The Department of Justice and Securities & Exchange Commission have long promised that companies will receive a tangible benefit for voluntarily disclosing violations of the Foreign Corrupt Practices Act (FCPA). Not so, says a recent draft study by two New York University School of Law professors, which examined FCPA enforcement actions from 2004 through 2011. Their study found no discernible evidence that voluntary disclosure of FCPA violations resulted in lesser penalties.
The study’s authors restricted their data set to cases by the DOJ and SEC involving alleged violations of the FCPA’s anti-bribery provisions by corporate defendants from 2004 to 2011; fines imposed against individual defendants were not considered. They then applied statistical models to the data to measure whether the total monetary penalty imposed (including fines and disgorgement of profits) was affected by engaging in activities consistent with the United States Sentencing Guidelines’ mitigating factors, e.g., remediation, cooperation and voluntary disclosure. The results showed no evidence that engaging in mitigation activities correlated with a reduced penalty for FCPA defendants.
The scope of the study notably did not include any effect on the FCPA defendant’s business activities or share prices. Nor did it attempt to quantify whether engaging in mitigating activities, such as remediation, cooperation or voluntary disclosure, had an impact on the level of scrutiny and control by the DOJ and SEC over the company’s internal investigation.
The study’s authors acknowledged that there may be other benefits to voluntary disclosure which they did not address. When asked about the results of the study, co-author Kevin E. Davis reportedly commented that “[w]e cannot rule out the possibility that disclosure does result in some form of leniency, but the fact that we could not find any evidence of the benefits of voluntary disclosure suggests that current enforcement practices are not creating clear incentives.”