Federal Reporting and Self-Disclosure

In many cases, corporate investigations will lead to the discovery of information that is subject to voluntary reporting or self-disclosure at the federal level, and failing to comply with mandatory disclosure obligations can lead to exposure above and beyond that created by the underlying issue. Our corporate compliance lawyers have extensive experience helping corporate clients comply with federal reporting and self-disclosure requirements.

When is your company required to report potentially-damaging information to the federal government? When is self-disclosure of a statutory or regulatory violation necessary, and when is it in a company’s best interests to take advantage of a federal self-disclosure program? These are important questions that do not have easy answers. Yet, with increasing frequency, corporate entities in a variety of industries are being forced to grapple with these exceedingly complex issues.

Is Your Company Required to Voluntarily Report or Self-Disclose Information to the Federal Government?

Voluntary reporting and self-disclosure requirements are unique aspects of the federal law enforcement regime. Under various statutes, corporate entities are required to inform federal government agencies when they learn that their employees, accountants, or other third-party providers have violated the law. While the risks of self-disclosure are patently obvious, the federal voluntary reporting and self-disclosure obligations are enforced through the imposition of substantial penalties; and, as a result, failure to disclose can be just as dangerous as – if not more dangerous than – attempting to conceal evidence of civil or criminal wrongs.

However, the federal voluntary reporting and self-disclosure obligations are not absolute. They do not apply in all scenarios, and the Fifth Amendment’s protections can often be asserted to protect against the disclosure of incriminating information. Yet, the federal voluntary reporting and self-disclosure obligations are still extraordinarily broad; and, in some instances, self-disclosure can provide protection (or at least limited protection) against the imposition of federal penalties.

7 Instances in Which Voluntary Reporting or Self-Disclosure May Be Required

There are a number of instances in which private and public companies can incur obligations to voluntarily report or self-disclose evidence of potential wrongdoing to the federal government. For example, seven of the most-common instances are:

1. Corporate Fraud and Securities Law Violations

Companies that are subject to registration and reporting obligations with the U.S. Securities and Exchange Commission (SEC) will often have an obligation to disclosure instances of corporate fraud and other securities law violations. While these voluntary reporting obligations are ostensibly designed to ensure that investors have access to complete and accurate material information, disclosing fraudulent or other criminal conduct through SEC filings also has the potential to lead to a federal civil or criminal law enforcement investigation.

2. Federal Contract Fraud

Federal government contractors have a general obligation to self-disclose violations of the False Claims Act. The False Claims Act prohibits the submission of any “false or fraudulent” claim for payment, and this prohibition encompasses virtually all types of intentional and unintentional contract breaches and billing violations. Under the Federal Acquisition Rule (FAR), federal government contractors must timely disclose:

“[T]o the [relevant] agency Office of Inspector General whenever [a] contractor has credible evidence that a principal, employee, agent, or subcontractor of the contractor has committed a violation of the . . . False Claims Act or a violation of Federal criminal law involving fraud, conflict of interest, bribery, or gratuity in connection with the award, performance, or closeout of a government contract or any related subcontract.”

3. Federal Grant Fraud

Federal grant recipients are subject to self-disclosure obligations that are largely similar to those imposed upon federal government contractors – although the consequences of self-disclosure violations may vary. For example, recipients of grants from the U.S. Department of Health and Human Services (DHHS), “must disclose evidence of potential violations of Federal criminal law involving fraud, bribery, or gratuity violations, potentially affecting the[ir] Federal award.” Critically, the law also states that grant recipients may voluntarily disclose violations that do not qualify for mandatory disclosure. Deciding to voluntary disclose a violation that is not subject to mandatory disclosure is a matter that requires serious critical consideration.

4. Federal Healthcare Fraud

Healthcare providers that bill Medicare, Medicaid, Tricare, the U.S. Department of Veterans Affairs (VA), and the U.S. Department of Labor (DOL) benefit program are required to self-disclose “evidence of potential fraud.” This includes violations of the False Claims Act, the Anti-Kickback Statute, the Stark Law, and potentially other laws as well. While billing errors (i.e. upcoding and unbundling) are the most-common triggers for self-disclosure obligations, entering into unlawful referral arrangements, offering and accepting kickbacks, and various other types of transactions can trigger healthcare providers’ self-disclosure obligations as well.

5. Disclosure of Offshore Accounts to the Internal Revenue Service (IRS)

Under the Foreign Account Tax Compliance Act (FATCA), companies that hold offshore accounts also hold reporting obligations to the IRS. Even if no tax is owed, companies must still file annual reports disclosing their foreign financial assets. For companies that have failed to meet their annual reporting obligations, there are self-reporting options available, and self-reporting a disclosure violation can reduce (but not eliminate) the penalties owed to the IRS.

6. Self-Reporting to the U.S. Food and Drug Administration (FDA) and U.S. Drug Enforcement Administration (DEA)

Food, cosmetic, and drug manufacturers, healthcare providers, and certain other entities owe self-reporting obligations to the FDA and DEA when qualifying “adverse events” occur. These adverse events include, but are not limited to: learning that a regulated product has caused or contributed to a death or serious injury; a medical device malfunction; and, diversion, theft, or loss of prescription medications.

7. Data Breach Notifications

Companies of all sizes can face self-disclosure obligations as a result of experiencing breaches of data security. If hackers steal or compromise consumers’ or patients’ personal, financial, credit, or health information, then the company may have an obligation to notify the affected individuals as well as an obligation to report the incident to the relevant federal authorities. In fact, even potential cybersecurity threats can give self-disclosure obligations in some circumstances.

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Lynette S. Byrd

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U.S. Department of Justice

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Former Assistant U.S. Attorney

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Joe Brown

Former U.S. Attorney & Former District Attorney

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Former U.S. Attorney

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Aaron L. Wiley

Former Federal Prosecutor

Local Counsel

Roger Bach

Former Special Agent (OIG)

Michael Koslow

Former Supervisory Special Agent (FBI)

Chris Quick

Former Special Agent (FBI & IRS-CI)

Ray Yuen

Former Supervisory Special Agent (FBI)

What Should You Do if an Internal Corporate Investigation Uncovers Evidence of a Violation that is Subject to Voluntary Reporting or Disclosure?

Let’s say your company conducted an internal investigation, and let’s say the investigation uncovered evidence of a federal statutory or regulatory violation that is subject to voluntary reporting or disclosure. What should you do next?

The answer to this question depends on factors ranging from the source of your company’s disclosure obligation to the nature of the violation in question. Avoiding unnecessary self-incrimination, preserving the attorney-client privilege, and various other considerations will come into play in the analysis as well. Ultimately, you need to make an informed decision based upon a thorough assessment of all relevant factors, and you must move forward with a clear, comprehensive, and decisive strategy that promotes your company’s best interests.

When we represent clients in connection with voluntary reporting and self-disclosure matters following corporate internal investigations, the services we typically provide include:

• Assessing the Self-Disclosure Obligation – Our attorneys can assess whether your company’s self-disclosure obligation is definitive or whether a particular statutory exemption or safe harbor may apply given the specific factual circumstances involved.
• Determining What Evidence is Subject to Disclosure – If self-disclosure is necessary (or in your company’s best interests), we can determine exactly what evidence should be disclosed. In order to do so, we will examine the evidence that exists in light of the specific statutory or regulatory provisions that apply.
• Determining What Evidence is Privileged – Is your company entitled to withhold information based upon the application of the attorney-client privilege? Is certain evidence covered by the Fifth Amendment privilege against self-incrimination? Once we determine what evidence is potentially subject to disclosure, will meticulously assess what information your company is entitled to withhold.
• Communicating with the Relevant Federal Agency – Prior to making the disclosure, our attorneys can communicate with the relevant federal agency on your company’s behalf in order to establish the terms of the disclosure and ensure that any available protections will be afforded.
• Making the Self–Disclosure – When the time is right, we will make the disclosure on your company’s behalf. In doing so, we will ensure that all applicable privileges and protections are preserved.
• Handling Subsequent Enforcement Action, Civil Litigation, and Criminal Matters – Finally, if the self-disclosure leads to enforcement action, civil litigation, or a criminal investigation, our attorneys can represent your company in the subsequent legal proceedings. All of the attorneys on our investigation team have extensive experience in private litigation and federal law enforcement matters.

Federal voluntary reporting and self-disclosure requirements often have short and strict timelines. If you are concerned that your company may have an obligation to provide evidence to the federal government, you should consult with an attorney promptly.

Discuss Your Company’s Situation with a Federal Self-Disclosure Lawyer at Oberheiden, P.C.

Are you concerned that your company may have an obligation to voluntarily report or self-disclose evidence to a federal government agency? To speak with an attorney on Oberheiden, P.C.’s investigation team in confidence, call 888-680-1745 or request a complimentary consultation online now.