DOJ’s Consumer Protection Branch rolls out new voluntary self-disclosure policy

As background for our food clients, CPB is the DOJ component responsible for enforcing laws that protect consumers’ health, safety, economic security, and identity integrity.¹ As part of this broad mandate, CPB handles both civil and criminal enforcement matters against food and dietary supplement companies for alleged violations of the Federal Food, Drug, and Cosmetic Act (FFDCA), 21 U.S.C. § 301, et seq., and other federal statutes and regulations. CPB partners closely with FDA and law enforcement agencies, as well as U.S. Attorney’s Offices around the country, which must notify and consult with CPB upon opening any criminal investigation involving an FFDCA violation.²

As noted above, the recently released CPB VSD Policy seeks to encourage companies to self-report potential criminal violations directly to CPB and applies to any violations of federal criminal law involving products regulated by, or conduct under the jurisdiction of, FDA, including failing to disclose or misrepresenting information to FDA.

A Broader Effort to Incentivize Self-Disclosure

CPB’s new VSD Policy underscores the DOJ’s stated commitment to uniformly incentivize self-disclosure and corporate cooperation across all DOJ components and across the country.³ In the September 15, 2022 “Monaco Memo,” Deputy Attorney General Lisa Monaco directed each prosecutorial DOJ component to review, or in some cases to draft and implement, its policies on corporate voluntary self-disclosures.⁴ Each policy reflects the common principle that absent aggravating factors, DOJ will not seek guilty plea where a company has voluntarily self-disclosed, cooperated, and remediated the misconduct.

In recent remarks delivered at the American Bar Association’s National Institute on White Collar Crime in Miami, Florida, Deputy AG Monaco made clear that each DOJ component must tailor its policy to its specific mission. The CPB VSD Policy is CPB’s first-ever attempt at developing a tailored policy applicable to the wide variety of criminal enforcement matters within its jurisdiction.

CPB’s Voluntary Self-Disclosure Criteria

Like other recently created self-disclosure policies by other components of DOJ, the CPB VSD Policy provides that absent aggravating factors, CPB will not seek a guilty plea for companies that voluntarily self-report, fully cooperate, and timely and appropriately remediate the underlying misconduct. Additionally, CPB will not impose an independent compliance monitor provided that a company’s compliance program is effective, as set forth in the U.S. Sentencing Guidelines.⁵

The CPB VSD Policy sets forth five additional factors that must be satisfied in order for a company to receive credit for self-disclosure, as follows:

1. Disclose the conduct directly to CPB before it becomes aware of an ongoing non-public government investigation;
2. Disclose the conduct directly to CPB within a reasonably prompt time after becoming aware of the offense;
3. The absence of a pre-existing obligation to disclose the conduct;
4. Timely preservation, collection, and production of relevant documents and/or information; and
5. Disclose relevant facts known to it at the time of the disclosure, including the individuals substantially involved in or responsible for the misconduct at issue and any third parties involved.

For companies in the food industry, the third factor is uniquely important. This is because food companies have an existing regulatory obligation to disclose certain events to the Reportable Food Registry (RFR). The RFR requires that a company report within 24 hours after it “determines” that a food is “reportable.” A food is “reportable” if use of the food presents a reasonable probability of serious risk of adverse health consequences or death in humans and animals. In the context of the CPB VSD policy, therefore, the extent to which CPB will offer voluntary self-disclosure credit for recall events is questionable.

Exclusionary Criteria

Even if the factors are met, CPB has retained discretion to determine that full credit should not be afforded to a disclosing company. There are three key reasons why CPB may choose to exercise that discretion:

Aggravating circumstances are present.

CPB may exercise its discretion to decline credit under the VSD Policy in the event of very serious wrongdoing. This includes conduct that is deeply pervasive throughout the company; intentional or willful conduct that places consumers at significant risk of harm; conduct that intentionally or willfully targets certain vulnerable populations; and knowing involvement of senior management in the conduct. The CPB VSD Policy does not clearly define these aggravating factors, which allows CPB prosecutors flexibility in characterizing such conduct. This exclusionary factor creates uncertainty for companies that identify more severe forms of misconduct. As a result, companies that discover such misconduct must carefully weigh the benefits of the decision to self-report against the risk that CPB may conclude such conduct actually disqualifies the company from such credit.

A company previously self-reported to another agency but not DOJ.

The CPB VSD Policy recognizes that in practice, companies may self-disclose directly to other government agencies like FDA. Companies must now ensure that any relevant disclosures are made to CPB too, as companies who self-report only to other agencies can be disqualified from receiving full credit in a subsequent CPB investigation.

The self-disclosure was not complete.

The CPB VSD Policy recognizes that a company may not know all the relevant facts at the time of disclosure; however, CPB expects a “fulsome disclosure” including the production of relevant documents. A failure to “fully” disclose known misconduct, or to preserve and collect documents and other electronically stored information, could render a company ineligible for self-disclosure credit.

Next steps

Looking ahead, in order to even consider whether to avail itself of the benefits provided for in the CPB VSD policy, food companies should ensure robust compliance programs are in place to identify potential wrongdoing and misconduct in a timely manner. The CPB VSD Policy makes clear that time is of the essence should a company want to benefit from self-reporting directly to CPB. Additionally, if a potential violation is discovered internally, companies should consider whether to engage outside counsel to assist with an internal investigation and the subsequent decision regarding whether to self-disclose. A company must carefully assess the available options, especially when aggravating circumstances may be present.

The CPB has recently ramped up its enforcement activity of food clients, as evidenced by recent settlements and several additional ongoing criminal investigations. Hogan Lovells is uniquely positioned to advise clients on these new areas of compliance, as well as to conduct swift internal investigations and handle any enforcement actions that may arise.