On Oct. 4, 2023, Deputy Attorney General Lisa Monaco announced a new safe harbor policy for merger and acquisition (M&A) transactions. Under the new safe harbor, acquiring companies that promptly and voluntarily disclose criminal misconduct discovered at the target company to the U.S. Department of Justice (DOJ) within a certain time period, cooperate with the ensuing investigation, and engage in timely remediation, restitution, and disgorgement will receive the presumption of a declination (i.e., the DOJ will not prosecute the company). The policy applies to all DOJ components engaged in corporate criminal enforcement.
Monaco said that the DOJ did not want to discourage companies with effective compliance programs from acquiring companies with ineffective programs and a history of misconduct. This may be welcome news for companies looking for ways to manage their criminal successor liability risk in M&A deals. But the DOJ is also putting companies engaged in M&A on notice, as Monaco continued: “If your company does not perform effective due diligence or self-disclose misconduct at an acquired entity, it will be subject to full successor liability for that misconduct under the law.”