One of the most challenging questions faced by white-collar defense counsel and their clients is whether to report voluntarily, that is, to “self-report,” information about the misconduct of a client company or individual. The issue is a particularly thorny one for companies which, unlike individuals, cannot resist the production of incriminating information by asserting Fifth Amendment rights, and which are obliged to make decisions based on the interests of shareholders, not current management.
As a practical matter, the decision about self-reporting commonly boils down to an assessment of three issues: (i) whether the client is obligated to report the misconduct—for example, under federal securities laws and the rules of industry self-regulatory organizations;1 (ii) the likelihood of exposure, through government investigation, journalistic inquiry, whistleblowing or otherwise; and (iii) the possible benefit of self-reporting and, concomitantly, the risk of additional sanction from failing to self-report wrongful behavior if it is later discovered. Because clients and counsel often need to make these assessments with little hard and sure information, the judgments and analysis are sometimes very difficult.
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