The chief of the US Justice Department’s counterintelligence and export control section has alluded to an updated policy on how companies are expected to report misconduct.
Speaking at GIR Live New York on 8 October, Jay Bratt, chief of the counterintelligence and export control section in the Department of Justice’s national security division, unveiled that it is currently revamping its policy on corporate voluntary disclosures.
“I don’t have anything to announce but I do have a tease, which is that we’ve been working on tweaking [the policy],” he said.
Bratt explained that the National Security Division’s 2016 policy for self-disclosure has not netted the desired results, and needed to be updated.
“I kind of joke that we had a voluntary self-disclosure party and nobody came – initially it was not a resounding success,” he said to laughter.
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The updates are also intended to make the section’s approach more consistent with the Foreign Corrupt Practices Act unit’s corporate enforcement policy, which has been broadly adopted across the criminal division. That policy gives companies the presumption of a declination if they self-report misconduct, cooperate with a subsequent government probe and fully remediate compliance failures.
“Our goal…is to make [the new policy] more consistent with what the department has been doing writ large and also to create a greater clarity of just what the benefits would be for somebody who comes in and does voluntary self-disclose.”
Bratt made his bid for companies to report directly to the counterintelligence section, noting that the export control bar has always found the section’s original policy to be “a bit controversial”. Lawyers often question why they should report to the counterintelligence section rather than directly to, for example, the Treasury Department’s Office of Foreign Assets Control, he said.
“One of the responses I say to counsel when they ask ‘why should we come to you and what’s really in it for the company’…is that, generally, these things eventually see the light of day and we do find out about it,” he said. “The earlier they come to us, the more beneficial it’s going to be for them.”
Bratt explained that companies shouldn’t dismiss disclosing to the counterintelligence section as other authorities aren’t looking for the same misconduct and bring different types of cases. With the caveat that his comment wasn’t meant as a criticism, Bratt said that other authorities don’t always tip them off to cases that the section would want to pursue.
He clarified that the section can also help companies that report to it coordinate with other authorities.
Seemingly in an effort to court corporations, Bratt added that the section’s push for voluntary self-disclosure is also to develop more cases against individuals.
“At the end of the day it’s not the company that committed a crime, it’s the people who did the bad things who should be held responsible,” he said.
“A comprehensive solution to a very, very bad situation”
Later on, Bratt responded to a question seeking examples of when companies gave persuasive compliance presentations. Bratt recalled a fraught matter that was taken to the DC Circuit: a judge’s decision to challenge a deferred prosecution agreement with aerospace company Fokker.
Fokker entered a $21 million resolution with US authorities in 2014 over a scheme to sell aircraft parts to customers in sanctioned countries including Iran. A Washington, DC, federal judge, Richard Leon, rejected the DPA for what he called an “anaemic” prosecution. But Judge Leon’s decision was later reversed after both sides launched an appeal. The DC Circuit held in 2016 that the prosecution alone has a say over whether a defendant should be criminally charged or has adequately complied with an agreement.
Bratt explained how Fokker, with the help of its counsel at Clifford Chance, persuaded him that it had successfully remediated following “egregious” misconduct.
“It was the thoroughness of how they did the training; how they empowered people at the right levels to report to higher levels at the company; it was the way they identified the risks in their intake of business…it was a comprehensive solution to a very, very bad situation,” he said.