FCPA CORPORATE ENFOR CEMENT POLICY
Since the DOJ's announcement in 2017 of its incorporation of the FCPA Pilot Program into the U.S. Attorneys' Manual (now the Justice Manual), which guides the DOJ's enforcement policies and practices, the DOJ has continued to release and formalize enforcement guidance.
In 2018, we reported on the DOJ's issuance of the Policy on Coordination of Corporate Resolutions, which provides a guide to DOJ attorneys when coordinating enforcement actions with multiple agencies and jurisdictions to avoid "piling on" corporations while still "achiev[ing] justice and protect[ing] the public." In 2018, the DOJ also produced formal guidance relating to conditions for awarding cooperation credit and considerations when engaging compliance monitors.
The trend continued in 2019, with the DOJ issuing new guidance on enforcement policies relating to assessing inability to pay, due diligence during mergers and acquisitions, software communication retention, and the evaluation of corporate compliance programs.
MINOR REVISIONS TO C ORPORATE ENFORCEMENT POLICY
Less than a year after issuing the FCPA Corporate Enforcement Policy in May 2018, the DOJ released revisions in March 2019. These revisions amounted to little more than tweaks and clarifications, although with potentially far-reaching impacts in practice.
First, the DOJ provided additional guidance on the ability of companies to obtain a declination under the Policy if they discover a violation during pre- or ("in appropriate instances") post-acquisition due diligence. This assuaged some concerns in an area of the Policy that had been a little unclear as originally issued, but still left considerable room for interpretation, particularly with respect to what the "appropriate instances" would be for the DOJ to award a declination for a postacquisition discovery. Such a possibility appears to recognize the practical reality that even thorough pre-acquisition due diligence might not uncover violations lurking in the far-flung subsidiaries and JVs of large multi-national companies. Further, it would not be illogical to suppose that the DOJ might be inclined to look more kindly upon companies that acquire FCPA violations through mergers or acquisitions, since these companies are forces for improving compliance, but the DOJ did not express any such inclination in this announcement. Either some of the DOJ's enforcement policies remain unspoken or declinations in the M&A context operate identically to those outside it.
Second, the DOJ's announcement regarding changes to its approach to the retention requirements for communications, while small, avoided a potentially major hurdle facing companies hoping to qualify for a declination or for remediation credit under the Policy. Specifically, the plain language of the original Policy suggested that companies could not qualify for a presumption of declination or remediation credit if their policies did not completely bar employees from using personal communication devices or ephemeral messaging platforms. This strict black-orwhite language left companies wondering if they needed to make drastic, potentially burdensome changes to policies, even in the absence of any allegation or investigation, and if their use of these commonly-used and previously non-controversial technologies at the time of a potential violation might preclude them from obtaining a declination or remediation credit. Indeed, many questioned whether the DOJ had stepped out of its lane by defining cooperation to exclude pre-investigative use of messaging software even when the company's adoption of or acceptance of such communication software was done without any intent to obstruct a non-existent investigation and instead was based on the utility and effectiveness of the software (or, for that matter, the DOJ had any basis for defining a company to be uncooperative when, before there was an investigation in which to cooperate, it chose, as part of its document retention policy, could, for any number of legitimate reasons, not to retain emails, voicemails, while-you-were-out pink pads, or any other types of records once there was no business need for them). The Policy, as updated in March 2019, now states that companies must have "[a]ppropriate retention of business records, and prohibiting the improper destruction or deletion of business records, including implementing appropriate guidance and controls on the use of personal communications and ephemeral messaging platforms that undermine the company's ability to appropriately retain business records or communications or otherwise comply with the company's document retention policies or legal obligations." This softer language ameliorates potential confusion by eliminating the flat prohibition of these communication methods that was in the original Policy. The result is much more practicable guidance for companies, especially given the realities of current communication habits and needs.
UPDATED GUIDANCE FROM DOJ ON THE EVALUATION OF COMPLIANCE PROGRAMS
On April 30, 2019, the DOJ Criminal Division released an updated version of its guidance on "Evaluation of Corporate Compliance Programs." This replaces the first version of this guidance, which was issued in February 2017 by the Fraud Section. In keeping with the prior version, the latest update still contains a list of general questions for prosecutors to ask when assessing a company's ethics and compliance program, rather than a formal rubric or checklist for compliance. The newly released version, however, goes further by providing more detail and concrete explanations for what prosecutors expect effective compliance programs to entail.
The Guidance focuses on three general aspects of a compliance program: the program's design, its implementation, and its effectiveness. For each of these areas, the Guidance provides the "critical factors" to consider and questions prosecutors may ask during their evaluations. However, the DOJ stresses that the Guidance does not purport to function as a checklist or concrete formula, giving the DOJ, as always, a little wiggle room in its approach. In keeping with the objectives and foci the DOJ has expressed recently, the Guidance hits several hot topics in FCPA enforcement, including the establishment of "disincentives for non-compliance" and disciplinary measures and emphasis on the tone at the top.
DOJ ISSUES GUIDELINES ON INABILITY TO PAY
In October 2019, the DOJ issued guidance on what is probably its least favorite topic—evaluating a company's inability to pay criminal fines or penalties. In a speech announcing the Guidelines, Assistant Attorney General Brian A. Benczkowski explained that "where a company is in fact unable to pay the appropriate fine or penalty, Criminal Division attorneys should recommend an adjustment to that amount." However, the DOJ will conduct the evaluation only "where legitimate questions exist regarding the company's ability to pay" and that the fine and penalty would only be adjusted to the point at which the company's viability and ability to pay restitution would be preserved.
Of course, the government has always been required to consider these factors when imposing a criminal penalty, pursuant to 18 U.S.C. § 3572 and the U.S. Sentencing Guidelines. The Guidance certainly adds a minor amount of color and some clarity to the factors considered regarding if and how much a company can pay, but overall it does not provide any concrete or bright-line rules or formulas. Instead, it merely provides the factors the government should consider at a high level, without explaining what would influence the outcome of the evaluation or how it impacts the ability to pay calculation. The only piece of guidance that could be considered formulaic is in a footnote that explains that, in assessing ability to pay, "Criminal Division attorneys may find it helpful to consult the accounting standards amendment promulgated by the Financial Accounting Standards Board ("FASB") in August 2014 regarding 'Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern.'" These accounting standards provide a bit more specificity and context to the financial condition in which a company must find itself to qualify for a reduction in the penalty.
FOREIGN EXTORTION PREVENTION ACT
In August 2019, the Foreign Extortion Prevention Act was introduced into the U.S. House of Representatives. The bill would cover a gap in the FCPA by allowing prosecution of foreign officials that accept or request bribes. The bill is still in committee, so it is too early to speculate as to its chances of passing. Its current form appears to be based on a perceived gap in the FCPA, which punishes the "supply" side—those who give bribes—and not the "demand" side—the corrupt officials whose demands may have been the root cause of the bribe. However, in the context of foreign government officials, it is not clear on its odds of becoming law or the specific elements of any final legislation. However, the bill's introduction recognizes a key failure of the FCPA—that is, it only punishes those who offer or provide bribes while failing to deter the demand-side of the transaction. Further, foreign officials can be (and often are) charged with FCPA-related offenses such as money laundering or wire fraud, but these are decidedly side-show charges that lack teeth. We will continue to watch the progress of the Foreign Extortion Prevention Act.
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