United States: New DOJ FCPA Enforcement Plan And Guidance Formalizes Efforts To Trigger Voluntary Disclosure Renaissance

On April 5, 2016, the Fraud Section of the US Department of Justice (DOJ) announced its Foreign Corrupt Practices Act (FCPA) Enforcement Plan and Guidance (Enforcement Plan). The Enforcement Plan formalizes DOJ's efforts to provide greater transparency into its FCPA enforcement decision making and demonstrate the tangible benefits available for voluntary disclosure and cooperation. Most notably, the Enforcement Plan includes a new, one-year voluntary disclosure pilot program (Pilot Program) under which participating companies can potentially secure an additional fine reduction of up to 25 percent for initiating a voluntary disclosure and meeting the other requirements of the Pilot Program, along with other benefits up to and including declination of prosecution. Prior to announcing the Enforcement Plan, the leadership of the Fraud Section (and more generally DOJ's Criminal Division) had utilized several recent speaking engagements and conference appearances to discuss the impact of voluntary disclosure and cooperation in the context of recent high-profile settlements—matters such as Avon and Alstom.

While it remains to be seen how the Enforcement Plan—and particularly the Pilot Program—is applied in practice, it is clear from the outset that it does not simplify a company's analysis of whether or not to initiate a voluntary disclosure when faced with a potential FCPA issue. At first blush, this may seem counterintuitive given the tangible benefits available under the Pilot Program. However, as companies that have faced FCPA investigations and enforcement actions learn all too often, the costs of voluntary disclosure and full cooperation, including broad-ranging internal investigations and difficult-to-anticipate collateral consequences, can often dwarf the penalties handed down by DOJ. And these costs are only likely to increase in the current enforcement environment as the Enforcement Plan follows last fall's issuance of the Yates Memorandum that upped the ante for cooperation, specifically regarding the amount of information required about individuals involved in underlying conduct. Additionally, the new DOJ resources and increased international cooperation announced as part of the Enforcement Plan further increase the detection risk for potential FCPA matters, and the Pilot Program's requirements compress the time period that companies have to complete analyses of whether voluntary disclosure is the proper course.

Consequently, in the wake of the Enforcement Plan, it is now more important than ever that companies faced with potential FCPA matters partner with experienced counsel who can guide and assist them in making a clear-eyed assessment, without any predisposition, of whether voluntary disclosure makes sense in the current enforcement environment.

As noted above, the Enforcement Plan includes three principal components:

  1. Increased Resources: The Enforcement Plan formally announced additional law enforcement resources, including:

    • The addition of 10 prosecutors within the Fraud Section's FCPA unit—representing a 50 percent increase; and
    • The establishment of three new FCPA-specific squads at the Federal Bureau of Investigation (FBI).
  2. Additional International Collaboration: The Enforcement Plan also expressed a renewed and deeper commitment by the Fraud Section to coordinate with foreign law enforcement, including:

    • Mutual exchange of investigative leads; and
    • More effective sharing of documents and witnesses.
  3. Pilot Program: Finally, the Enforcement Plan instituted the one-year Pilot Program. Effective as of April 5, 2016, the Pilot Program applies to any company that makes a voluntary disclosure or cooperates with the Fraud Section's FCPA Unit during its pendency. Following the pilot period, DOJ will assess whether to modify or extend the Pilot Program.

The elements of the Pilot Program are as follows:

  • Initiate a qualifying voluntary disclosure. Disclosures will be assessed to determine if they were truly voluntary, timely, and complete, including as follows:

    • Truly Voluntary: The disclosure cannot be otherwise required by law or agreement;
    • Timely: The disclosure must be made "prior to an imminent threat of disclosure or government investigation" and "within a reasonably prompt time after becoming aware of the offense"; and
    • Complete: The disclosure should include all relevant facts known to the company, including relevant facts regarding individuals involved.
  • Provide full cooperation. Cooperation will be assessed to determine if it was proactive and complete, including as follows:

    • Proactive: The cooperation should include disclosure of all relevant facts, even those not specifically requested, including identification of opportunities for the government to procure evidence (including evidence not in the company's possession and evidence unknown to the government); and
    • Complete: Relevant documents and information must be preserved and produced; updates on internal investigations must be provided promptly and should include disclosure of all relevant facts gathered during the internal investigation (including facts regarding third parties); employees should be made available for interview upon request; and companies should disclose and help provide access to overseas documents and witnesses.
  • Conduct timely and appropriate remediation. Remediation will be assessed for the following criteria:

    • Implementation of an effective compliance and ethics program;
    • Appropriate discipline of employees;
    • Additional steps commensurate with the seriousness of the conduct; and
    • Implementation of measures reducing the risk of future misconduct and identifying future risk.
  • Disgorge all profits from the FCPA violation.

The benefits of the Pilot Program are as follows:

  • Limited Mitigation Credit: A company that provides full cooperation and conducts timely and appropriate remediation, but does not make a qualifying voluntary disclosure, remains eligible for a fine reduction of up to 25 percent from the bottom of the Sentencing Guidelines range.
  • Full Mitigation Credit: A company that initiates a qualifying voluntary disclosure, in addition to providing full cooperation and conducting timely and appropriate remediation, is eligible for full mitigation credit, which means:

    • The fine may be reduced up to 50 percent from the bottom of the Sentencing Guidelines range;
    • A compliance monitor generally will not be required for the matter if an effective compliance program has been implemented at the time of resolution; and
    • The Fraud Section will consider declining to prosecute the matter

Originally published April 29, 2016

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