United States: Fraud Section Launches Pilot Program For Voluntary Disclosure Of FCPA Violations: Carrot And Stick Or Bluff And Bluster?

On April 5, 2016, in a memorandum entitled Fraud Section's Foreign Corrupt Practices Act Enforcement Plan and Guidance ("Guidance"), the DOJ's Fraud Section unveiled an initiative to encourage voluntary self-reporting in FCPA cases.

The purported "carrot" is the one-year pilot program laid out by the Guidance, under which the DOJ will allow a reduction of up to 50% off the low-end of the applicable U.S. Sentencing Guidelines penalty range for companies that self-report violations, cooperate fully with the DOJ's subsequent investigation, and take steps to remediate the misconduct. In addition, under the pilot program, companies that have implemented an effective compliance program may not be required to retain a corporate compliance monitor. The "stick" is the threat that "FCPA violations that might have gone uncovered in the past are now more likely to come to light." In particular, the Fraud Section points to: (1) its increase in FCPA investigative and prosecutorial resources through the addition of 10 new prosecutors and three new FBI squads -- all dedicated to corruption; and (2) the increased collaboration between the DOJ and international law enforcement bodies to combat bribery.

Pilot Program

According to the Guidance, in order to qualify for full credit under the pilot program (50% reduction from the otherwise applicable U.S. Sentencing Guidelines penalty range, no compliance monitor, and consideration of declination of prosecution), companies must meet certain requirements.

  • First, a company must voluntarily disclose the FCPA violation. In order for a disclosure to be considered voluntary, it must occur prior to an "imminent threat" of disclosure by an employee or third party or the initiation of a government investigation, be made within a reasonable time of the company becoming aware of the violation, and must include all relevant facts (including information regarding the individuals involved). Moreover, a disclosure will not be considered voluntary if the company is required to make it by law, agreement or contract. The Guidance is clear that even with full cooperation and appropriate remediation, absent voluntary disclosure, the Fraud Section's FCPA Unit will grant a maximum reduction of only 25% off the bottom of the U.S. Sentencing Guidelines penalty range.
  • Second, a company must provide full cooperation to the Fraud Section's FCPA Unit. Doubling-down on the so-called Yates Memo issued last year, in order to receive full cooperation credit, a company must be prepared to disclose all facts relevant to the investigation, including the involvement of the company's officers, employees, or agents.
  • Third, a company must take appropriate and timely steps to remediate the misconduct, including implementing an effective ethics and compliance program, appropriate discipline of employees, and any other steps to reduce the risk of misconduct recurring.
  • Finally, to be eligible for the credit, even a company that voluntarily self-discloses, fully cooperates and remediates will be required to disgorge all profits resulting from the FCPA violation.

Potential Impact on the Decision Whether to Voluntarily Disclose an FCPA Violation

Will this program change the equation for a company with knowledge of an FCPA violation? The potential reductions from the otherwise applicable Sentencing Guidelines penalty range under the pilot program are significant, as is the opportunity to avoid the imposition of the compliance monitor or avoid prosecution altogether.

Moreover, the chances of an FCPA violation forever staying "internal" are growing smaller and smaller by the day. The Guidance's reference to increased cooperation among international enforcement bodies is not just bluster. In the last 18 months, we have seen DOJ settlements arising out of cooperation with the national authorities in the U.K., Indonesia, Switzerland, Germany, the Netherlands, Saudi Arabia, Cyprus and Taiwan, as well as other international organizations such as the African Development Bank. In addition, employees have more incentive than ever to report violations directly to U.S. authorities and collect potentially millions of dollars in whistle-blower awards. Finally, as recent headlines such as those covering the "Panama Papers" demonstrate, the potential for a data breach (either internal or through the work of hackers) that reveals wrongdoing is perhaps at its greatest discovery risk point in history. This would suggest that in some situations a company would be wise to self-disclose misconduct and take the accompanying remediation credit rather than waiting for the DOJ to come knocking on the door.

However, even under the pilot program, there are no guarantees for companies willing to approach the DOJ hat-in-hand. In allowing "up to" a 50% reduction, the Guidance still provides significant discretion to the FCPA Unit under the pilot program in determining how much credit will be given to companies who choose to participate, without any guidance as to how the determination will ultimately be made. The requirement of full disgorgement of profits also allows for a great deal of discretion, as the amount of profit resulting from improper conduct is often difficult to calculate and can be a point of negotiation itself. Given that FCPA settlements can now reach into the billions of dollars, how much comfort will companies take from such a heavily couched offer?

Moreover, it is not clear that the pilot program will actually change the way the FCPA Unit approaches settlements. The DOJ has historically afforded substantial credit to companies that voluntarily disclose FCPA violations, cooperate with an investigation and remediate misconduct--a fact acknowledged in the Guidance. A Resource Guide to the U.S. Foreign Corrupt Practices Act issued by the DOJ and SEC in 2012 provides several examples of companies that were able to avoid prosecution because the companies voluntarily disclosed the violation, cooperated fully and took appropriate remedial action. It is not clear that the reduction offered under the pilot program is significantly, if at all, greater for those companies willing to voluntarily disclose than it was before.

Ultimately, even if the pilot program does not have the impact that was intended, it remains essential that corporations consider the range of potential consequences and benefits of voluntary self-disclosure, particularly in light of the increasing likelihood that any significant FCPA violation will eventually become public. To make an informed analysis and best protect its interests, it remains as important as ever that a company fully investigate potential wrongdoing in an organized, transparent and defensible manner. It is only after such an investigation that a company can make the difficult decision regarding voluntary disclosure and take the appropriate remedial measures that are essential to prevent similar misconduct in the future.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.