Most Read Contributor in United States, December 2016
In an recent article on Law360, Robert W. Kent, Jr. looked
at lessons to be learned from the first six months of the
Department of Justice's Foreign Corrupt Practices Act (FCPA)
Pilot Program. Announced in April 2016, the year-long pilot
program is designed to up the ante for companies during FCPA
investigations by offering sentencing reductions or declinations
(with disgorgement of all profits from the alleged misconduct) to
companies that voluntarily disclose misconduct and cooperate fully
while ostensibly restricting any cooperation credit for companies
that no not meaningfully participate in an investigation.
Mr. Kent offers a number of insightful observations on the first
six months of the pilot program. Among his many insights are a few
key take-aways for companies of all sizes.
First, FCPA enforcement actions have increased dramatically. As
of October, there have already been more enforcement actions
announced in 2016 than in any full year prior. Whether this surge
will continue remains to be seen, but companies must assume that
this heightened level of vigilance is the new standard.
Second, the DOJ is publicizing the details of alleged misconduct
with more detail in the past. The factual recitations of the
alleged conduct, even in letters declining further investigation or
prosecution, clearly outline the alleged schemes and those
involved, and may tarnish a company's relationship with
partners and the public.
Third, the Yates Memo's focus on individual
accountability appears to be taking root as the DOJ and SEC have
appeared to coordinate efforts, leading to SEC enforcement actions
against four individuals in the past six months. The specter
individual enforcement actions or criminal charges is a powerful
deterrent and one the DOJ and SEC seem ready to use as part of the
current enforcement push.
Finally, a bit of good news for companies in the midst of the
government's enforcement surge, the DOJ and SEC are recognizing
and crediting the value of robust FCPA compliance programs. In
numerous releases regarding FCPA resolution, the DOJ and SEC have
focused on the responsiveness of compliance programs when
allegations of misconduct arise internally. Subsequent internal
investigations which include the strict preservation of evidence
and aid from internal investigators to government agencies in
deciphering global financial data are similarly lauded.
Nevertheless, the ability to identify and report potential
misconduct will always require training employees and executives at
every level. Therefore, while the yield from the internal
investigations may garner leniency from the DOJ or SEC, training
which will allow the company to identify misconduct and start the
process of internal investigation and self-disclosure must not be
At the half-way point, the FCPA pilot program is proving to be a
genuine catalyst for changing how FCPA violations are reported and
investigated. In April, the DOJ said that it would re-evaluate the
need to continue the pilot program after a year. However, another
six months like this and we may have arrived at a new FCPA
enforcement status quo, pilot program or none.
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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On November 9, 2016 Andrew Liazos presented at the New York City Bar. He discussed innovative approaches used by public companies during the 2016 proxy season for disclosing executive compensation practices.
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