The US Department of Justice (DOJ) has issued a bold new FCPA enforcement policy that offers the presumption of a declination to companies that voluntarily report Foreign Corrupt Practices Act (FCPA) violations, cooperate fully with prosecutors and engage in timely and appropriate remediation, absent aggravating circumstances that may warrant criminal resolution. Matters with aggravating circumstances may still qualify for a resolution that includes a 50 percent reduction off the low end of the applicable US Sentencing Guidelines fine range and the lack of a corporate monitor.
The new policy, announced on November 29, 2017 and called the FCPA Corporate Enforcement Policy (Policy), represents a significant development in FCPA enforcement and is meant to encourage voluntary disclosures by providing greater certainty about the benefits of cooperation.
DOJ Deputy Attorney General Rod Rosenstein announced the Policy in his remarks at the 34th International Conference on the FCPA and stated that it will be incorporated into the United States Attorneys' Manual (USAM). According to Rosenstein, the Policy is intended to "promote consistency by attorneys throughout the Department [of Justice]" and "provide guidance and greater certainty for companies struggling with the question of whether to make voluntary disclosures of wrongdoing."
The Policy builds on and borrows from the elements of the FCPA Pilot Program launched in April 2016 as well as the Evaluation of Corporate Compliance Programs guidance that was issued earlier this year, and provides concrete guidance on when a company should expect to receive a declination of prosecution if the requisite conditions are met. Under prior DOJ guidance, in contrast, the DOJ had merely stated that it would "consider a declination" if a company voluntarily disclosed, fully cooperated and remediated. Companies should recognize, however, that the Policy does not apply to the US Securities and Exchange Commission, which remains free to chart its own course in prosecuting FCPA violations.
Key components of the new policy
The FCPA Corporate Enforcement Policy states that when a company has "voluntarily self-disclosed misconduct in an FCPA matter, fully cooperated, and timely and appropriately remediated," then there will be "a presumption that the company will receive a declination absent aggravating circumstances involving the seriousness of the offense or the nature of the offender." According to the DOJ, "aggravating circumstances" include "involvement by executive management of the company in the misconduct; a significant profit to the company from the misconduct; pervasiveness of the misconduct within the company; and criminal recidivism."
Companies should recognize that to qualify for the new policy, they must pay all disgorgement, forfeiture, and/or restitution resulting from the misconduct at issue. Payments in a parallel SEC action may satisfy this condition.
Additionally, a company that voluntarily discloses and meets all other cooperation requirements of the Policy but is found to have aggravating circumstances may still receive a 50 percent reduction off the low end of the applicable Sentencing Guidelines fine range and generally will not be required to appoint a corporate monitor if the company can demonstrate that it has implemented an effective compliance program at the time of the criminal resolution.
Finally, the Policy provides limited credit for companies that do not make voluntary disclosures but otherwise fully cooperate with the DOJ by allowing for a potential 25 percent reduction off the low end of the applicable Sentencing Guidelines fine range.
1. Voluntary self-disclosure
In order to receive full credit under the new Policy, voluntary disclosures must occur "prior to an imminent threat of disclosure or government investigation" and "within a reasonably prompt time" after a company becomes aware of the violation. In addition, the company must disclose "all relevant facts," including "all relevant facts about all individuals involved in the violation of law."
2. Full cooperation
In addition to satisfying the cooperation requirements set forth in the Principles of Federal Prosecution of Business Organizations, which include the "identif[ication] of all individuals involved in or responsible for the misconduct at issue," companies are expected to do the following to receive credit for full cooperation:
- Timely and thorough disclosure: A timely disclosure of all facts relevant to the wrongdoing at issue, including all relevant facts gathered during a company's independent investigation; attribution of facts to specific sources where such attribution does not violate the attorney-client privilege; timely updates on a company's internal investigation, including but not limited to rolling disclosures of information; all facts related to involvement in the criminal activity by the company's officers, employees or agents; and all facts known or that become known to the company regarding potential criminal conduct by all third-party companies including their officers, employees or agents.
- Proactive response: Proactive cooperation, including the timely disclosure of facts relevant to the investigation and the identification of opportunities for the DOJ to obtain relevant evidence not already in the company's possession or otherwise known to the DOJ.
- Preservation and disclosure of evidence: Timely preservation, collection and communication of relevant documents and information relating to their provenance, including disclosure of overseas evidence, the facilitation of third-party evidence production and, where requested and appropriate, the translation of foreign-language evidence. In those instances where the production of documents obtained overseas may be prohibited due to foreign law restrictions, the company still bears the burden of establishing this prohibition and is expected to identify all legal bases to provide such documents.
- Coordination of investigations: Coordination of investigative steps a company intends to take as part of its internal investigation with the steps the DOJ may take as part of its investigation, including witness interviews.
- Making individuals available for interviews: When requested, making company officers and employees who possess relevant information available for interviews.
3. Timely and appropriate remediation
Finally, the Policy requires companies to timely and adequately remediate any issues. Many of the steps identified in the Policy are taken from the Evaluation of Corporate Compliance Programs guidance issued by the DOJ earlier this year. In order to obtain full cooperation credit, companies need to show that they did the following:
- Understood and addressed the root causes of the misconduct: Demonstration of thorough analysis of the root causes of underlying conduct and, where appropriate, remediation of those issues.
- Implemented an effective compliance program: Demonstration that the company has implemented an effective compliance and ethics program, which will depend on the size and resources of the organization.
- Disciplined culpable employees: Demonstration that those responsible for the misconduct – either directly or indirectly – have been appropriately disciplined.
- Preserved and retained relevant evidence: Demonstration that the company has retained relevant business records and prohibited the improper destruction or deletion of such records, including "prohibiting employees from using software that generates but does not appropriately retain business records or communications."
In addition, prosecutors will consider any additional actions demonstrating that the company recognizes "the seriousness of [its] misconduct, acceptance of responsibility for it, and the implementation of measures to reduce the risk of repetition of such misconduct, including measures to identify future risks."
Implications for companies
The new Policy provides greater incentives for companies to self-disclose potential FCPA misconduct and cooperate with federal prosecutors. Companies that meet the DOJ's expectations – voluntary disclosure, full cooperation and adequate remediation – should be rewarded with a declination absent aggravating factors.
Moreover, the Policy goes further than prior DOJ guidance by providing additional assurances for companies that self-disclose violations despite the presence of aggravating factors such as executive management involvement or significant profit. The FCPA Pilot Program provided for "up to" a 50 percent reduction off the bottom end of the Sentencing Guidelines for matters with aggravating factors or where the DOJ deemed a criminal resolution to be warranted. In contrast, the Policy provides that, in most cases, the DOJ "will accord" a 50 percent reduction off the low end of the Sentencing Guidelines.