and financial penalties. 

Two Policies, Two Different Paths for Corporate Defendants 

Several substantive tensions exist between the DOJ CEP and the SDNY policy. 

• Penalties: The DOJ CEP requires companies to pay disgorgement and forfeiture as part of any declination, whereas the SDNY program promises no financial penalties beyond restitution. 

• Aggravating and Mitigating Circumstances: The DOJ CEP treats factors such as corporate recidivism, the egregiousness of misconduct, and the involvement of senior leadership as potentially aggravating circumstances that could preclude a declination. The SDNY policy, on the other hand, expressly excludes those factors from its aggravating-circumstances analysis, stating that “the seriousness of the offense, the pervasiveness of the misconduct within the company, the severity of harm caused by the misconduct, past criminal adjudications, or the involvement of senior leaders” are not aggravating or disqualifying circumstances.

• Applicable Offenses: The SDNY program is narrower in scope, applying only to fraud and financial market misconduct. The DOJ CEP covers all corporate criminal matters except antitrust.

• Procedural Benefits: The SDNY policy provides for a conditional declination letter within weeks of a self-report, a specific procedural commitment not replicated in the DOJ CEP.

Companies considering voluntary self-disclosure face uncertainty as to which framework will govern their resolution. Significantly, companies cannot be certain whether Main Justice will override an SDNY declination or deferred prosecution agreement. 

Key Takeaways for Corporations and Corporate Leaders 

Given this uncertainty, companies should consider the following actions.

• Evaluate existing compliance programs. Companies should ensure that their internal compliance and reporting programs are robust enough to detect and escalate potential misconduct swiftly, regardless of which enforcement framework ultimately applies. 

• Preserve records and communications. Both policies emphasize full cooperation and document preservation, including guidance on the use of ephemeral messaging platforms. Companies should review their document-retention policies to ensure compliance with the strictest applicable standard. 

• Assess disclosure strategy carefully. Given the divergence between the SDNY and DOJ frameworks — particularly regarding financial penalties, aggravating circumstances, and the speed of conditional declinations — companies that identify potential misconduct should carefully evaluate the forum, timing, and substance of any voluntary self-disclosure. 

• Engage experienced counsel. Given the competing policy frameworks and the uncertainty surrounding their application, companies facing potential enforcement exposure should consult with experienced white-collar defense counsel to navigate the current environment and develop an informed disclosure and cooperation strategy.