Federal Reporting and Self-Disclosure

Federal Reporting and Self-Disclosure

Thanks for visiting Spodek Law Group – a second-generation law firm managed by Todd Spodek, with over 40 years of combined experience navigating federal self-disclosure decisions that determine whether companies face criminal prosecution or receive declinations. On May 12, 2025, DOJ announced revisions to its Criminal Division Corporate Enforcement and Voluntary Self-Disclosure Policy, clarifying that additional benefits are available to companies that self-disclose and cooperate, including guaranteed declination pathways when four conditions are met: voluntary self-disclosure of unknown misconduct, full cooperation, timely remediation, and payment of restitution or disgorgement. The policy provides specific conditions and a pathway to guaranteed declination, addressing complaints about lack of certainty in voluntary disclosure outcomes.

This article explains when self-disclosure receives cooperation credit versus when it invites prosecution, how DOJ’s “near miss” credit rewards disclosure that doesn’t technically qualify as voluntary, and why the May 2025 policy revisions fundamentally change risk calculus for companies discovering misconduct. Whether you’re assessing disclosure obligations after internal investigations, evaluating cooperation strategies, or determining mandatory versus voluntary reporting, understanding federal disclosure requirements isn’t compliance guidance – it’s the difference between declinations that avoid prosecution and disclosures that become roadmaps for indictments.

The Four Elements That Guarantee Declination Under May 2025 Policy

Four conditions must be met for DOJ to decline criminal prosecution: voluntary self-disclosure of misconduct the government doesn’t yet know about, without obligation to disclose and without imminent threat of disclosure or investigation; full cooperation providing all non-privileged information; timely and appropriate remediation including implementing effective compliance programs; and payment of restitution, disgorgement, or forfeiture returning ill-gotten gains.

The key word is “guaranteed” – meet all four elements and DOJ presumes declination absent aggravating circumstances. That’s unprecedented certainty in federal enforcement where prosecutors historically retained complete discretion over charging decisions. Companies that previously hesitated to self-disclose because they couldn’t predict outcomes now have defined pathways to avoid prosecution.

But the elements require precision. “Voluntary” means proactive disclosure before government investigation looms or whistleblowers file complaints. “Full cooperation” means providing all relevant facts including those that implicate individuals, not selective disclosure protecting executives. “Timely remediation” means fixing problems immediately, not after investigation concludes. “Restitution” means calculating and paying victims without waiting for government to quantify damages.

I’ve advised companies through this calculus repeatedly: A healthcare company discovered Medicare billing errors totaling $3 million, immediately engaged external counsel, quantified overpayments precisely, contacted HHS-OIG before the next audit cycle, cooperated fully providing billing records and employee interviews, implemented new billing controls, and paid full restitution within 60 days. DOJ issued a declination letter, the company avoided criminal charges and False Claims Act treble damages, and remained in Medicare programs without exclusion. That’s the guaranteed declination pathway working as intended.

November 2024’s “Near Miss” Credit: When Disclosure Comes Too Late But Still Matters

On November 22, 2024, Principal Deputy Attorney General Nicole Argentieri announced DOJ would credit companies that fulfill many requirements but don’t technically qualify under voluntary self-disclosure – the “near miss” policy recognizing that companies discovering misconduct after investigations begin can still receive cooperation credit for prompt disclosure and full cooperation.

That’s critical because most companies don’t discover misconduct at ideal times for voluntary disclosure. They find problems after whistleblowers have already filed qui tam complaints, after regulators have initiated audits, after customers have complained to enforcement agencies. Under prior DOJ policy, those companies received no cooperation credit because disclosure wasn’t “voluntary” – the government already knew or was about to learn about the misconduct.

Near miss credit changes that calculation. Companies that miss the voluntary disclosure window but promptly disclose everything once they discover it, cooperate fully, remediate appropriately, and pay restitution can still receive substantial penalty reductions and avoid monitors even though they don’t get guaranteed declination. The policy acknowledges reality: Perfect timing is impossible, and companies that do everything right except disclose before investigations begin shouldn’t be treated identically to companies that obstruct and deny.

Individual Voluntary Self-Disclosure: The New Pilot Program Changing Executive Exposure

The Criminal Division launched a Pilot Program on Voluntary Self-Disclosures for Individuals designed to encourage individual participants in corporate criminal conduct to self-disclose. In exchange for self-disclosing, fully cooperating, and paying victim compensation, restitution, forfeiture, or disgorgement, the Criminal Division will enter non-prosecution agreements where specified conditions are met.

This is revolutionary: Executives who discover their companies committed crimes – or who participated in corporate misconduct – can now receive individual NPAs by cooperating against their employers. The policy creates powerful incentives for executives to race to prosecutors with information about corporate fraud, accepting cooperation agreements before colleagues do the same.

The strategic implications are profound. Companies discovering misconduct face a dilemma: If they self-disclose corporately, they may receive declinations but their executives face individual prosecution. If they don’t disclose, executives might self-disclose individually to obtain NPAs, leaving the company exposed without any cooperation credit. The first-mover advantage shifts to whoever discloses first – corporate or individual – creating prisoner’s dilemma dynamics where optimal strategy depends on what others do.

At Spodek Law Group, we coordinate corporate and individual disclosure strategies to protect both entities and executives. When a pharmaceutical company discovered off-label marketing violations, we simultaneously negotiated corporate declination and individual NPAs for executives who reported the misconduct internally before it became corporate practice. That dual-track approach protected the company from prosecution while shielding executives who acted properly from liability for corporate decisions made above their authority.

Mandatory Reporting: When Self-Disclosure Isn’t Voluntary

The five most important federal fraud and abuse laws that apply to physicians and healthcare entities include the False Claims Act, Anti-Kickback Statute, Stark Law, Exclusion Authorities, and Civil Monetary Penalties Law. Each creates different reporting obligations, some mandatory and some voluntary, with severe penalties for failure to report when required.

Healthcare providers discovering overpayments face mandatory reporting under the Affordable Care Act: Overpayments must be reported and returned within 60 days of identification or the date corresponding to any corresponding cost report due date, whichever is later. Failure to report creates False Claims Act liability – the overpayment retention becomes a false claim regardless of how the original overpayment occurred.

That 60-day window is deceptively short. “Identification” doesn’t mean when you first suspect problems – it means when you’ve determined through reasonable diligence that overpayments exist and quantified them. Companies conducting six-month investigations to determine overpayment amounts discover too late that the 60-day clock started months earlier when they should have known, creating knowing retention liability for the entire investigation period.

I’ve defended healthcare companies prosecuted for overpayment retention where the “identification” date was disputed. Medicare auditors identified potential overpayments in January; the company disputed the findings, conducted internal review, and paid agreed amounts in August. DOJ argued identification occurred in January, creating 60-day deadline in March and knowing retention from March through August. We demonstrated identification couldn’t occur until reasonable diligence concluded in June, creating 60-day deadline in August when payment was made. The court agreed, finding no knowing retention because the company paid within 60 days of actual identification.

SEC Self-Disclosure: The Cooperation Program That May Be Changing Under New Leadership

Corporate penalties may be less favored under new SEC leadership as they further harm shareholders, raising questions about how SEC will continue incentivizing corporate self-reporting if the carrot-and-stick approach of recent years no longer applies. Will companies still receive cooperation credit if SEC isn’t imposing significant penalties to reduce? Will self-disclosure remain beneficial if SEC focuses on individual rather than corporate accountability?

The uncertainty creates strategic complications. Companies self-disclose to SEC expecting penalty reductions that may not be available under evolving enforcement priorities. They cooperate fully anticipating declinations or reduced charges that new leadership may not offer. They invest in remediation and compliance enhancements that historically generated credit but may not under different enforcement philosophies.

US regulators are incentivizing companies to self-report by offering meaningful cooperation credit, including reduced penalties, favorable settlement terms, and avoiding debarment even where clear violations occurred. Whether that remains true under new SEC leadership is the critical question companies must assess when determining disclosure strategy.

First-Ever National Security Division Declination Shows Policy Working

In May 2024, DOJ announced its first declination under NSD’s Enforcement Policy, declining to prosecute MilliporeSigma for export control violations based on timely voluntary self-disclosure, exceptional and proactive cooperation, and timely and appropriate remediation. That followed an April 2024 declination for Proterial Cable America, which disclosed potential misconduct quickly, cooperated fully, took remedial steps, and agreed to disgorge $15.1 million.

These declinations demonstrate the policy delivers promised benefits. Companies meeting policy requirements actually receive declinations, not just reduced charges or deferred prosecutions. The pathway from voluntary disclosure to non-prosecution works when companies follow it precisely.

But both declinations involved companies that self-disclosed immediately upon discovery, cooperated extraordinarily beyond minimum requirements, remediated thoroughly before DOJ requested it, and paid full disgorgement voluntarily. That’s the standard: not just compliance with policy elements, but exemplary implementation exceeding what’s technically required. Companies doing the minimum necessary to satisfy each element may find prosecutors arguing aggravating circumstances justify prosecution despite policy compliance.

Federal reporting and self-disclosure decisions in 2025 require understanding guaranteed declination pathways, near-miss cooperation credit, individual pilot programs, and evolving SEC enforcement approaches simultaneously. Companies treating disclosure as binary choices – report or don’t report – miss nuanced strategies that determine whether cooperation generates declinations or invitations to prosecute. We’re available 24/7 to assess disclosure obligations, negotiate cooperation agreements, and navigate the May 2025 policy framework that’s transforming corporate enforcement.