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A Fresh Take

Insights on M&A, litigation, and corporate governance in the US.

| 4 minutes read

New DOJ Pilot Program and Recent DOJ Declination Demonstrate the Importance of Cooperation and Self Disclosure

On April 12, 2024, the U.S. Department of Justice (DOJ) issued a declination letter to Proterial Cable America, Inc. (Proterial) (formerly Hitachi Cable America Inc.), a company that disclosed potential misconduct to DOJ quickly after it was discovered, cooperated with investigators, took remedial steps, and ultimately agreed to disgorge $15.1 million. The Proterial declination is a meaningful example of DOJ practicing what it has previously preached: with this declination, Proterial becomes the fourth company to benefit from recent revisions to the Corporate Enforcement and Voluntary Self-Disclosure Policy (CEP), announced by former Assistant Attorney General for the Criminal Division, Kenneth Polite, in January 2023. 

A few days after it declined to prosecute Proterial, DOJ doubled down on rewarding cooperation when it announced a new pilot program on voluntary self-disclosures for individuals.

Allegations Against Proterial

According to DOJ, between at least December 2006 and April 2022, Proterial misrepresented to customers that its motorcycle brake hose assemblies met federal safety performance standards. Specifically, DOJ found evidence that certain employees made false, fraudulent, and misleading material representations that the brake hose assemblies complied with applicable federal standards when, in fact, they had failed a number of these tests. In all, DOJ alleged that the company earned approximately $15.1 million in illicit profits through the sale of noncompliant brake hose assemblies.

Application of the CEP to Proterial

In a letter to Proterial, DOJ explained that it declined to prosecute because of an assessment of certain factors set out in the CEP, the Justice Manual, and the Principles of Federal Prosecution of Business Organizations, including:

  • Voluntary and Timely Self-Disclosure: DOJ emphasized that Proterial disclosed the potential misconduct “within weeks” of an employee raising concerns during an internal audit. 
  • Full and Proactive Cooperation: DOJ noted that the company offered “full and proactive cooperation,” providing “all known relevant facts,” including “information about all of the individuals involved in the misconduct.”
  • Timely and Appropriate Remediation: DOJ emphasized that Proterial terminated employees involved in the misconduct and made “significant investments” to “substantially improv[e]” its compliance program and internal controls.
  • Agreement to Remit Payment: DOJ noted that Proterial agreed to pay a disgorgement amount of over $15 million which, according to DOJ, represented the total profit it obtained through its misrepresentations.
  • Nature and Seriousness of the Offense: DOJ acknowledged that the brake hose assemblies in question “[had] not been the subject of a safety recall or been linked to any injury.”

Taken as a whole, DOJ found that these factors weighed in favor of declining to prosecute Proterial. 

Of note, DOJ’s declination did not offer any protection to potentially culpable individuals. Indeed, given that Proterial was afforded a declination in part because of the provision of information about individuals allegedly involved in the misconduct, it remains a real possibility that some individuals may ultimately be prosecuted for their alleged roles in the conduct at issue.

Pilot Program on Voluntary Self-Disclosure for Individuals

Just days after the Proterial declination, on April 15, 2024, DOJ announced a new Pilot Program on Voluntary Self-Disclosure for Individuals. Under this Pilot Program, any individual who voluntarily self-discloses information to DOJ about criminal misconduct will receive a non-prosecution agreement (NPA), as long as the individual satisfies the following criteria:

  • The information disclosed must be “original information” (defined as non-public information not previously known to DOJ), and relate to at least one of six specific types of violations listed in the Pilot Program guidance, which includes violations by financial institutions and violations related to foreign bribery and corruption, among others;
  • The disclosure must be “voluntary,” meaning the individual has not yet received a government request in relation to the investigation and is not under any other preexisting obligations;
  • The disclosure must be “truthful and complete,” encompassing all information known to the individual related to the misconduct, including the individual’s own role in it;
  • The reporting individual must agree to “fully cooperate” and to “provide substantial assistance” to DOJ in the investigation of relevant conduct; and
  • The reporting individual must forgo any profits from criminal wrongdoing and pay restitution or victim compensation.

The Pilot Program imposes restrictions on the types of individuals who may benefit, prohibiting participation by CEOs, CFOs, or leaders of the conduct, and by individuals with a previous felony conviction, among other limiting criteria.

In addition to potentially catching the attention of wrongdoers who seek to benefit from the offer of a declination, the Pilot Program should also signal to companies that DOJ is continuing to think of new ways to learn of misconduct committed by corporations. As Deputy Attorney General Lisa Monaco said in March 2024, when she announced a similar but different whistleblower rewards program, companies should continue to search for and disclose potential misconduct, and “knock on [DOJ’s] door before [DOJ] knocks on [theirs].” You can see our coverage of DAG Monaco’s announcement here.

Key Takeaways

Proterial is the fourth company DOJ has declined to prosecute since it revised its CEP in January 2023, and it is clear that DOJ remains committed to rewarding companies that voluntarily self-disclose potential misconduct and take timely steps to remediate and forfeit ill-gotten gains.

While application of the CEP is inherently fact intensive, the Proterial case offers important insight into DOJ’s current thinking on declination decisions.

In addition, DOJ’s separate announcement of a new pilot program on voluntary self-disclosure for individuals signals its continued search for opportunities to expand cooperation incentives, and that it is willing to seek out evidence of potential misconduct using increasingly creative means.


investigations, compliance, misconduct