United States: DOJ Makes Permanent Its Program To Incentivize Self-Disclosure In FCPA Investigations

Timothy D Belevetz is a Partner in our Washington DC office.

HIGHLIGHTS:

  • The U.S. Department of Justice's (DOJ) pilot program established in 2016 to incentivize companies to self-report violations of the Foreign Corrupt Practices Act (FCPA) will, with slight revisions, be made permanent.
  • The principal change to the program is that companies that completely fulfill the DOJ's expectations may be eligible to pay no penalty rather than simply a reduced penalty.
  • While a company's decision whether to self-disclose and cooperate may not be easy, this now-permanent policy at least serves to help clarify what is expected and how compliance with the requirements will affect the ultimate resolution of the matter.    

The U.S. Department of Justice (DOJ) announced on Nov. 29, 2017, that the pilot program it established in 2016 to incentivize companies to self-report violations of the Foreign Corrupt Practices Act (FCPA) will, with slight revisions, be made permanent. Under the program, business organizations can earn benefits for reporting bribes, cooperating with the government's subsequent investigation and taking corrective action. The principal change to the program is that companies that completely fulfill the DOJ's expectations may be eligible to pay no penalty rather than simply a reduced penalty.

In a April 5, 2016, memorandum titled The Fraud Section's Foreign Corrupt Practices Act Enforcement Plan and Guidance,1 the DOJ's Fraud Section rolled out the program under which companies could receive a reduction in criminal penalties of up to 50 percent, avoidance of a compliance monitor and even a declination to prosecute. The Justice Department also announced at that time that it was increasing its FCPA enforcement resources by adding 10 new prosecutors that specialize in FCPA matters – a 50 percent increase – and by creating three new squads of FBI agents devoted to FCPA investigations. It further stated that it would enhance coordination efforts with its international counterparts with regard to foreign corruption matters by sharing leads, documents and witnesses in a more effective way. The goal of the effort, according to then-Assistant Attorney General Leslie Caldwell, was to create transparency in FCPA resolutions so that companies could make more rational decisions about whether to cooperate.2

Since its inception, the leniency program has yielded 30 voluntary disclosures. The DOJ has issued seven declinations during that time.3

The New Policy

Under the modified terms of the now-permanent program, reflected in the DOJ's FCPA Corporate Enforcement Policy, companies may avoid paying any criminal penalties for FCPA offenses and formal prosecution in certain circumstances but will still have to disgorge profits obtained from the corrupt conduct and endure public disclosure of the offense. In instances where the conduct does lead to an enforcement action, companies may still receive up to a 50 percent reduction in the low end of the penalty range established under the U.S. Sentencing Guidelines and may forego the requirement of a corporate monitor. Even companies that do not self-report but that later cooperate and remediate may receive credit in the form of a reduced penalty.

During a speech announcing the revised policy at an anti-corruption conference in Maryland, Deputy Attorney General Rod Rosenstein signaled that the effort is intended to clarify what corporate America can expect from prosecutors after foreign bribery has been discovered and emphasize that law enforcement should be regarded as the business community's ally rather than its foe.4

The program will be memorialized as a policy in the United States Attorneys' Manual, which provides guidance to federal prosecutors with respect to a broad range of issues.5 As Rosenstein noted during his address, however, the policy will not create any private rights and will not be enforceable in court.

Program Requirements

The FCPA Corporate Enforcement Policy sets forth guidance with regard to a range of scenarios. Under the policy, the Fraud Section, which oversees all FCPA prosecutions, will provide cooperation credit as follows:

  • If a company 1) voluntarily self-discloses the violation to the government, 2) provides full cooperation, and 3) timely and appropriately remediates the underlying issues, it will be entitled to a presumption that the DOJ will decline to prosecute unless there are aggravating circumstances relating to the seriousness of the offense or the nature of the offender. Examples of aggravating circumstances that may warrant criminal prosecution include executive management's involvement in the misconduct, significant profits generated by the offense, the pervasiveness of the misconduct within the company and a history of FCPA offenses.
  • If a company has voluntarily self-disclosed, cooperated fully and remediated in a timely and appropriate manner but remains exposed to criminal prosecution, the DOJ will recommend to the sentencing court a 50 percent reduction off the low end of the applicable fine under the U.S. Sentencing Guidelines and, provided that the company has implemented an effective compliance program at the time of the resolution, not insist on the appointment of a corporate monitor.
  • If a company does not voluntarily self-disclose but later fully cooperates and timely and appropriately remediates the underlying issues, the DOJ will recommend a reduction of up to 25 percent off the low end of the applicable fine range under the sentencing guidelines.

Companies that satisfy any, or even all, of the requirements will still have to pay full disgorgement, forfeiture and/or restitution that results from the offense.

The policy provides additional guidance with regard to what is expected. Among the most important is that the self-disclosure must be voluntary, i.e., 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; and a company must disclose all relevant facts known to it, including facts related to culpable individuals.

With regard to cooperation, a company must, among other things, be proactive in sharing information, attribute facts to specific sources (other than in instances that would violate the attorney-client privilege), provide timely updates regarding its internal investigation, and disclose information related to potential criminal conduct by third-party companies and outside individuals.

As for remediation, the company must demonstrate a thorough analysis of the causes of the underlying conduct; take steps, where appropriate, to remediate those underlying issues; implement an effective compliance and ethics program; appropriately discipline employees involved in the offense; and preserve relevant business records.

Companies Should Weigh Benefits of Cooperation Against Risks

There is, of course, nothing in the revised (or pre-existing) policy that requires a company to cooperate by self-disclosing, cooperating in the investigation and taking remediation measures. Just like an individual, a company is free to make its own choices in this regard, and there are risks and benefits to both approaches. On the one hand, self-disclosure is a guarantee that the government will learn about an offense when it otherwise might not, an assurance of an expensive and potentially 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 could learn about an FCPA violation through some other means. 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 that there is enough evidence to support a successful enforcement action – a company will face a much worse result.

While the decision whether to self-disclose and cooperate may not be easy, this now-permanent policy at least serves to help clarify what is expected and how compliance with the requirements will affect the ultimate resolution of the matter. It will help companies faced with FCPA issues and their counsel make a more informed decision about whether to pick up the phone or sit tight and hope the government never notices. 

Footnotes

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

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

3 See DOJ's Pilot Program Declinations.

4 See Deputy Assistant Attorney General Rod Rosenstein's remarks at the 34th International Conference on the Foreign Corrupt Practices Act, Nov. 29, 2017.

5 See FCPA Corporate Enforcement Policy, United States Attorneys' Manual.

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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