On July 3, 2020, the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) released the second edition of the Resource Guide to the U.S. Foreign Corrupt Practices Act (2020 Guide), the first update to the Guide in nearly 10 years. Like the first edition, which was released in November 2012, the 2020 Guide does not break any meaningful new ground.1 Instead, the 2020 Guide refreshes and updates the prior Guide in three main ways. First, the new edition incorporates significant policies that have been released by the DOJ since the first edition-for example, the Corporate Enforcement Policy (CEP). Folding these new policies into the 2020 Guide reinforces the DOJ's stated goal of providing more guidance about the information considered and the standards applied when assessing and resolving Foreign Corrupt Practices Act (FCPA) matters with corporate entities.2 Second, the 2020 Guide incorporates the recently decided and, in some cases, contested court decisions in the Kokesh, Hoskins and Esquenazi matters and sounds some critical notes as to the general applicability of the decisions in Hoskins and Kokesh by rejecting the holdings in these cases as not yet final or generally applicable. Third, the new edition updates case examples, referring to more recently resolved matters and adding those that illustrate new developments in the field; for example, the 2020 Guide highlights the "connected hiring" cases as illustrations of what constitutes a "thing of value" under the statute. The 2020 Guide refreshes a basic resource that will be familiar to compliance officers and practitioners. In fact, many compliance professionals will likely have digested the various guidance documents and case updates upon their earlier issuance but will benefit from their collection and consolidation in one document.
DOJ's POLICY GUIDANCE REFLECTED, BUT WHERE IS THE SEC?
As noted above, much of the new content in the 2020 Guide pertains to the incorporation of guidance issued by the DOJ since 2012 concerning how it decides to open an investigation and how it makes charging decisions. It bears emphasizing that the updated content stems nearly entirely from DOJ-generated guidance and that the SEC has seemingly not "signed on" to these portions of the Guide. This means that since the issuance of the 2012 Guide, the SEC has offered very little formal, published guidance on its own enforcement views and the best explanation of the SEC's corporate charging decisions remains the 2001 Seaboard Report (as incorporated into the SEC's Enforcement Manual)-a document that is nearly 20 years old.3 As we discuss further below, it is also notable that the updated Guide omits or tempers some of the DOJ guidance issued since 2012, namely the Yates Memo and its focus on individual accountability.
- DOJ Corporate Enforcement Policy
The 2020 Guide explains that in addition to the Principles of Federal Prosecution we noted upon its issuance, the CEP effectively made permanent the DOJ's 2016 FCPA "pilot program" that increased incentives for self-disclosure by adding a presumption of a declination if certain cooperation, remediation and disgorgement standards were met.4 and the Principles of Federal Prosecution of Business Organizations5-both of which were described in the 2012 Guide-the DOJ's decision regarding whether to open an investigation or bring charges will also be guided by the 2017 CEP.6 As we noted upon its issuance, the CEP effectively made permanent the DOJ's 2016 FCPA "pilot program" that increased incentives for self-disclosure by adding a presumption of a declination if certain cooperation, remediation and disgorgement standards were met.7 The 2020 Guide also reflects the caveat from the CEP that, in some cases, aggravating circumstances such as involvement by executive management of the company in the misconduct and criminal recidivism may warrant prosecution, self-disclosure notwithstanding.
As noted in the new 2020 Guide, "[a] declination pursuant to the CEP is a case that would have been prosecuted or criminally resolved except for the company's voluntary disclosure, full cooperation, remediation, and payment of disgorgement, forfeiture, and/or restitution."8 CEP declinations are made public as a matter of course, but the second edition marries the CEP policy guidance with the actual CEP declinations, which will likely prove a useful tool for analysis. In one example, the DOJ explains that it declined to prosecute a company for misconduct despite the involvement of high-level corporate officers for a number of reasons, particularly because of the company's actions: (1) timely and voluntary self-disclosure and cooperation with the DOJ; (2) thorough and comprehensive investigation; (3) agreement to disgorge to the DOJ all profits made from the illegal conduct, a figure just under $100,000; (4) multiple steps to reform its compliance program and internal controls; (5) remediation measures, including the termination of all executives and employees involved in the misconduct; and (6) assistance in enabling the DOJ to identify and charge the culpable individuals.9 The DOJ notes in a second example that it declined to prosecute a company that voluntarily self-disclosed, fully cooperated, and timely and appropriately remediated, and where the company also agreed to pay a significant fine as part of a parallel investigation with the UK Serious Fraud Office.10
Declinations are also discussed elsewhere in the second edition. Although the text introducing these examples suggests that these were not declinations issued in connection with the CEP,11 they nonetheless provide a real-life illustration of some of the factors set forth in the CEP-voluntary disclosure, cooperation, remediation and disgorgement-and therefore merit close analysis, particularly as the facts of non-CEP declinations typically are not publicized.
References to the CEP in the updated Guide are carefully preceded by "DOJ" and are included only in a section specific to the DOJ-the text explicitly makes clear that "[t]he CEP applies only to DOJ, and does not bind or apply to SEC."12 Although many of the factors employed by the SEC are similar to those utilized by the DOJ, with respect to this issue, the 2020 Guide notes simply: "As discussed above, SEC's decision to bring or decline to bring an enforcement action under the FCPA is made pursuant to the guiding principles set forth in the Seaboard Report, as incorporated into the SEC's Enforcement Manual."13
- Incorporation of the DOJ's Evaluation of Corporate Compliance Programs
Strong compliance programs continue to be essential in preventing and detecting FCPA violations. The 2020 Guide details the hallmarks of an effective compliance program, while noting that "no one-size-fits-all program" exists, and describes the impact of strong compliance programs on charging decisions. As we described just last month when the DOJ issued updates to its guidance, the most recent iteration of the DOJ Compliance Guidance frames its examination of corporate compliance programs in the context of factors prosecutors should note and questions prosecutors should ask in the course of the investigation and resolution of DOJ matters.14 New content in the 2020 Guide reflects the incorporation of recent elements from DOJ guidance, specifically the DOJ's Evaluation of Corporate Compliance Programs (DOJ Compliance Guidance). As we described just last month when the DOJ issued updates to its guidance, the most recent iteration of the DOJ Compliance Guidance frames its examination of corporate compliance programs in the context of factors prosecutors should note and questions prosecutors should ask in the course of the investigation and resolution of DOJ matters.15 For example, the 2020 Guide notes that a well-designed compliance program requires a thoughtful root cause analysis of misconduct and timely and appropriate remediation and states that "[t]he truest measure of an effective compliance program is how it responds to misconduct."16
As with the inclusion of the CEP, the 2020 Guide incorporates the FCPA content from the DOJ Compliance Guidance, and there is nothing substantively new in those additions. Interestingly, unlike the sections incorporating the CEP, the SEC does appear to "sign on" to the inclusion of these new updated compliance guidance elements, although the content in the 2020 Guide is obviously limited to the evaluation of FCPA compliance programs, whereas the DOJ Compliance Guidance is much broader.
- Guidance on the Selection and Imposition of a Compliance Monitor or Independent Consultant
Illustrating the DOJ's and the SEC's continued efforts to increase transparency around the imposition of compliance monitors in FCPA resolutions, including the recent publication of all current DOJ monitors on the Fraud Section website, we noted when this guidance was issued, it seemed to suggest the tempering of the imposition of corporate monitors and a potential narrowing of their scope of review during monitorships. The 2020 Guide echoes some of the cost and prudential considerations noted in the 2018 Monitor17 the 2020 Guide again incorporates a discussion of when the selection and appointment of a compliance monitor or independent consultant might be appropriate. New to this section are considerations from the DOJ's 2018 memorandum, Selection of Monitors in Criminal Division Matters (2018 Monitor Memorandum);18 as we noted when this guidance was issued, it seemed to suggest the tempering of the imposition of corporate monitors and a potential narrowing of their scope of review during monitorships. The 2020 Guide echoes some of the cost and prudential considerations noted in the 2018 Monitor Memorandum, ultimately restating that "[w]here a corporation's compliance program and controls are demonstrated to be effective and appropriately resourced at the time of resolution, a monitor will likely not be necessary."19
While the discussion of the 2018 Monitor Memorandum in the updated 2020 Guide identifies it clearly as a DOJ document, there are some changes to factors both agencies consider when determining whether a compliance monitor is appropriate. For example, rather than focusing solely on the seriousness of the misconduct, the 2020 Guide indicates that the "nature" of the misconduct will now also be considered. Additionally, the Guide clarifies that both agencies will now take a full view of the evaluation of a company's compliance program from the time of misconduct to the present: specifically, while the 2012 version identified the "[q]uality of the company's compliance program at the time of the misconduct" as a factor, the updated version now notes that the evaluation will also include "whether the company's current compliance program has been fully implemented and tested."20
- Incorporation of the "No-Piling-On" Policy
Finally, the 2020 Guide explains that a goal of both the DOJ and the SEC is to avoid imposing duplicative penalties, forfeiture and disgorgement of the same conduct and cites the 2016 Braskem resolution between the DOJ, the SEC, and Brazilian and Swiss authorities as an example of how the agencies have sought to pursue this goal. Here again, however, the Guide notes that the DOJ has "memorialized this practice of coordinating resolutions to avoid 'piling on'" with written guidance to prosecutors. As we noted in 2018 when the DOJ issued its Policy on Coordination of Corporate Resolution Penalties (No-Piling-On Policy), the No-Piling-On Policy sets out four basic principles.21 The 2020 Guide makes explicit these principles-essentially that US prosecutors should endeavor to coordinate with international counterparts and domestic regulators to avoid duplicative resolutions for the same misconduct-and the related factors prosecutors should consider in determining how much to credit penalties paid to a foreign authority.22
- Exclusion of the Yates Memo
The 2020 Guide's discussion of what the DOJ considers when deciding to open an investigation or bring charges does not refer to the DOJ's 2015 Memorandum on Individual Accountability for Corporate Wrongdoing (Yates Memo).23 Authored by then Deputy Attorney General Sally Q. Yates, the purpose of the memorandum was to further the DOJ's goal of holding individuals accountable for corporate wrongdoing. As we previously reported, for corporations to receive any cooperation credit, the Yates Memo required them to provide the Department with "all relevant facts relating to the individuals responsible for the misconduct." In other words, companies no longer could pick and choose what to disclose. In 2018, the DOJ slightly modified the approach in the Yates Memo, revising its protocols to allow companies seeking cooperation credit in criminal cases to identify every individual who was substantially involved in or responsible for the criminal conduct.24 Following concerns about the inefficiency of requiring companies to identify every employee involved regardless of culpability, the DOJ clarified that investigations should not be delayed merely to collect information about individuals who were not likely to be prosecuted and whose involvement was not substantial. This allowed the DOJ greater flexibility and discretion in awarding cooperation credit in civil cases. Notably, the 2020 Guide neither refers to the "all relevant facts" requirement in the Yates Memo nor discusses the tempering of that requirement in 2018. Juxtaposed against repeated statements from DOJ officials over recent years emphasizing that individual prosecutions remain a priority, the omission of the Yates Memo from the 2020 Guide is notable.25
1. US Dep't of Justice and US Sec. and Exch. Comm'n, Resource Guide to the U.S. Foreign Corrupt Practices Act (1st. ed. 2012), https://www.sec.gov/spotlight/fcpa/fcpa-resource-guide.pdf (hereinafter "2012 Guide").
2. Rod Rosenstein, Deputy Att'y Gen., US Dep't of Justice, Remarks at the 34th International Conference on the Foreign Corrupt Practices Act (Nov. 29, 2017) ("The new [FCPA Corporate Enforcement Policy] enables the Department to efficiently identify and punish criminal conduct, and it provides guidance and greater certainty for companies struggling with the question of whether to make voluntary disclosures of wrongdoing."), https://www.justice.gov/opa/speech/deputy-attorney-general-rosenstein-delivers-remarks-34th-international-conference-foreign; Leslie Caldwell, Asst. Att'y Gen., US Dep't of Justice, Remarks at American Conference Institute's 32nd Annual International Conference on Foreign Corrupt Practices Act (Nov. 17, 2015) ("[O]ne of [the] priorities in the Criminal Division has been to increase transparency regarding charging decisions in corporate prosecutions."), http://www.justice.gov/opa/speech/assistant-attorney-general-leslie-r-caldwell-delivers-remarks-american-conference.
3. Sec. & Exch. Comm'n, Release No. 44969, Report of Investigation Pursuant to Section 21(a) of the Securities Exchange Act of 1934 and Commission Statement on the Relationship of Cooperation to Agency Enforcement Decisions (2001), http://www.sec.gov/litigation/investreport/34-44969.htm.
4. Dep't of Justice, Justice Manual § 9-27.000, Principles of Federal Prosecution, https://www.justice.gov/jm/jm-9-27000-principles-federal-prosecution.
5. Id. § 9-28.000, Principles of Federal Prosecution of Business Organizations, www.justice.gov/usam/usam-9-28000-principles-federal-prosecution-business-organizations.
6. 2020 Guide at 51-52. See also Justice Manual § 9-27.000, https://www.justice.gov/jm/jm-9-27000-principles-federal-prosecution; Justice Manual § 9-28.000, www.justice.gov/usam/usam-9-28000-principles-federal-prosecution-business-organizations.
7. Andrew Weissmann, US Dep't of Justice, The Fraud Section's Foreign Corrupt Practices Act Enforcement Plan and Guidance (2016), https://www.justice.gov/opa/file/838386/download.
8. 2020 Guide at 77.
9. Id. at 53.
10. Id. at 52-53.
11. See id. at 79 ("Other than those pursuant to the CEP, neither DOJ or SEC typically publicizes declinations but, to provide some insight into the process, the following are anonymized examples of matters DOJ and SEC have declined to pursue.").
12. Id. at 52.
13. Id. at 79. The SEC's policies regarding awarding cooperation credit are also set forth in the Seaboard Report, published in 2001. See supra note 3.
14. 2020 Guide at 58.
15. The 2020 Guide explicitly includes "Confidential Reporting and Internal Investigations," "Continuous Improvement: Periodic Testing and Review," "Mergers and Acquisitions: Pre-Acquisition Due Diligence and Post-Acquisition Integration," and "Investigation, Analysis, and Remediation of Misconduct" as hallmarks of an effective compliance program. Id. at 66-68.
16. Id. at 67.
17. Dep't of Justice, List of Independent Compliance Monitors for Active Fraud Section Monitorships (June 2, 2020), https://www.justice.gov/criminal-fraud/strategy-policy-and-training-unit/monitorships.
18. Brian A. Benczkowski, US Dep't of Justice, Selection and Use of Monitors in Deferred Prosecution Agreements and Non-Prosecution Agreements with Corporations (2018), https://www.justice.gov/criminal-fraud/file/1100366/download.
19. 2020 Guide at 74 (citing Benczkowski, supra note 17, https://www.justice.gov/criminal-fraud/file/1100366/download).
21. Dep't of Justice, Justice Manual § 1-12.100, Coordination of Parallel Criminal, Civil, Regulatory, and Administrative Proceedings, https://www.justice.gov/jm/jm-1-12000-coordination-parallel-criminal-civil-regulatory-and-administrative-proceedings. The policy sets out four basic principles: (1) "Department attorneys should remain mindful of their ethical obligation not to use criminal enforcement authority unfairly to extract, or to attempt to extract, additional civil or administrative monetary payments"; (2) where multiple DOJ components investigate a company for the same conduct, "Department attorneys should coordinate with one another to avoid unnecessary imposition of duplicative fines, penalties, and/or forfeiture against the company," with the "goal of achieving an equitable result"; (3) the DOJ "should also endeavor, as appropriate, to coordinate with and consider the amount of fines, penalties, and/or forfeiture paid to other federal, state, local, or foreign enforcement authorities that are seeking to resolve a case with a company for the same misconduct"; and (4) the DOJ "should consider all relevant factors in determining whether coordination and apportionment between Department components and with other enforcement authorities allows the interests of justice to be fully vindicated," including "the egregiousness of a company's misconduct; statutory mandates regarding penalties, fines, and/or forfeitures; the risk of unwarranted delay in achieving a final resolution; and the adequacy and timeliness of a company's disclosures and its cooperation with the Department." Id.
22. 2020 Guide at 71.
23. Sally Q. Yates, US Dep't of Justice, Individual Accountability for Corporate Wrongdoing (2015), https://www.justice.gov/archives/dag/file/769036/download.
24. Rod J. Rosenstein, Deputy Att'y Gen., US Dep't of Justice, Remarks at the American Conference Institute's 35th International Conference on the Foreign Corrupt Practices Act (Nov. 29, 2018), https://www.justice.gov/opa/speech/deputy-attorney-general-rod-j-rosenstein-delivers-remarks-american-conference-institute-0.
25. See, e.g., Rod J. Rosenstein, Deputy Att'y Gen., US Dep't of Justice, Keynote Address on FCPA Enforcement Developments (Mar. 7, 2019), https://www.justice.gov/opa/speech/deputy-attorney-general-rod-j-rosenstein-delivers-keynote-address-fcpa-enforcement (stating that the DOJ would focus on identifying individuals "who play significant roles in setting a company on a course of criminal conduct" in an effort to identify those individuals "who devised and authorized criminal schemes.").
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