Recent press reports suggest that the Justice Department is reconsidering its FCPA criminal prosecution policies, particularly with respect to corporate defendants. As reported, DOJ is considering defining and increasing corporate benefits from voluntary disclosures and cooperation. This re-evaluation appears to have been triggered by changes in the Criminal Division leadership.
DOJ’s recent Yates memorandum imposed new and significant obligations on companies seeking credit for cooperation by requiring companies to identify and provide information about all culpable individuals. DOJ is now re-examining the benefits offered to companies for disclosure of potential FCPA violations, and considering ways to increase incentives for companies to decide to disclose and cooperate.
DOJ is considering giving companies a pass on FCPA liability if the company fully discloses all FCPA violations and identifies and assists in the prosecution of culpable individuals. If DOJ goes so far as being reported, this would be a significant sea change in corporate decisions to disclose and cooperate.
Many years ago when the FCPA was originally enacted, the SEC’s Director of Enforcement and the (Grand)father of the FCPA, Stanley Sporkin, offered a similar strategy. Under Sporkin’s policy, companies were given a window to investigate and disclose FCPA violations. Any company that participated in the program and made such disclosures escaped liability.
I have written in prior postings that DOJ needs to define the specific benefit that companies would receive for voluntary disclosure and cooperation. Some have suggested a sliding scale of percentage reductions in potential fines. Others have proposed a leniency type program, like the Justice Department’s Antitrust Division’s Leniency Program, under which a company that fully cooperates would receive a full pass but individual executives and employees would be subject to prosecution.
The Justice Department’s policy revision is appears to be premised on the policy decision that individual prosecutions, rather than corporate prosecutions, will maximize deterrence of foreign bribery. The balance between corporate and individual liability is an important calculation. It is unlikely that betting on one extreme – maximize corporate or individual prosecutions – is unlikely to be the most effective strategy.
Corporate prosecutions have to be reserved for the right cases – no one can argue that Alstom, Siemens or other companies involved in systemic foreign bribery schemes should not have been prosecuted. Those corporate cases, however, may have had a more significant impact if relevant corporate officials were prosecuted, even while giving the company a reduction in their fine to reward them for cooperating against culpable individuals.
DOJ’s recalibration of FCPA prosecutions has been telegraphed by statements that DOJ was seeking to bring “high profile” FCPA cases. Unfortunately, DOJ has not defined what it means by that term and there are many interested parties who will be ready to comment and criticize DOJ for a significant policy change based on an undefined concept such as “high profile” FCPA prosecutions.
Whether DOJ gets the right balance or not, it is not clear what is motivating this policy revision other than personnel changes in political appointments in the Fraud Section and Criminal Division. How this change comes about and the reasons for the changes will be scrutinized so whatever is ultimately done, the key political appointees better make sure they make such changes carefully and with proper consideration of relevant factors and influences.