With the new administration's stated focus on rooting out waste and abuse, it should surprise no one that the U.S. Department of Justice continues to view fraud as an enforcement priority.

The scale of fraud affecting the government fisc is astounding, with some estimates totaling upward of $200 billion for pandemic-related fraud alone.[1]

What remains to be seen, however, is whether the DOJ continues its formalized approach to encouraging voluntary self-reporting of criminal misconduct.

Although cooperation has always been welcomed, it was not until April 2024 that the DOJ formally implemented a pilot program encouraging voluntary self-disclosures for individuals involved in corporate wrongdoing.

Under that program, individuals may be able to obtain nonprosecution agreements where a number of specified conditions are met:

• The violations are related to certain types of misconduct, such as healthcare fraud and government contracting fraud.
• "The reporting individual must disclose original information," defined as "non-public information not previously known to" the DOJ.
• The disclosure is voluntary, meaning that it came before the initiation of any government investigation.
• "The disclosure must be truthful and complete," both as to the individual's own wrongdoing and that of others.
• The "individual must agree to fully cooperate with and be ... able to provide substantial assistance to the [DOJ] in its investigation of related conduct and prosecution of equally or more culpable individuals or entities."
• The individual must "forfeit or disgorge any profit from the [fraud] and pay restitution" to victims.
• The individual must not have engaged in certain enumerated serious offenses or have a previous felony conviction on their record.

In addition to the DOJ's pilot program, a number of U.S. attorney's offices across the country have launched their own voluntary self-disclosure programs.

There has been no indication that the new administration intends on dialing back these self-disclosure programs. What has changed, however, is the DOJ's key enforcement priorities.

Under new leadership, the DOJ has refocused enforcement efforts on particular areas, such as combating drug cartels and transnational criminal organizations, or TCOs. That has led to significant policy changes and, as a byproduct, increased uncertainty for those who may be considering voluntary self-disclosures for crimes that are no longer considered an enforcement priority.

The Foreign Corrupt Practices Act is a prime example. The DOJ has paused enforcement of the FCPA for 90 days, and signaled that moving forward, it will prioritize foreign bribery prosecutions involving schemes that facilitate the criminal operations of cartels and TCOs.

But does that mean it is now foolish for someone to self-report an FCPA violation outside of those categories? Not necessarily. Although enforcement may be temporarily paused, that reprieve is not guaranteed to last forever. Most importantly, unless and until Congress changes the law, the underlying conduct remains illegal.

If enforcement priorities change — as they often do — failing to self-report now could close off avenues to leniency that may have otherwise been available. At the same time, self-reporting could end up proving to be unwise if it draws the government's crosshairs at a time when it was not likely to have raised its sights.

Now — as always — the decision to self-report is a complex one.

What about the wisdom of self-disclosures in a case involving individual instances of pandemic fraud?

There is no time like the present to ask that question. The DOJ has reaffirmed its commitment to pursuing those who exploited emergency relief programs for personal gain, and the convictions for such behavior continue to roll in.

Take the case of Jacob Schneider, a Minnesota man who, like many others, falsified information on a Paycheck Protection Program loan application, securing more than $500,000 in PPP loans. Rather than use that money to help cover payroll and other essential business expenses, he diverted it for his own personal use.

But Schneider did something unusual — he ultimately decided to turn himself in before any knock on his door from the authorities, and ultimately pled guilty late last year to one count of wire fraud in the U.S. District Court for the District of Colorado. His act of self-reporting earned him a measure of leniency. Rather than a likely prison sentence in the range of 21-27 months, he was ultimately sentenced in January to prison for one year and a day. With good behavior, he is likely to serve even less time.

Given the attention on waste, fraud and abuse, it would seem to make sense for the DOJ to double down on its voluntary self-disclosure programs. Even in a case not involving wider corporate wrongdoing, offering nonprosecution agreements to individuals in exchange for making the government whole might be preferable to the alternative — i.e., expending even more government resources to ferret out the bad actors.

Such a policy may fairly be questioned, however, as essentially offering a get-out-of-jail free card to those who can afford to pay back the money they stole. That may ultimately create perverse incentives that do more harm than good to the DOJ's crime-fighting mission in the long run.

Those policy questions will continue to kick around as commentators, and putative criminal defendants, wait for further clarification from the DOJ.

Ultimately, deciding whether to report one's own misconduct is a personal decision that requires careful consideration. On the positive side, voluntarily admitting to criminal behavior may lead to reduced legal consequences, demonstrate accountability and potentially mitigate reputational damage.

However, while one could reasonably expect self-reporting to result in more favorable treatment, the degree of leniency will of course be case-dependent. And individuals who self-report are still subject to substantial legal and financial repercussions, including fines, restitution and prison time.

Whether a critical mass of other individuals follow Schneider's lead in self-reporting criminal activity remains to be seen, but one thing is clear: The federal government is unlikely to ease its aggressive pursuit of fraudsters who have pilfered the U.S. treasury.

As enforcement intensifies, those with knowledge of or involvement in criminal activity should weigh the potential benefits of coming forward in exchange for leniency.

Regardless of whether the DOJ ultimately expands or contracts voluntary self-disclosure programs, it would be wise for individuals, and their counsel, to at least have the conversation.

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