The need to make financial disclosures can arise in tax audits, criminal investigations, political campaigns, internal investigations at work and other circumstances. The disclosure might be uncomfortable because it involves the revelation of private information. If criminal wrongdoing has occurred, divulging the evidence might give rise to legal culpability. Each situation needs to be individually examined to assess the possible risks and benefits.
A public servant might be faced with the need to make a disclosure before accepting a position with the government or running for office. Voluntarily disclosing information about your finances might be helpful under these circumstances if there is no evidence of wrongdoing. One of the most famous instances of voluntary financial disclosure was Richard Nixon's 1952 "Checker's speech," which included the results of a Price-Waterhouse audit that revealed Nixon didn't misuse campaign funds. While his disclosure was a calculated political risk, it did not turn off a majority of voters. Six weeks after the speech, the Eisenhower-Nixon ticket defeated Adlai Stevenson in a presidential election.
Being in Control
Voluntary disclosure can be helpful because it allows you to control the message. For example, if the disclosure involves an audit at work, you might be able to identify a problem, explain how it happened and how the error was discovered and explain what you are doing to resolve the issue. Such good faith disclosures can be beneficial if you are not personally liable and the mistake has a good chance of being made public if you don't disclose it. However, making voluntary financial disclosures can be fraught with peril because you cannot control the reaction to your statements or how others might use the information you reveal.
In some instances, making a voluntary disclosure can help you avoid penalies. Both the U.S. Department of Justice and the U.S. Securities and Exchange Commission view disclosures of information that would be otherwise be protected by attorney-client privilege as evidence of cooperation that warrants favorable treatment. Such voluntary disclosures can even be helpful when it comes to paying overdue taxes. For example, in Ohio, voluntarily disclosing financial information to the state might help you avoid penalties for failing to file or pay state taxes.
Regardless of the content of a disclosure, even the decision to disclose or not to disclose creates impressions. Opponents of 2012 presidential candidate Mitt Romney castigated him for his refusal to disclose tax information beyond the minimum required by law because they thought he might be dodging taxes or availing himself of tax shelters used by wealthy individuals. Romney decided not to voluntarily disclose past tax records, because he believed they would be the basis for opposition research.
- The Compliance Officer's Handbook: Robert A. Wade and Christine Bachrach
- The Securities Enforcement Manual; Tactics and Strategies; Richard M. Phillips, editor
- Nardone Law Group: Voluntary Disclosure Programs -- Ohio and Other States
- Washington Post: Why Mitt Romney Isn’t Releasing His Tax Returns, Part 563
- Strategic Management Review; Antecedents and Consequences of Disclosures Containing Strategic Content; Jason A. Harkins and Aaron D. Arndt
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