The United States Department of Justice (the ‘DOJ’) has recently eased its policy requiring companies to turn over all relevant facts regarding individuals tied to misconduct with respect to the Foreign Corrupt Practices Act (‘FCPA’).
The FCPA, enacted in 1977, contains both anti-bribery and accounting provisions. The anti-bribery provisions prohibit covered persons from making corrupt payments to foreign officials to obtain or retain business. The accounting provisions require covered persons to keep accurate books and records. Covered persons are construed very broadly under U.S. law and while the FCPA is an American federal law, it is characteristic of the extremely long-arm of U.S. extraterritorial jurisdiction.
U.S. deputy attorney general Rod Rosenstein, on 29 November 2018, announced what is effectively a streamlining of the DOJ Memorandum on Individual Accountability for Corporate Wrongdoing issued by the then-deputy attorney general, Sally Yates (the ‘Yates Memo’). Under the Yates Memo, in order to receive credit for cooperating with the DOJ in a criminal case, a company must provide ‘all’ relevant facts about ‘all’ individuals involved in the relevant corporate misconduct. The Rosenstein adjustment to DOJ policy mitigates the heavy burden on companies by requiring them to provide details only on those individuals ‘substantially involved in or responsible for’ alleged criminal misconduct. However, the provision of such details must be in good faith and the reduced onus is also very much a benefit to the DOJ as explained below.
As part of the disclosure process, companies must have ‘full and frank’ discussions with prosecutors to help the DOJ identify those employees with substantial involvement in the misconduct. The underlying goal of this policy shift seems designed to save time and augment penalty revenues for the U.S. government by narrowing the field of investigations to only those culprits materially involved in serious misconduct rather than target ‘all’ involved parties, which may include persons with tangential involvement who are unlikely to be prosecuted.
While the priority in prosecuting criminal cases may as a matter of public policy be to penalise uncooperative companies to discourage malfeasance, the objective in prosecuting civil cases appears to be to recover money via the imposition of hefty fines or penalties. Consequently, Mr Rosenstein views the ‘all or nothing’ approach to cooperation introduced a few years ago to be counterproductive in civil cases. Therefore, if criminal liability is not at issue, Mr Rosenstein believes DOJ lawyers should be flexible to accept settlements that remedy the harm and deter future violations so other important cases can be pursued. To this end, the most important aspect of the DOJ’s adjusted policy is that a company must identify all wrongdoing by senior officials, including members of senior management or the board of directors, if it wants to earn any credit for cooperating in a civil case.
Ultimately, whether the DOJ interest in corporate wrongdoing is criminal or civil, the DOJ expects a company to identify all wrongdoing by senior officials, including members of senior management or the board of directors, if it wants to earn any cooperation credit in a civil case. The Rosenstein adjustment gives DOJ lawyers discretion and allows them to reward cooperation that meaningfully assists civil investigations without the need to agree about every employee with potential individual liability. While DOJ policy prohibits its attorneys from awarding any credit to any corporations that conceal misconduct or otherwise demonstrate a lack of good faith in investigations, the DOJ will reward companies that self-report, cooperate and remediate the harm they caused.
Bribery and corruption are some of the most serious and costly organisational threats. Such risks expose organizations to massive financial penalties and significant reputational and brand damage. Any organisation engaged internationally is at risk. Managing corruption risks preventatively and actively are the only realistic and cost effective options. Bribery and corruption are rarely apparent. One can never assume that one’s organisation is free of transgressions or questionable practices. Moreover, if an organisation does have a history of misbehaviour, it is better to address the problems in the present and remediate them rather than wait and hope the illegal acts remain secret.