On November 29, 2017 the Department of Justice (“DOJ”) announced a Foreign Corrupt Practices Act (“FCPA”) Corporate Enforcement Policy (“FCPA Policy”). The policy was incorporated into the United States’ Attorney’s Manual and is based on the 2016 FCPA Pilot Program designed to promote greater compliance.
Under the Pilot Program, companies were given special incentives to encourage more self-disclosures for reporting violations of the FCPA provided that those self-disclosures met specific requirements, such as a truly voluntary, prompt and complete disclosure, full cooperation, and the timely remediation of any violations. The Pilot Program also required the company to pay all disgorgement, forfeiture, and restitution resulting from its misconduct.
In June of 2017, acting under the authority created by the Pilot Program, the DOJ extended a declination of prosecution for an FCPA violation resulting from a 2006 transaction. The DOJ found that a violation was committed when a secret arrangement was formed between a Georgian state-owned entity, National High Technology Center (“NHTC”), and a New Jersey company, Spectra Gases Inc. The arrangement called for Spectra Inc. to share the profits it generated from its purchase of Boron gas production equipment from NHTC with senior officials at NHTC in exchange for these officials’ help in promoting Spectra over rival bidders.
In conducting its investigation, the DOJ found the parent company of Spectra Gases Inc. acted proactively in withholding payment to NHTC officials once wrongdoing had been discovered. In addition, the parent company filed a timely and voluntary self-disclosure of the matter and cooperated fully with the DOJ by releasing all known facts about the transaction and FCPA violation. Further, Spectra Gases’ parent company also agreed to disgorge a total of 7.82 million in profit generated from Spectra’s use of the Boron gas equipment and to forfeit another 3.4 million in payments Spectra intended for NHTC officials.
The new FCPA Policy not only codifies the original pilot program, but expands it by offering even stronger incentives for encouraging voluntary self-disclosures of FCPA violations. In supporting his decision to permanently incorporate the incentives program, Deputy Attorney General Rod Rosenstein noted that during the pilot program’s 18-month testing phase, DOJ prosecutors received 30 voluntary disclosures. This was a 67% increase from the 18 voluntary disclosures filed during the previous 18-month period.
The FCPA Policy states that 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. That presumption may be overcome only if there are aggravating circumstances related to the nature and seriousness of the offense.
If aggravating factors are found, the DOJ’s treatment of a self-disclosure changes. Under the FCPA Policy, aggravating factors could include: direct involvement by executive management of the company in the misconduct; the generation of significant profit by the company related to the misconduct; and any criminal recidivism involved.
However, even if the presence of an aggravating factor does alter the presumption against prosecuting the company submitting the disclosure, the new FCPA Policy still provides incentives to proactively disclose FCPA violations. Specifically, a voluntary self-disclosure that meets the DOJ’s cooperation and remediation expectations, but contains the presence of an aggravating factor, the DOJ will recommend a 50% reduction off the low end of the United States Federal Sentencing Guidelines fine range. Moreover, if the company has subsequently implemented satisfactory remediation measures at the time the FCPA matter is resolved, the DOJ may not require the appointment of a monitor.
Moreover, the DOJ has also provided guidance on establishing satisfactory anti-corruption compliance programs that could allow a company to qualify for the benefits described above. The FCPA Policy details eight elements characteristic of compliant companies. These elements include: a culture of compliance, sufficient resources devoted to compliance, the use of experienced compliance personnel, safeguards for protecting the authority and independence of compliance personnel, the degree to which a company’s compliance program accounts for risks specific to its own business, and the compliance program’s self-auditing capacity.
Self-disclosures function as voluntary admissions of mistakes made, exposing companies to the potential risk of incurring DOJ penalties for any violations that might have occurred. As such, these tools draw attention to violations that otherwise may not have been discovered absent the self-disclosure. It is important to note that the DOJ does not provide any guarantees for a company making a disclosure. However, filing a self-disclosure also creates an opportunity for businesses to minimize the potential range of penalties the DOJ might impose for FCPA violations. Accordingly, business organizations should evaluate their unique situations to make an appropriate decision for resolving potential FCPA violations in a manner that both complies with the law, while also maximizing the new opportunities the DOJ offers for potentially limiting liability.
This article was co-authored by Sarah Wirskye at Wirskye Law Firm.