Ryan Rohlfsen, Ropes & Gray government enforcement partner, analyzes the first year of the U.S. Department of Justice’s FCPA Pilot Program.
Click here to view video.
The DOJ enacted the Pilot Program in early 2016. It was part of a long running effort by the DOJ to provide more transparency and consistency into how it addresses, investigates and resolves cases. It was also designed to incentivize companies to proactively self-disclose issues they may have. To do so, the DOJ provided a number of incentives to companies that come in and self-disclose issues early and continue throughout the process to cooperate with the DOJ in order to help the DOJ conclude its investigation.
We've analyzed the data over the last year and we have found some consistency in the results. Specifically, companies that did self-disclose received very favorable treatment compared to those that did not. Certain companies that self-disclosed received full declinations from the Justice Department. Those that did not self-disclose however, and yet still cooperated, received substantial discounts on the fines, penalties and form of resolution with the Department. However, the majority of companies that have resolved with the Justice Department have been required to retain a corporate compliance monitor.
FCPA cases can take a long time to work their way through the system, so the DOJ's going to want to have another year or two of data in order to analyze, from its perspective, the success of the program. The DOJ will want to see a greater number of self-disclosures versus what they saw before the program took effect. On the defense side, we'll be watching for declinations, more favorable terms and conditions of resolutions, and more information in how monitors are selected and in what cases.
Overall, DOJ is clearly trying to incentivize self-disclosure and that's because they want companies to bring cases to their attention. It preserves their own resources and allows them to focus on perhaps other companies or individuals who are not cooperating. The flip side of course is that not every FCPA issue should be turned into a federal case – so it requires a very complex and detailed analysis of these issues as they arise in order to protect the company and its shareholders, and to decide what is the best avenue for the company to proceed down.
When I was with the Justice Department in the FCPA unit, obviously every case was unique and not every issue is one that the Justice Department wants a full disclosure on. Certain cases simply just don't merit it. However, the Justice Department will expect companies to be transparent and candid in their discussions with them regarding any issues that are self-disclosed. So whenever there is an issue, companies are advised to carefully consider the issues, to talk to their advisor, and figure out what are the appropriate steps they should take as they decide where to move forward.
Every case is unique. Even when companies don't self-disclose issues, that doesn't mean the Justice Department isn't going to hear about the case from some other source, be it former employees, current employees, whistleblowers, competitors or other cases. Companies have to take this into consideration as well when they're deciding whether to self-disclose an issue to the Department. Of course, part of the cure is prevention in and of itself. Having an effective compliance program will help prevent these issues from coming up in the first instance and will help protect a company when they do arise.