On January 17, 2023, Assistant Attorney General Kenneth A. Polite, Jr. (AAG Polite) announced changes to the Department of Justice’s (DOJ) FCPA Corporate Enforcement Policy (CEP).1 The CEP, which applies to all Criminal Division matters, explains how the DOJ considers self-disclosure, cooperation, and remediation when determining whether a declination is appropriate or, if deemed not appropriate, calculating penalties.2
In her September 2022 remarks, Deputy Attorney General Lisa Monaco (DAG Monaco) emphasized that the “clearest path for a company to avoid a guilty plea or an indictment is voluntary self-disclosure” of misconduct. She directed all DOJ components “to clarify the benefits of promptly coming forward to self-report, so that chief compliance officers, general counsels, and others can make the case in the boardroom that voluntary self-disclosure is a good business decision.”3
In his remarks, AAG Polite explained that the Criminal Division heeded DAG Monaco’s “call as an opportunity to reassess and strengthen” its own self-disclosure policy. The latest CEP revisions focus on incentivizing self-disclosure by (1) providing a path to declination for companies that had prior criminal resolutions or are navigating other aggravating circumstances, and (2) providing, in cases where a criminal resolution is appropriate, an increase in available fine reductions for companies that voluntarily self-disclose, cooperate, and remediate.
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Under the former and current versions of the CEP, companies qualify for a presumption of a declination if they voluntarily self-disclose misconduct, fully cooperate, and timely and effectively remediate after identifying misconduct. However, that presumption is negated if there are aggravating factors, such as executive management involvement, significant profits, and egregious and pervasive misconduct within the company.
Another aggravating factor is criminal recidivism, or companies with prior history of criminal resolutions. In October 2021, DAG Monaco directed prosecutors to consider a company’s record of past misconduct, including prior criminal, civil, and regulatory resolutions, both domestically and internationally, when deciding the appropriate resolution.4 DAG Monaco later clarified that not all prior misconduct is equally relevant or probative in this determination, and factors such as the seriousness of the past misconduct and its similarity to the present issue would affect the determination.5 However, DAG Monaco’s statements continued to raise concerns about whether a company with, for example, a recent criminal resolution, should voluntarily self-disclose identified misconduct if there was no clear path to obtaining a declination. In his remarks, AAG Polite acknowledged this tension, stating that “companies that have identified potential wrongdoing … will be concerned that an aggravating factor may prevent a company from obtaining a declination,” and that concern could lead companies to conclude “that it is more prudent not to disclose the misconduct.”
To assuage those concerns, the CEP now provides an avenue for companies—including criminal recidivists—to obtain a declination, even if there are aggravating factors present. While not entitled to a presumption of a declination, prosecutors now have the discretion to agree to a declination if a company has satisfied three factors:
- “The voluntary self-disclosure was made immediately upon the company becoming aware of the allegation of misconduct;”
- “At the time of the misconduct and disclosure, the company had an effective compliance program and system of internal accounting controls, which enabled the identification of the misconduct and led to the company’s voluntary self-disclosure;” and
- “The company provided extraordinary cooperation with the Department’s investigation and undertook extraordinary remediation that exceeds the respective factors listed herein.”
As noted by AAG Polite, these criteria intentionally echo the familiar themes of self-disclosure, cooperation, and remediation—but companies seeking a declination if they are criminal recidivists or there are other aggravating factors present will need to go above and beyond existing requirements.
- The requirement that the voluntary self-disclosure occur “immediately upon the company becoming aware of the allegation of misconduct” well exceeds the threshold for receiving voluntary self-disclosure credit in the absence of aggravating factors. Generally, a company can obtain voluntary self-disclosure credit if it discloses the conduct “within a reasonably prompt time after becoming aware of the misconduct.” As a practical matter, it is difficult for companies to self-disclose immediately upon “becoming aware of the allegation of misconduct,” as they must investigate allegations of misconduct that would warrant disclosure to ascertain the veracity of the allegations and the scope of any misconduct.
- Under the prior and current versions of the CEP, prosecutors consider whether a company has an effective compliance program in place at the time of resolution when determining whether a company is entitled to remediation credit (and therefore a declination), and whether a corporate compliance monitor is necessary. To qualify for a declination despite aggravating factors, companies must demonstrate that they had an effective compliance program in place “at the time of the misconduct and the disclosure” which “enabled the identification of the misconduct.” In other words, if there are aggravating factors, a company’s efforts to bolster its compliance program after identifying an issue, during discussions with the DOJ and prior to resolution, won’t cut it.
- Companies must provide “extraordinary cooperation” “above and beyond the criteria for full cooperation” generally required for a declination. AAG Polite explained that extraordinary cooperation is “not just run of the mill, or even gold-standard cooperation, but truly extraordinary.” While it remains unclear precisely what such cooperation would entail, in trying to pinpoint the difference between “extraordinary” and “full” cooperation, AAG Polite noted that it may be “more in degree than kind”: “we know ‘extraordinary cooperation’ when we see it.”
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If a declination is not available, companies that voluntarily self-disclose, cooperate, and remediate are now eligible for greater DOJ-recommended reductions in fines off the US Sentencing Guidelines.
- Companies that voluntarily self-disclose, fully cooperate, and timely and appropriately remediate are eligible for a recommendation of at least 50%, and up to a 75%, reduction in fines—a significant increase from the prior cap of 50%.
- Companies that do not self-disclose, but otherwise fully cooperate and remediate, will be eligible for a recommendation of up to a 50% reduction in fines—twice as much as the 25% reduction previously available. However, AAG Polite emphasized that a reduction of 50% won’t become the new normal: “Every company starts at zero cooperation credit … This is not a race to the bottom.”
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These revisions are intended to convey “an undeniable message” to corporations: “come forward, cooperate, and remediate.” However, while the revised CEP provides additional avenues for obtaining credit in corporate resolutions, as noted by the Assistant AG Polite, the DOJ’s “default” is still not a declination, non-prosecution agreement, or deferred prosecution agreement.
If a company uncovers potential misconduct, it should carefully consider the costs and benefits of voluntary self-disclosure. Regardless of whether a company decides to self-disclose, it should conduct any investigation in a manner that would enable it to provide the requisite “extraordinary cooperation” later if necessary, and promptly and fully remediate the issue.
The revisions also are a stark reminder to companies that they should be proactive—and not reactive—in implementing a robust, effective corporate compliance program. If there are any aggravating factors relating to the misconduct, then the company seeking a declination will need to demonstrate that it had an effective compliance program and internal controls in place before the misconduct occurred, and that its program and controls enabled the identification of the misconduct. Companies should examine their compliance programs now—waiting until after an issue arises will be too late.