DOJ’s Acting Head of the Criminal Division, John Cronan, announced publicly that the FCPA Corporate Enforcement Policy, which is now part of the U.S. Attorney’s Manual and is considered formal guidance for FCPA cases, would be used as “nonbinding guidance” in all criminal division cases. This policy provides specific incentives for companies to voluntarily report wrongdoing to the DOJ. As described by Deputy Attorney General Rod Rosenstein, “when a company satisfies the standards of voluntary self-disclosure, full cooperation, and timely and appropriate remediation, there will be a presumption that the Department will resolve the company’s case through a declination”.
In his remarks, Mr. Cronan touted the application of the Policy to the resolution of a manipulation of foreign currency options trading case against a large financial institution. The financial institution voluntarily disclosed the misconduct to the DOJ, cooperated completely and remediated the issue. As a result, the DOJ declined to prosecute, and the financial institution agreed to pay $12.9 million in restitution and disgorgement of profits. It should be noted that the DOJ criminally charged an individual at the financial institution for the alleged misconduct.
Although this expansion of the FCPA Corporate Enforcement Policy may benefit some companies, there are certain drawbacks. Most important is that the decision whether to decline is not guaranteed – it is a presumption only. DOJ is the sole arbiter whether the company has (1) “timely” self-disclosed; (2) “fully cooperated” (including, for example, giving up individuals, “proactively” cooperating, preserving documents, de-conflicting witness interviews); and (3) timely and appropriately “remediated” (including, for example, disciplining employees, enhancing compliance program, and conducting a root cause analysis).
Moreover, the DOJ may decide that “aggravating circumstances” (such as involvement of executive management, excessive profits or pervasiveness of misconduct) exist, in which case a company would not be entitled to the presumption at all.
Finally, the Policy itself states: “To qualify for the FCPA Corporate Enforcement Policy, the company is required to pay all disgorgement, forfeiture, and/or restitution resulting from the misconduct at issue.” So, once a company has made a decision to voluntarily disclose to the government, there will be monetary penalties (in addition to the increased legal fees associated with dealing with government cooperation demands).
We issued an alert that discusses in detail the FCPA Corporate Enforcement Policy, which can be found here. The expansion to general crimes is generally a good thing for companies – they need to consider the potential benefits that attach to a voluntary disclosure. The policy, however, does not always mitigate in favor of a voluntary disclosure.