On November 20, 2019, the U.S. Department of Justice (DOJ) announced several subtle, but important, adjustments to its Foreign Corrupt Practices Act (FCPA) Corporate Enforcement Policy. These recent changes relate to companies’ voluntary disclosures of potential FCPA violations to the DOJ, including the information companies are expected to share with DOJ prosecutors.
By way of background, the FCPA Corporate Enforcement Policy—which, unlike some other DOJ policy statements, is incorporated into the Justice Manual—aims to provide “additional benefits to companies based on their corporate behavior once they learn of misconduct” in light of the “unique issues presented in FCPA matters.” In particular: “When a company has voluntarily self-disclosed misconduct in an FCPA matter, fully cooperated, and timely and appropriately remediated, all in accordance with the standards set forth below, 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.” Further, even where a criminal resolution is warranted, a company may still be eligible for “a 50% reduction off of the low end of the U.S. Sentencing Guidelines (U.S.S.G.) fine range,” and the appointment of a corporate compliance monitor “generally” will not be required if the company “has, at the time of resolution, implemented an effective compliance program.”
The November 2019 changes, discussed below, represent a further refinement of these principles and requirements:
First, the DOJ has revised one of the three requirements a company must meet “to receive credit for voluntary self-disclosure of wrongdoing.” Previously, that third prong required a company to disclose “all relevant facts known to it, including all relevant facts about all individuals substantially involved in or responsible for the violation of law.” Under the November 2019 clarification, a company must disclose “all relevant facts known to it at the time of the disclosure, including as to any individuals substantially involved in or responsible for the misconduct at issue.” In other words, this change embodies the DOJ’s practice and acknowledges—quite reasonably—that a company must disclose the “relevant facts known to it” when the disclosure occurs, while also replacing the “violation of law” standard with “misconduct.” In addition, a new footnote states:
The Department recognizes that a company may not be in a position to know all relevant facts at the time of a voluntary self-disclosure, especially where only preliminary investigative efforts have been possible. In such circumstances, a company should make clear that it is making its disclosure based upon a preliminary investigation or assessment of information, but it should nonetheless provide a fulsome disclosure of the relevant facts known to it at that time.
This change emphasizes the DOJ’s desire for prompt disclosure, with the government recognizing that such disclosure could come before an internal investigation into the facts can be completed.
Second, to receive full cooperation credit, a company that “is aware of relevant evidence not in the company’s possession… must identify that evidence to the Department.” This amounts to a simplification of a prior requirement that a company that “is or should be aware of opportunities for the Department to obtain relevant evidence not in the company’s possession and not otherwise known to the Department… must identify those opportunities to the Department.” Moreover, by removing the term “should,” the DOJ avoids the importation of a negligence standard into the evaluation of a company’s cooperation.
Third, the “M&A Due Diligence and Remediation” was revised to make clear that the “presumption of a declination” applies where (assuming other requirements are met) a company discovers misconduct “by the merged or acquired entity.” This language appears to be directed at encouraging companies to disclose conduct discovered post-merger and to assure the acquirer that it will not face successor liability. The presumption applies in favor of the acquiring company even where aggravating circumstances, such as “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,” apply to the acquired company.
These (comparatively minor) changes are only the latest in a series of updates to DOJ guidance and policies aimed at providing more transparency and, to a limited extent, flexibility around DOJ’s exercise of prosecutorial discretion. For instance, in 2018, then-Deputy Attorney General Rod Rosenstein issued a memorandum entitled “Policy on Coordination of Corporate Resolution Penalties,” directing DOJ attorneys to “consider the totality of fines, penalties, and/or forfeiture imposed by all [DOJ] components as well as other law enforcement agencies and regulators in an effort to achieve an equitable result”—in other words, to help prevent undue “piling on” by multiple enforcement authorities. Thereafter, in October 2018, Assistant Attorney General Brian A. Benczkowski issued a memorandum entitled “Selection of Monitors in Criminal Division Matters,” providing clarity as to the criteria to be considered when determining whether a corporate compliance monitor is warranted. This spring, the DOJ issued a guidance document entitled, “Evaluation of Corporate Compliance Programs,” which built on prior compliance guidance while emphasizing the importance of implementing corporate compliance programs that are not merely well-designed but also effective and adaptable. And, on October 8, 2019, the DOJ issued a new guidance memorandum entitled “Evaluating a Business Organization’s Inability to Pay a Criminal Fine or Criminal Monetary Penalty,” which aimed to provide greater clarity, transparency, and uniformity as to how the DOJ’s Criminal Division evaluates claims by companies that they are unable to pay a proposed criminal fine or monetary penalty.
Broadly speaking, like these other directives, these recent adjustments to the FCPA Corporate Enforcement Policy are consistent with an effort by the DOJ to ensure greater consistency and transparency, while attempting to account for practical realities when investigating and considering enforcement action against corporations.