United States: Fighting Fraud And Corruption: The DOJ's New FCPA Pilot Program

Last Updated: April 20 2016
Article by Olga Torres

The Department of Justice (DOJ) recently announced its creation of a new pilot program designed to encourage companies to voluntarily self-disclose Foreign Corrupt Practices Act (FCPA) violations in exchange for penalty mitigation. This announcement should not come as a surprise as the Department has been making significant enhancements to the DOJ's ability to investigate and prosecute FCPA cases over the last few months. For example, the DOJ has doubled the size of its Fraud Section's FCPA unit by adding ten prosecutors, an increase of 50 percent. To provide additional support, the FBI created three new squads of special agents devoted to FCPA investigations and prosecutions. Additionally, the DOJ plans on increasing international cooperation with foreign law enforcement to investigate and prosecute FCPA-related violations by exchanging documents, witnesses, and leads.

Requirements Under the New Pilot Program

Simply stated, the requirements of a company under the pilot program include:

  1. The company's voluntary self-disclosure of FCPA violations. Notably, the DOJ differentiates between a company's "true" voluntary self-disclosure and self-disclosing only after a wait-and-see approach, or after an imminent threat of disclosure or government investigation. The burden is on the company to show timeliness.
  2. The company's full cooperation. Amongst other things, companies will now be required to provide information about their officers, employees, and any other individuals involved in the violations. While announcing the pilot program, the DOJ repeatedly referenced the "Yates Memo," which makes it a priority to hold individuals accountable for their misconduct and requires companies to provide evidence leading to the prosecution of responsible individuals. Note that the benefits of the program extend only to companies and not individuals.
  3. The company's implementation of timely and appropriate remediation. Companies should implement effective compliance and ethics programs, or reevaluate their existing ones.

Meeting the Requirements

In the event that a company voluntarily self-discloses its FCPA misconduct and also meets the requirements of full cooperation and timely and appropriate remediation, the company can be awarded up to a 50% reduction of fines. In addition, the company may not be required to have a monitor if it has implemented an effective compliance program by the time of resolution. Finally, the government may consider declining prosecution for companies that timely disclose, cooperate, and remediate.

The DOJ has clarified that if a company does not voluntarily disclose, but later fully cooperates and timely and appropriately remediates, it can still receive limited credit. This credit will be limited to, at most, a 25% reduction off the bottom of the Sentencing Guidelines fine range.

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The DOJ designed the pilot program to encourage companies to voluntarily self-disclose FCPA misconduct and increase cooperation. The pilot program will increase transparency as it will reveal more information on the handling of FCPA cases by DOJ and will also increase accountability. Companies should approach voluntary self-disclosures with caution and carefully assess all pertinent facts and risks involved. Now it's a good time for companies to evaluate and strengthen their existing FCPA policies.

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