Manhattan Federal Prosecutors Urge Companies to Self-Report Fraud

The US Attorney’s Office for the Southern District of New York (SDNY) is offering companies that self-report fraud a path to avoiding criminal charges, fines, and public disclosure of wrongdoing, as reported by the Financial Times.

The policy, promoted in recent weeks through meetings with criminal defense lawyers and corporate advisers, applies solely to fraud and is more generous than the broader Department of Justice (DOJ) self-reporting guidelines. Companies that come forward can receive confirmation within two to three weeks that the office does not plan to prosecute them, and can avoid criminal fines or forfeiture, provided they make reasonable best efforts to reimburse victims.

According to the FT, such deals are available even where alleged fraud was pervasive, caused severe harm, involved senior leaders, or had already been reported in the press or by a whistleblower. Details of these deals will not be made public by the SDNY. The policy seeks to protect companies’ shareholders, while still allowing prosecutors to charge individuals.

US Attorney Jay Clayton told the FT the new system was designed to enable the office to uncover more fraud more quickly. “If you don’t report and we find it, we’re going to kill you,” Clayton reportedly said during a recent conference. “That’s the deal . . . If you know [about fraud], and you don’t tell us, that’s bad.”