On April 5, 2016, the Department of Justice (DOJ) Criminal Division’s Fraud Section launched a one-year pilot program offering businesses that self-report violations of the Foreign Corrupt Practices Act (FCPA) the opportunity to receive substantially reduced penalties and perhaps even avoid criminal prosecution. The new program appears to have been motivated, at least in part, by calls from the FCPA defense bar for DOJ to be more transparent about the tangible benefits that a company would receive for self-disclosing potential FCPA violations.
In a nine-page memorandum, the Fraud Section set forth the standards that it will apply over the next year to determine whether and how much credit a company should receive for disclosing FCPA violations. These standards are designed to be consistent with the DOJ’s Principles of Federal Prosecution of Business Organizations (USAM Principles), the US Sentencing Guidelines (Sentencing Guidelines), and the memorandum of the Deputy Attorney General dated September 9, 2015 (Yates Memorandum). As such, they do not deviate significantly from past practice of the Department. Nevertheless, the details provided by the Fraud Section this week should give companies a clearer sense of what they must do to receive lenient treatment for FCPA violations and what more lenient treatment might look like.
The program, which DOJ describes as imposing “stringent requirements,” mandates:
- Voluntary Disclosure. Disclosure of potential FCPA violations must occur “prior to an imminent threat of disclosure or government investigation,” and “within a reasonably prompt time after becoming aware of the offense,” and include all relevant facts known to the company, including information about individuals involved in any FCPA violations.
- Full Cooperation. A company’s cooperation must include, among other things, the preservation, collection, and disclosure of relevant documents and information; timely updates to the DOJ on the status of any internal investigation and (except where protected by privilege) the findings of any such investigation, including the attribution of facts to specific sources rather than a general narrative; the disclosure of all known facts relevant to potential criminal conduct by individuals, including officers, employees, and agents; and the disclosure of overseas documents, except where “impossible” due to foreign law. The Fraud Section notes, however, that “absent facts to suggest a more widespread problem, evidence of criminality in one country, without more, would not lead to an expectation that an investigation would need to extend to other countries.”
- Remediation. A company must demonstrate the adequacy and rigor of its internal controls and compliance program, disgorge all profits earned from the FCPA misconduct at issue, and take appropriate disciplinary actions against individual wrongdoers. The standards provide details about how DOJ will assess the effectiveness of a compliance program, apparently reflecting input from the DOJ’s new Compliance Counsel.
Where a company voluntarily discloses its FCPA misconduct and satisfies the other conditions of the pilot program, the DOJ “will consider” declining prosecution. In the absence of a declination, DOJ “may” accord up to a 50% reduction off the bottom end of the Sentencing Guidelines fine range, if a fine is sought. Moreover, in such cases, the Fraud Section will “generally” not require the appointment of a monitor so long as the company has implemented an effective compliance program, as described above.[[Id. at 8-9.]]
Where a company does not voluntarily self-report FCPA misconduct, the Fraud Section will accord, at most, a 25% reduction off the bottom of the U.S. Sentencing Guidelines fine range, even if the company meets the requirements for cooperation and remediation.
While the Fraud Section’s new guidance provides some welcomed transparency on how foreign bribery cases will be handled, companies considering voluntary disclosure should still exercise caution. Under the program, as noted, prosecutors and agents continue to wield significant discretion, and factors such as the severity of the underlying conduct, the completeness of the disclosure, and the sufficiency of remediation efforts are still likely to play a major role in determining the disposition of the case. The program also provides that in deciding whether to prosecute, the Department should consider, among other things, the seriousness of the offense, the involvement of executive management in the misconduct, and the size of the ill-gotten profit.
The benefits of the program extend only to companies, not individuals. Consistent with the DOJ’s interest in holding individuals accountable for FCPA violations, Assistant Attorney General Leslie R. Caldwell predicts that the program will lead to “more prosecutions of individuals responsible for those crimes.” Indeed, one standard for success of the program will be whether it increases prosecutions of individuals. The DOJ’s efforts will be bolstered by increased resources devoted to FCPA cases, including 10 new FCPA prosecutors and three new squads of FBI special agents devoted to FCPA cases. DOJ is also strengthening its coordination with foreign counterparts by “sharing leads, making available essential documents and witnesses, and more generally working together to reduce criminals’ ability to hide behind international borders.”