Voluntary Self-Disclosures – How To Prepare An Acceptable Disclosure – Part I

Voluntary Self-Disclosures – How To Prepare An Acceptable Disclosure – Part I

Those three words, Voluntary Self-Disclosure, rate probably, amongst the three worst words a company’s legal and trade compliance department can hear—I know, having worked in corporations for over 25 years. There was always a bad feeling in my stomach, whenever I heard someone say, “We need to file a VSD”, for I knew that a) we had, or likely had, committed some sort of infraction, and b) the time to prepare and investigate any infraction was going to take resources away from an already strained department, not to mention outside legal fees.

If there was something I learned whenever such situations arose, was that when preparing and filing a disclosure, the Federal agencies, whether it be DDTC, BIS, Customs or Census, prefer to have such disclosures in a format they recognize. Too many times, have I seen disclosures prepared that read more like a short novel, rather than being concise (yet, thorough) and in a format which allows the auditors and government case managers, to follow the facts which led to the violation(s) and the corrective actions taken to mitigate and address company errors in the future.

This article is not meant to address every area of a VSD, but to provide an “outline”, based on my personal experience, when drafting and submitting disclosures, primarily to the DDTC, BIS, and U.S. Census. First and foremost, is once you are made aware of a potential, or actual, violation, is to put an immediate stop to it; doing otherwise, will only compound an already bad situation and lead to possible on-going violations. Once this is done, you need to begin collecting as many facts and evidence you can, not only the violations, but what led up to them and how/when/what was done to address them and to prevent them from occurring in the future. At this point, you should have enough information to file your “Initial Voluntary Disclosure” or “Prior Disclosure”.

I always recommend starting with a brief narrative on what your company is; i.e. global manufacturer of electronic components for civil and military industrial generators. This does not have to be too lengthy, but sufficient to explain the company and any subsidiary that may have been involved in the infraction(s). Also, if the violations occurred by one of your subsidiaries, it is important to state this, as well as if any direct or indirect evidence exists that the parent company was either, a) involved in the infraction(s) and b) aware of the infraction(s). The next step, is to list the “potential violations”. I’ve italicized these 2 words, because, in my professional opinion, you should never state, in an initial voluntary disclosure, a factual finding that violations did occur; this should be left to the Perfected Disclosure, once all evidence has been collected, analyzed, and confirmed. Remember, you are merely filing an initial disclosure, in order to mitigate potential civil and/or criminal penalties, before the government is made aware or discover the violations themselves.

Listing of these potential violations should be done in a bullet-point format, and should be concise and to the point; i.e. Unauthorized exports of defense articles or Incorrect EEI filings for export shipments. Of course, you need to including the legal language that the company is not aware of any investigation by any U.S. federal agency at this time, etc., so that the agency(ies) are aware the company has uncovered these potential violations, not the U.S. government. You then want to ensure that a clause concerning ‘Oral Presentation’ is reserved, in the event you need to present to the federal government your findings, evidence and arguments.

Most importantly, you want to ensure you include a paragraph requesting confidentiality and exemption of the disclosure under the Freedom of Information Act (in the case of DDTC, this would be under 5 USC §522, and its appropriate subcategories). You then, include the name and address of the person making the disclosure, as well as the central point of contact (if there is a law firm involved, I usually recommend they be the primary POC). Lastly, you conclude with a paragraph stating that based on corrective measures in process, the nature of the potential violations (remember, you are still in the initial VSD, so state “potential”), and the company’s commitment to compliance (if in the case of Census, BIS and DDTC, this would be “export compliance”; in the case of Customs, this would be “import compliance”).

Prior to signing your name, state the full regulatory citation applicable to submission of your fully perfected disclosure. You also should include a “Certification”, in which the person signing the disclosure, represents all information is true and correct, in accordance with the appropriate legal citation; remember, each agency has its own certification requirements. The disclosure should be signed by an executive of the company or the General Counsel.

Thus, in summary, you would have the following key areas in your initial disclosure:

  1. Brief background on your company and summary of the potential violations
  2. Bullet format listing the potential violations (remember, this is an initial VSD, so you can expand on this section when you perfect the final disclosure)
  3. Reserve your right to an Oral Presentation
  4. Request for Confidentiality
  5. Name/Address/POC of person making disclosure (if a law firm is involved, include them, in addition to the company’s POC information)
  6. Conclusion
  7. Certification

 

Watch for our upcoming Part 2 of this article, which will address “Perfecting your disclosure for acceptance by federal agencies”. If our readers would be interested in a webinar series, outlining specifically, what should be included and how to draft such disclosures, please let us know, by emailing Info@gtsci.org and based on the number of requests, GTSCI may provide a future, 2-part series, on how to draft VSDs.

 

Written by: Christos Linardakis, J.D., LL.M

 

The opinions expressed in this article are those of the author. This article is for educational purposes only and does not establish any attorney-client relationship nor should it be considered legal advice.

Don't Forget to Share...Share on FacebookTweet about this on TwitterShare on Google+Share on LinkedInShare on TumblrEmail this to someonePrint this pageShare on StumbleUponShare on VKShare on Reddit