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Complying with the U.S. Department of Justice’s New Safe Harbor Guidelines

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Key questions corporate counsel should consider

On October 4, 2023, U.S. Deputy Attorney General Lisa Monaco announced a Department-wide Safe Harbor Policy for voluntary self-disclosures made in the context of the mergers and acquisition process. Monaco noted:

  • “Going forward, acquiring companies that promptly and voluntarily disclose criminal misconduct within the Safe Harbor period, and that cooperate with the ensuing investigation, and engage in requisite, timely and appropriate remediation, restitution and disgorgement – they will receive a presumption of declination.” 
  • “Compliance should no longer be viewed as just a cost center for companies. Good corporate governance and effective compliance programs can shield companies from enormous financial risks and penalties.”

Deputy Attorney General Monaco stated that the Department was setting “clear timelines” to ensure predictability:

  • To qualify for the Safe Harbor, companies must disclose misconduct discovered at the acquired entity within six months from the date of closing. That applies whether the misconduct was discovered pre- or post-acquisition.
  • Companies will then have a baseline of one year from the date of closing to fully remediate the misconduct.
She noted that this new policy will “only apply to criminal conduct discovered in bona fide, arms-length M&A transactions” and will not impact civil merger enforcement.

DAG Monaco concluded about the importance of compliance in the M&A process: 

  • “[F]or those advising boards and deal teams – here are the takeaways. We are placing an enhanced premium on timely compliance-related due diligence and integration. Compliance must have a prominent seat at the deal table if an acquiring company wishes to effectively de-risk a transaction.”

Creating a Data-Driven Solution 

This new DOJ policy reinforces the importance of conducting thorough due diligence both during the M&A process and after the acquisition has been completed, not just of contracts and corporate documents but also to assess conduct or activity that may suggest possible illegal activity. To comply with this new policy, companies can take advantage of new technologies and implement a data-driven solution that targets and identifies possible incidents of illegal behavior. 

To get started, consider the following: 

  • What types of data are available and searchable post deal closure?  

  • What methods of communication tools were used by acquired company personnel?   Did this vary by region?

  • What types of activities or behavior does the company want to investigate? And for what period of time? 

With the six-month disclosure timeframe, companies need to move quickly to identify potential misconduct. After establishing the overall data types, communication channels, individuals, and timeframes to investigate, corporate counsel should work with partners who can accelerate their discovery process through expertise and the application of technology.

Some items to consider when selecting a partner include:

  • Does the partner have data experts adept at utilizing artificial intelligence tools? Applying AI can turn a multi-month process into one that takes a few weeks. 

  • Does the partner have experience with merger and white collar investigations? In addition to searching for activities or behavior identified by the company, partners with pre-built  AI models will ensure you have covered all the bases.

Leveraging artificial intelligence and substantive expertise, companies can gain early and critical intelligence about actions and behavior reflected in corporate data that may create legal liability.    

With this information, corporations can make strategic decisions to quickly address potentially harmful situations, including evaluating whether to self-disclose potential illegal activity to government agencies.
See Regulatory Risk Insights™ for information about Epiq’s ability to utilize pre-built subject matter AI models, proprietary analysis, and custom workflows to discover possible issues of concern.  

Erin Toomey
Vice-President and Managing Director, Global Investigations Practice Group Leader

Edward Burke
Managing Director, Legal Solutions

The contents of this article are intended to convey general information only and not to provide legal advice or opinions.

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