United States: DOJ Announces Pilot Program To Standardize Cooperation Credit In FCPA Cases

Timothy D. Belevetz is a partner in Holland & Knight's Washington, D.C.'s office.

HIGHLIGHTS:

  • The U.S. Department of Justice (DOJ) has established a one-year pilot program under which it will provide companies with standardized benefits for self-disclosing Foreign Corrupt Practices Act (FCPA) offenses, fully cooperating with the investigations and correcting the underlying problems.
  • The DOJ is bolstering its foreign bribery enforcement efforts by adding prosecutors and agents devoted to FCPA investigations and prosecutions, and strengthening coordination with its international law enforcement counterparts.
  • The program includes new guidance that will enable companies facing FCPA issues to make a more informed decision about whether to cooperate.

The Fraud Section of the U.S. Department of Justice's (DOJ) Criminal Division has announced a new initiative to motivate companies to self-report violations of the Foreign Corrupt Practices Act (FCPA), cooperate with the ensuing investigations and take corrective action. Under this new pilot program, business organizations can earn specific benefits for their efforts, including a 50 percent reduction in criminal penalties, the avoidance of a compliance monitor, and even a declination of prosecution.

In its April 5, 2016, memorandum titled The Fraud Section's Foreign Corrupt Practices Act Enforcement Plan and Guidance,1 the Fraud Section also announced that the DOJ is enhancing its FCPA enforcement resources by adding 10 new prosecutors who specialize in FCPA matters – a 50 percent increase – and creating three new squads of FBI agents devoted to FCPA investigations. In addition, it stated it would enhance coordination efforts with its international counterparts with regard to foreign corruption matters by sharing leads, documents and witnesses more effectively. The goal of the effort, according to Assistant Attorney General Leslie Caldwell, is to create transparency in FCPA resolutions so that companies can make more rational decisions regarding whether to cooperate.2

Pilot Program Requirements

Under the one-year pilot program, companies that uncover foreign bribery will receive specific mitigation credit if they meet certain requirements. Companies must 1) voluntarily self-disclose the violation to the government, 2) provide full cooperation, and 3) remediate the underlying issues. Companies that satisfy the requirements will still have to disgorge all of the ill-gotten profits.

The Fraud Section, which oversees all FCPA prosecutions, has a history of seeking a reduction below the low end of the U.S. Sentencing Guidelines fine range for companies that voluntarily disclose, fully cooperate and appropriately remediate. However, under the new initiative, such companies are eligible to receive additional credit above and beyond a Guidelines fine reduction. Companies can now receive further credit in the form of an additional reduction in the criminal penalties, the avoidance of a compliance monitor and a prosecution declination.

To qualify, a company must first comply with a number of requirements, some of which have been in place for some time. Among the most important are that the self-disclosure must be voluntary, that is, it must be made prior to the imminent threat of disclosure or a government investigation; it must be made within a reasonably prompt time after its discovery; a company must disclose all relevant facts known to it, including facts related to culpable individuals as required by the so-called Yates Memo;3 and a company must implement an effective compliance and ethics program.

The extent of a company's compliance with the requirements determines the credit the DOJ will accord. Under the new initiative, the Fraud Section will provide cooperation credit as follows:

  • A company that furnishes all relevant facts about culpable individuals in accordance with the Yates Memo but fails to meet some or all of the other criteria will receive "some" mitigation credit.
  • A company that does not self-disclose but later fully cooperates with the investigation and appropriately remediates is eligible for up to a 25 percent reduction off the bottom end of the Guidelines range for fines.
  • A company that has voluntarily self-disclosed, fully cooperated and appropriately remediated is eligible for up to a 50 percent reduction off the low end of the Guidelines fine range (if a fine is even sought); will not have to retain a compliance monitor; and may be considered for a declination of prosecution.

At the end of the one-year project, the Fraud Section will decide whether to continue the program as it is or modify it in light of the program's results.

Companies Should Weigh Benefits and Risks of Cooperation

As the memo makes clear, no company is required to cooperate by self-disclosing, complying with the investigation and taking remediation measures. A company, like an individual, is free to do as it sees fit, and there are risks and benefits to both approaches. On one hand, self-disclosure is an assurance that the government will find out about a violation when it otherwise might not, a guarantee that there will be an expensive and possibly lengthy investigation, and a near certainty that there will be some type of sanction.

The risk of not self-disclosing, on the other hand, is that the DOJ will come to learn about an FCPA violation some other way. A whistleblower might bring it to the government's attention, or the violation might be revealed as part of a regulatory examination, a tax audit or a government investigation into an unrelated matter. Under those circumstances – and provided there is enough evidence to support a successful enforcement action – a company will face a much worse result. In her announcement of the new initiative, AAG Caldwell highlighted this point by stressing that investigations of FCPA offenses committed by companies that choose not to cooperate but that nonetheless come to light "will result in a significantly different outcome."4

While the decision whether to self-disclose and cooperate may not be easy, this new guidance at least serves to make clear what is expected and how meeting the requirements will impact the ultimate resolution of the matter. It will help companies facing FCPA issues and their counsel make a more informed decision about whether to pick up the phone or sit tight and hope for the best.


Footnotes

1 See The Fraud Section's Foreign Corrupt Practices Act Enforcement Plan and Guidance, April 5, 2016.

2 See Assistant Attorney General Leslie R. Caldwell's remarks re "Criminal Division Launches New FCPA Pilot Program," April 5, 2016 (AAG Remarks).

3 See Deputy Attorney General Sally Quillian Yates's Sept. 9, 2015, Individual Accountability for Corporate Wrongdoing memorandum, commonly known as the "Yates Memo."

4 See AAG Remarks.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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