Speaking at a conference in Maryland on November 29, 2017, Deputy Attorney General Rod Rosenstein announced a revised Foreign Corrupt Practices Act (“FCPA”) Corporate Enforcement Policy (“CEP”). This policy builds on the Pilot Program initiated by the Department of Justice (“DOJ”) in April 2016 and renewed in March 2017, and it clarifies and enhances incentives for corporations to disclose potential FCPA violations. Significantly, the policy converts the FCPA Pilot Program’s informal incentives for voluntary disclosure into a “presumption” that the DOJ will decline to prosecute and not impose a monitor for corporations that disclose, cooperate and remediate. The revised enforcement approach is intended to inspire more corporate disclosures and, in turn, enable the DOJ to bring more prosecutions of individual wrongdoers.
Refining the Pilot Program
The FCPA Pilot Program sought to incentivize voluntary disclosure by offering credit to companies that (1) voluntarily disclose violations, (2) fully cooperate with government authorities, and (3) timely and appropriately remediate violations. As noted by Deputy Attorney General Rosenstein, of the 17 FCPA-related corporate enforcement matters that the Justice Department has settled since 2016 (resulting in penalties and forfeiture in excess of US$1.6 billion), only two were voluntary disclosures under the Pilot Program. Mr. Rosenstein emphasized that both of the voluntary disclosure cases were resolved through non-prosecution agreements, and neither included imposition of an independent compliance monitor. By contrast, of the 15 corporate resolutions that were not voluntary disclosures, 12 were resolved with guilty pleas or deferred prosecution agreements, and ten imposed a monitor.
The new policy provides greater detail as to how the DOJ interprets the disclosure, cooperation and remediation requirements.
Voluntary Disclosure: Companies must disclose potential violations “prior to an imminent threat of disclosure or government investigation” and “within a reasonably prompt time after becoming aware of the offense.” Furthermore, companies must disclose “all relevant facts known to [them].”
Full Cooperation: Companies must provide comprehensive, specific, and timely disclosures and rolling updates thereafter. They must cooperate proactively, providing relevant information without prompting and directing the DOJ to potential sources of evidence. Companies must also facilitate the preservation and disclosure of relevant documents, including translation of documents in foreign languages and facilitation of production by third parties. Furthermore, the CEP requires disclosing parties to take de-confliction steps on request and to make company employees and officers available for DOJ interviews.
- Timely and Appropriate Remediation: Effective remediation includes (1) demonstrating the company’s “thorough analysis” of root causes underlying relevant misconduct, (2) implementing effective, tailored compliance and ethics programs, (3) appropriately disciplining responsible employees, (4) appropriately retaining business records, and (5) taking additional steps to show the company’s recognition of the seriousness of the misconduct.
Notably, where the Pilot Program left room for speculation as to how much credit companies could earn through disclosure, cooperation and remediation, the CEP specifies that when a company satisfies these elements “there will be a presumption that the company will receive a declination,” which will include disgorgement of profits.
The presence of aggravating circumstances can overcome this presumption. The CEP defines “aggravating circumstances” to include (1) involvement by executive management in FCPA violations, (2) significant profits stemming from misconduct, (3) pervasiveness of misconduct, and (4) repeat offenses. Where a company discloses, cooperates, and remediates but aggravating circumstances are present, the policy clarifies that the DOJ will recommend a 50% reduction off the minimum sanction under the U.S. Sentencing Guidelines and will not impose a monitor (assuming implementation of an effective compliance program).
Areas to Monitor
Notwithstanding the revised policy, some issues remain to be resolved. For example, concerns remain about U.S. Government de-confliction requests during investigations and whether a company must hold off on interviewing key individuals to allow the government to interview such personnel first. The CEP clarifies that such requests are necessary for cooperation credit, “will be made for a limited period of time[,] and will be narrowly tailored to a legitimate investigative purpose.” However, it remains to be seen how this may impact the conduct of internal investigations and how an individual employee who exercises his fifth amendment right, by declining a Government requested interview, will factor into the calculation of cooperation credit for the company.
While the full impact of the CEP may not be readily apparent in the near term, it is clear the DOJ intends the policy to result in an increased flow of disclosures that will enable the Department to prosecute more individual wrongdoers. As individuals facing the prospect of significant jail time often have less incentive than corporations do to settle enforcement matters, an indirect long-term consequence of the revised policy may be an uptick in judicial review of the Department’s approach to assertions of jurisdiction and criminal liability under the FCPA. This may prove especially interesting with respect to non-U.S. citizens located and acting outside the United States.