Advancing Clarity and Cooperation – An Overview of the DOJ’s New FCPA Corporate Enforcement Policy
November 6, 2018
Article originally published by the Criminal Law Section of the Federal bar Association – Summer 2018
by Sarah Hyser-Staub and Maggie Meyers (2018 Summer Associate of McNees Wallace & Nurick LLC)
On November 29, 2017, U.S. Deputy Attorney General Rod J. Rosenstein unveiled the Department of Justice’s (DOJ) latest Corporate Enforcement Policy on the Foreign Corrupt Practices Act (FCPA). The place and time were more than appropriate: Rosenstein’s announcement was made at the 34th International Conference on the FCPA, and 2017 marked four decades since Congress enacted the statute, which was the first effort by any country in the world to criminalize the bribing of foreign officials. The new Policy formalizes and builds upon many aspects of the DOJ’s previous FCPA Pilot Program, which explored how to best incentivize corporations to self-disclose FCPA violations committed by their employees. Fundamentally, the new Policy aims to clarify the terms and outcomes of voluntary disclosures and strengthen cooperation between the DOJ and private corporations in the complex struggle against global corruption. Although it is too early to say for sure, the policy appears to be achieving results.
Evolution of the New Policy
The DOJ’s earlier Pilot Program, implemented April 5, 2016, was designed to test whether “promot[ing] transparency and accountability” in FCPA prosecutions would incentivize corporations to self-disclose violations. The Pilot Program required the DOJ to consider declining prosecution when the company met four criteria—self-disclosure, cooperation, remediation, and disgorgement of ill-gotten profits—essentially allowing corporations to trade their collaboration with the DOJ for possible leniency. This approach was undeniably successful: the DOJ received 30 voluntary disclosures of FCPA violations during the 18-month Pilot Program, compared to just 18 during the previous 18-month period. Moreover, the demonstrated willingness of corporations to weigh the pros and cons of disclosing wrongdoing—and to decide in favor of disclosure if the price is right—signaled that increased transparency and certainty in the DOJ’s decision-making process was a winning combination.
Three Essential Differences between the Pilot Program and the Policy
The Policy, while building upon the success of the Pilot Program, features three essential differences: (1) a presumption of declination of prosecution; (2) increased leniency for corporations that do not qualify for declination; and (3) greater clarity concerning how the DOJ evaluates an appropriate compliance program for remediation credit. These improvements are intended to be powerful incentives for corporations to disclose, cooperate, and remediate according to the DOJ’s requirements, even if they do not qualify for declination.
Like the Pilot Program, the Policy requires companies seeking credit to disgorge, forfeit, and/or pay restitution for all monetary gain from their wrongdoing, which may be satisfied by a parallel resolution with a regulating body like the Securities and Exchange Commission (SEC). However, instead of merely requiring the DOJ to consider declination for qualifying corporations, the Policy establishes a presumption of declination (in the absence of aggravating circumstances) for corporations that meet the DOJ’s standards of “voluntary self-disclosure,” “full cooperation,” and “timely and appropriate remediation.” Each of these requirements are set out in detail in the text of the Policy, adding to the increased certainty enjoyed by corporations weighing whether to disclose violations and seek leniency from the DOJ. The Policy also elaborates upon the aggravating circumstances that may overcome a presumption of declination, which include, but are not limited to: the involvement of the company’s executive management in the wrongdoing, the company making significant profit from the misconduct, the pervasiveness of the misconduct within the company, and criminal recidivism.
Even if the DOJ determines that aggravating circumstances exist, a company that has voluntarily disclosed the wrongdoing, fully cooperated, and timely and appropriately remediated will not go unrewarded. In this situation, the Policy requires the DOJ to recommend a 50 percent reduction off the low end of the U.S. Sentencing Guidelines fine range, except when there is criminal recidivism. Furthermore, the Policy generally will not require appointing an independent monitor if the company has implemented an effective compliance program. If a company does not voluntarily disclose its misconduct, but later fully cooperates and timely and appropriately remediates, the Policy requires the DOJ to recommend a 25 percent reduction off the low end of the U.S. Sentencing Guidelines fine range. Accordingly, even companies that do not qualify for declination may nevertheless take advantage of the DOJ’s offerings of leniency.
The Policy also fleshes out the remediation requirement and the DOJ’s evaluation of a corporation’s compliance measures. The non-exhaustive hallmarks of an effective compliance and ethics program include: fostering a culture of compliance; dedicating sufficient resources to compliance activities; and ensuring that experienced compliance personnel have appropriate access to management and to the board.
Initial Results are Promising
In his remarks last November, Deputy Attorney General Rosenstein prophesized that the Policy would “incentivize responsible corporate behavior and reduce cynicism about enforcement.” Indeed, the initial months of the Policy have been promising. Dun & Bradstreet received the first public declination explicitly citing the Policy on April 23, 2018, but the reverberations of the Policy have been felt since its announcement. The DOJ and SEC filed fewer FCPA enforcement actions in the first three months of 2018 than in any first quarter since 2014, and first quarter sanctions were significantly lower than those imposed in any other first quarter period during the last decade. Six declinations were reported in the first quarter of 2018 alone, a pace that will easily surpass declinations under the Pilot Program if it continues.
Several companies have benefited from the Policy’s other leniency provisions as well. In April 2018, Panasonic Avionics Corporation received a 20 percent reduction off the low end of its Sentencing Guidelines range and a deferred prosecution agreement (DPA) with a compliance monitor, after failing to self-report but later cooperating and remediating. In June, Société Générale received a 20 percent reduction, ultimately getting a DPA that does not include a compliance monitor. And in June, Legg Mason secured a non-prosecution agreement (NPA) from the DOJ, even though it chose not to self-disclose its alleged violations. After Legg Mason’s extensive cooperation and remediation, the DOJ recommend a 25 percent fine reduction.
Although results and implications continue to unfold, the DOJ’s Corporate Enforcement Policy is further proof that the arc of white collar enforcement bends toward cooperation. Companies engaged in foreign business are advised to become familiar with the FCPA and the new Policy, and to consult with counsel on compliance and strategy in the event of a violation.