“I volunteer as tribute” In The Hunger Games, Katniss Everdeen bravely uttered these words as she stepped forward to take the place of her sister in Panem’s annual fight to the death. While volunteering worked out for Katniss, ten of her rivals perished. Now, based on new guidance from the Fraud Section of the U.S. Department of Justice (DOJ), organizations must consider whether coming forward to volunteer information about their violations of the Foreign Corrupt Practices Act (FCPA) is a wise strategy.
Last month, DOJ released its new FCPA Enforcement Plan and Guidance, which is designed to encourage businesses to self-report bribery as part of a new three-part enforcement strategy: (1) increasing the number of FCPA prosecutors by more than 50 percent, (2) strengthening coordination with foreign counterparts to “reduce criminals’ ability to hide behind international borders,” and (3) creating a one-year pilot program “to motivate companies to voluntarily self-disclose FCPA-related misconduct, fully cooperate with the Fraud Section, and, where appropriate, remediate flaws in their controls and compliance programs.”
Under the pilot program, which became effective on April 5, 2016, self-disclosing organizations must meet a number of disclosure, cooperation, and remediation mandates to qualify for a mitigation credit:
- The disclosure must be voluntary and not required by law, agreement, or contract.
- The disclosure must occur before “an imminent threat of disclosure or government investigation.”
- The disclosure must be “within a reasonably prompt time after becoming aware of the offense.”
- Companies must preserve, collect, and disclose all relevant facts and “documents and information relating to their provenance,” including documents stored overseas.
- Companies must proactively “disclose facts that are relevant to the investigation, even when not specifically asked to do so, and must identify opportunities for the government to obtain relevant evidence not in [their] possession and not otherwise known to the government.”
- Companies must keep the DOJ informed of the status of their internal investigation and make rolling disclosures of information.
- Companies must make available current and former officers and employees with relevant information, including overseas and third-party personnel.
Remediation Requirements Companies must implement an “effective compliance and ethics program,” which is evaluated based on numerous factors:
- their culture of compliance,
- the resources they have dedicated to compliance,
- the experience of their compliance personnel,
- the independence of their compliance team,
- whether they have completed an effective risk assessment and whether they have tailored the compliance program to that assessment,
- their compensation and promotion of compliance personnel,
- their audits of the compliance program,
- their reporting structure for compliance personnel,
- their discipline of employees who engage in misconduct and those who supervise those employees, and
- additional steps showing that they recognize the seriousness of their misconduct, take responsibility for it, and implement measures to reduce the risk of future misconduct.
Companies that satisfy these requirements are eligible for up to a 50 percent reduction in fines and generally will not require the appointment of a third-party monitor. The DOJ may also decline to prosecute the company depending on the seriousness of the event and other factors, such as the company’s history of violations. The pilot program also provides limited credit up to a 25% reduction in fines for companies that do not voluntarily self-disclose but fully cooperate and remediate.
In our next blog, we will address the seven steps leading organizations are taking to put the odds of surviving the pilot program unscathed “ever in [their] favor.”