Late last month, Andrew Weissmann, the Chief of the Fraud Section of the U.S. Department of Justice (“DOJ”) announced that the DOJ would be hiring a “compliance counsel.” This individual reportedly will serve as an in-house expert “to help prosecutors ‘differentiate the companies that get it and are trying to implement a good compliance program from the people who have a near-paper program.’”1 According to press reports of Weissmann’s statements, the compliance expert, who has been selected and is undergoing final vetting, hails from the private sector, has significant experience in developing and implementing compliance programs, and will be a resource to prosecutors in FCPA and non-FCPA cases alike.2 The DOJ, of course, already has provided guidance about what it expects from compliance programs in its 2012 Resource Guide to the U.S. Foreign Corrupt Practices Act, published jointly with the U.S. Securities and Exchange Commission.3 DOJ has also issued internal guidance from which prosecutors are to work when assessing company compliance programs in the course of determining when to charge a company with an FCPA or other criminal law violation.4 And the U.S. Sentencing Commission has issued guidelines, which the Supreme Court has held are “advisory” for the U.S. federal courts,5 governing what sentence is appropriate in light of such matters as the effectiveness of a company’s compliance program.6 The Sentencing Guidelines apply upon conviction of an offense, but they are also routinely utilized to identify appropriate penalties in the course of settlement discussions, and are customarily analyzed in Deferred Prosecution Agreements (“DPAs”) presented by the parties to corporate resolutions to the U.S. courts. Continued on page 10 1. Joel Schectman, “Compliance Counsel to Help DOJ Decide Whom to Prosecute,” The Wall Street Journal (July 30, 2015), http://blogs.wsj. com/riskandcompliance/2015/07/30/compliance-counsel-to-help-doj-decide-whom-to-prosecute/. See also Karen Freifeld, “U.S. Justice Department Hiring Compliance Expert,” Reuters (July 30, 2015), http://www.reuters.com/article/2015/07/30/doj-compliance-hireidUSL1N10A26420150730. 2. See sources cited at note 1, supra. 3. See U.S. Dep’t of Justice & U.S. Sec. and Exch. Comm’n, “A Resource Guide to the U.S. Foreign Corrupt Practices Act” (Nov. 14, 2012), http://www.justice.gov/criminal-fraud/fcpa-guidance. 4. See U.S. Attorney’s Manual, Principles of Federal Prosecution of Business Organizations §§ 9-28.000 to 9-28.1300 (2008), http://www.justice. gov/usam/usam-9-28000-principles-federal-prosecution-business-organizations. 5. See United States v. Booker, 543 U.S. 220 (2005). 6. See U.S. Sentencing Commission, 2014 Federal Sentencing Guidelines Manual Chapter 8 (effective Nov. 1, 2014), http://www.ussc.gov/ guidelines-manual/2014/2014-chapter-8. www.debevoise.com FCPA Update 10 August 2015 Volume 7 Number 1 In light of existing guidance, the main benefits from this new appointment – if and when it is finalized – seems most likely to be greater standardization of DOJ’s expectations for compliance programs and hopefully a further indication of DOJ’s seriousness in considering such programs when making charging decisions, even absent a formal compliance defense. While such standardization ideally should promote greater fairness in administration of the criminal law, the impact of the DOJ’s new hire remains uncertain. Companies, their boards, compliance officers, and in-house legal staff will thus doubtless be awaiting details on how this individual will function. In this article, we identify some of the risks, opportunities, and issues presented by this innovative step by DOJ. Practical Issues Presented by a DOJ Compliance Expert To appreciate the issues that might arise under the DOJ compliance expert’s tenure, it is important for companies and their employees to be aware of some of the baseline rules governing criminal prosecutions. Because the FCPA has no compliance defense, compliance programs and their features come into play in an FCPA criminal matter principally at the stage at which DOJ considers whether to bring charges and then, if a conviction or settlement results, what the terms of sentence or penalty should be. Although consistency in criminal law enforcement is an enormously important goal, the DOJ’s exercise of its prosecutorial discretion to select which cases not to bring is largely unreviewable. As the Supreme Court held 30 years ago, in Heckler v. Chaney, “[t]his Court has recognized on several occasions over many years that an agency’s decision not to prosecute or enforce, whether through civil or criminal process, is a decision generally committed to an agency’s absolute discretion.”7 For this reason, among others, absent a case in which a prosecution has been initiated, say, in retaliation for that defendant’s exercise of a constitutional right, or on the basis of a defendant’s or another’s race, religion, gender, or other protected class, the ability of a defendant to obtain dismissal of a charge on the basis of a claim of selective prosecution is limited.8 There is thus little likelihood that any corporate defendant could successfully argue that it received an unlawful result if it were prosecuted after having a compliance program in all material respects identical to that of a company that received a declination. Under existing law and procedure, many other facts can go into a particular charging decision. Risks and Opportunities Arising from DOJ’s New “Compliance Counsel” Continued from page 9 7. 470 U.S. 821, 831 (1985). 8. See, e.g., United States v. Blankenship, No. 5:14-cr-00244, 2015 WL 1565710 (S.D.W.Va. Apr. 8, 2015). Continued on page 11 www.debevoise.com FCPA Update 11 August 2015 Volume 7 Number 1 Even to the extent a goal of DOJ’s hiring a compliance counsel is to bring greater consistency to evaluations of corporate compliance programs, this development probably will not provide companies with formal routes of redress if any particular level of consistency is not ultimately achieved. It would require a significant change in DOJ policy to give the “compliance program factor” that is to be assessed along with eight others pursuant to the DOJ’s Principles for the Federal Prosecution of Business Organizations (“Principles”) a general outcome-determinative effect. And, as there is no suggestion yet that DOJ’s proposed compliance expert will have any formal or practical veto over charging decisions, a key role of the DOJ’s new compliance expert is likely to focus on serving as a clearinghouse for expertise about what can reasonably be expected from a corporate compliance program. There is also no suggestion so far that, even in the process by which compliance programs are given weight now in the charging decision, DOJ will be retreating from the current policy that the “critical factors” for assessment of a compliance program involve whether the program is “adequately designed for maximum effectiveness in preventing and detecting wrongdoing by employees and whether corporate management is enforcing the program or is tacitly encouraging or pressuring employees to engage in misconduct to achieve business objectives.”9 While no changes to the Principles have been announced, the appointment of a compliance expert holds out some hope that DOJ will be better able to signal to companies how they should devote compliance resources to meet the “adequately designed for maximum effectiveness” standard. The appointment may even signal the possibility that DOJ could reformulate the standard for compliance programs in a way that better accords with basic principles of internal control. As Fraud Section Chief Weissmann stated to the press, one task for the compliance expert will involve “‘benchmarking with various companies in a variety of different industries Risks and Opportunities Arising from DOJ’s New “Compliance Counsel” Continued from page 10 Continued on page 12 9. Principles at § 9-28.800(B). “[T]he appointment of a compliance expert holds out some hope that DOJ will be better able to signal to companies how they should devote compliance resources to meet the ‘adequately designed for maximum effectiveness’ standard. The appointment may even signal the possibility that DOJ could reformulate the standard for compliance programs in a way that better accords with basic principles of internal control.” www.debevoise.com FCPA Update 12 August 2015 Volume 7 Number 1 to make sure we have realistic expectations . . . and tough-but-fair ones in various industries.’”10 He added: “‘It doesn’t do anyone good to have people wasting their compliance dollars on areas that are low risk.’”11 If and when the compliance expert takes up residence at DOJ, individual companies and industries will no doubt face important choices in terms of how they would like to work with DOJ on this benchmarking exercise. Companies that already participate in trade associations may wish to use those groups to bring certain information to DOJ’s attention. Individual companies that have unique risk profiles may wish to respond proactively to any DOJ call for information, or even earlier, as the DOJ expert gathers preliminary information about compliance programs. Companies and the DOJ alike will in turn face issues of how to handle the transmittal of confidential information about the operation of a compliance program, and how joint industry presentations can be made in a manner that avoids the risk of improper collusion. The very existence of a robust DOJ benchmarking exercise may cause some companies concern that providing honest and robust assistance in that exercise will cause DOJ to launch an investigation, or, to the contrary, that not participating in the benchmarking exercise will somehow draw DOJ’s attention. How companies manage the dialogue with DOJ’s expert in the benchmarking exercise – and how DOJ works to alleviate the concerns of those who choose to cooperate in the project or not – may thus present unique and potentially difficult challenges. That is true not only for companies that have recognized they have deficiencies and are working to redress them, but also for companies that have weak compliance programs but, for whatever reason, do not appreciate the weaknesses. For the DOJ specifically, the new appointment also raises a number of potentially important issues. For example, coming as it does late in the second term of the Obama Administration, the appointment raises practical questions whether sufficient work can be done by the compliance expert to generate standards before a new Administration comes into office and possibly replaces the expert or otherwise amends or nullifies what the expert has done. Not only may any standards be repealed, any non-final charging decisions may later be changed. Risks and Opportunities Arising from DOJ’s New “Compliance Counsel” Continued from page 11 10. See Schectman, note 1, supra. 11. Id. Continued on page 13 www.debevoise.com FCPA Update 13 August 2015 Volume 7 Number 1 If compliance program standards eventually are promulgated in formal or informal guidance, questions may also arise over whether those provide what the Supreme Court in Chaney identified as a “meaningful standard against which to judge the agency’s exercise of discretion” in a manner that could provide a basis for judicial review under the Administrative Procedure Act or other law.12 A company facing a charging decision that failed to give what it believed was the appropriate weight to efforts to implement a robust corporate compliance program may, depending on how any new standards are worded, have a substantial defense.13 Other questions of both substance and process will undoubtedly arise as this interesting DOJ innovation takes shape. Conclusion Whatever role the DOJ compliance expert position ultimately plays, its creation signals that DOJ has recognized the need for fact-based input and consistency in the evaluation of a company’s corporate compliance program. This innovation is not without its challenges, even without a corporate compliance defense. Nevertheless, the reform to DOJ’s processes and standards for investigating, evaluating, and prosecuting FCPA and other corporate criminal matters does provide some reason for hope that genuinely robust corporate compliance initiatives will receive their due when the DOJ makes charging decisions, especially in situations involving rogue actions of employees who actively evade such risk-based and well-executed compliance programs. Andrew M. Levine David A. O’Neil Steven S. Michaels Andrew M. Levine and David A. O’Neil are partners in the New York and Washington, D.C. offices, respectively. Steven S. Michaels is a counsel in the New York office. They are members of the Litigation Department and the White Collar Litigation Practice Group. The authors may be reached at firstname.lastname@example.org, email@example.com, and firstname.lastname@example.org. Full contact details for each author are available at www.debevoise.com.