United States: US Deputy Assistant Attorney General Reinforces Importance Of Transparency In M&A Compliance Programs

Last Updated: July 31 2018
Article by Alison Tanchyk, Eric W. Sitarchuk, Kelly A. Moore and Amanda Robinson

US Deputy Assistant Attorney General Matthew S. Miner recently delivered remarks at a forum on anti-corruption compliance, where he highlighted the Department of Justice's growing efforts to increase transparency between DOJ and companies that self-report misconduct and cooperate with the government when misconduct is uncovered, particularly with regard to mergers and acquisitions.

In his July 25 remarks at the American Conference Institute 9th Global Forum on Anti-Corruption Compliance in High Risk Markets, US Deputy Assistant Attorney General Matthew S. Miner emphasized the importance of a creating a fairer and more predictable environment resulting from compliant companies in the field of mergers and acquisitions, specifically through transparency between the Department of Justice (DOJ) and those companies self-reporting misconduct. Mr. Miner referred to DOJ's Foreign Corrupt Practices Act (FCPA) Corporate Enforcement Policy, which, he explained, allows "companies that promptly report misconduct, fully cooperate with the Department, and enact effective remedial measures after misconduct is detected" to be "presumed eligible for a declination of prosecution, subject to disgorgement of ill-gotten gains." Mr. Miner further added that the policy "includes incentives for companies that fail to promptly self-disclose, but otherwise meet the policy's cooperation and remediation terms."

Mr. Miner noted that DOJ "intend[s] to apply the principles contained in the FCPA Corporate Enforcement Policy to successor companies that uncover wrongdoing in connection with mergers and acquisitions and thereafter disclose that wrongdoing and provide cooperation, consistent with the terms of the policy." In the policy's application to mergers and acquisitions, Mr. Miner explains that DOJ is providing "companies and their advisors greater certainty when deciding whether to go forward with a foreign acquisition or merger, as well as in determining how to approach wrongdoing discovered subsequent to a deal."

Throughout his remarks, Mr. Miner also emphasized DOJ's focus on compliance in the context of mergers and acquisitions. He explained that because acquisitions involve companies inheriting other company's compliance issues, there is a strong need to level the playing field for the law-abiding companies involved in transactions. Additionally, acquiring companies have a right to uncover any misconduct before finalizing an acquisition, and are in a very advantageous position to do so. There are also benefits for both the company and DOJ when an acquiring company performs its due diligence and uncovers and reports wrongdoing. The company has the necessary information through preacquisition due diligence efforts, and the DOJ can divert its resources to other areas. In encouraging this practice, Mr. Miner also noted that such compliance efforts will provide companies with the peace of mind that any consequences they may face will be fair as per the FCPA Corporate Enforcement Policy, and that any individual wrongdoers will be held responsible.

Mr. Miner noted that for any wrongdoing uncovered prior to finalizing an acquisition, the acquiring company should obtain guidance by going through the DOJ's FCPA Opinion Procedures—a process that can be expedited if necessary. If the wrongdoing is uncovered postacquisition, however, DOJ encourages disclosure by the company's management and advisors, knowing that the consequences will be fair as per the FCPA Corporate Enforcement Policy and that there is an opportunity to appropriately move forward.

Finally, Mr. Miner addressed (1) DOJ's efforts to publicize declination letters for cases that are resolved under the FCPA Corporate Enforcement Policy and (2) DOJ's anti–piling on policy.

Mr. Miner pointed to Dunn & Bradstreet, the first case of corporate declination under the FCPA Corporate Enforcement Policy. In this case, Dunn & Bradstreet uncovered misconduct in connection with hiring practices by its acquired subsidiaries in China. The company took remedial measures and satisfied the policy's requirements, which enabled the company to avoid criminal sanctions. Moreover, as a result, DOJ gave the company a declination plus credit for disgorgement as part of a $9 million payment in a related Securities and Exchange Commission administrative proceeding. Mr. Miner explained that this credit was provided in accordance with DOJ's recent policy change to avoid the duplicative fines and other financial penalties by various enforcement agencies in corporate settlements. Some of the factors that led to Dunn & Bradstreet's declination included the following:

  • The fact that the company identified the misconduct and promptly and voluntarily self-disclosed the misconduct to DOJ
  • The thorough internal investigation undertaken by the company
  • Its full cooperation in the matter, including identifying all individuals involved in or responsible for the misconduct, providing DOJ all facts relating to the misconduct, making current and former employees available for interviews, and translating foreign language documents to English
  • The company's enhancements to its compliance program and internal accounting controls
  • Full remediation, including terminating the employment of 11 individuals involved in the misconduct in China, including an officer of the China subsidiary and other senior employees of one subsidiary, and disciplining other employees by reducing bonuses, reducing salaries, lowering performance reviews, and formally reprimanding them
  • Disgorgement to the SEC

Overall, Mr. Miner's remarks reinforce the ongoing theme that DOJ expects companies, specifically those in the merger and acquisition context, to devote meaningful consideration to self-reporting and cooperating if they become aware of any misconduct so that the impact of any consequences can be mitigated.

This article is provided as a general informational service and it should not be construed as imparting legal advice on any specific matter.

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