The question that companies face when they uncover a potential FCPA violation is TO REPORT OR NOT REPORT. Last week, Deputy Attorney General Rosenstein announced a new “FCPA Corporate Enforcement Policy.” Does this new policy “move the needle” in terms of answering that most important question? We think that the new policy offers no concrete change from how the DOJ has handled past cases, and certainly does not provide companies with an automatic “YES” answer to the key question. Companies still should weigh the risks and benefits of just fixing the problem, remediating as much as reasonably possible, strengthening their compliance programs, and moving forward versus the certain costs of reporting the issue to DOJ.

Deputy Attorney General Rosenstein highlighted three key aspects of the new policy. First, he stated 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 sounds good, right? The company is off the hook if it makes a voluntary self-disclosure. Yet the policy itself then 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."

This is perfectly in line with DOJ’s handling of recent “declinations.” These declinations are accompanied by “disgorgements” – meaning the company has to pay money to the government. So, although companies are not criminally prosecuted and they do not sign a deferred prosecution agreement, they do sign an agreement to pay disgorgement, forfeiture and/or restitution.

Moreover, another drawback is that 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). Of course, the “presumption” of a declination is only a “presumption.” 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.

Second, Mr. Rosenstein touted that if the company voluntarily discloses but the DOJ decides that “aggravating circumstances compel an enforcement action, the Department will recommend a 50% reduction off the low end of the Sentencing guidelines fine range.” Of course, such reductions would not apply to criminal recidivists, and even with a reduction, the “flexibility” of Guideline ranges makes any benefit indeterminate. The policy further states that DOJ “generally” will not require the appointment of a monitor in such cases, which still provides a lot of wiggle room for the government.

Third, Mr. Rosenstein stated that the policy “provides details about how the Department evaluates an appropriate compliance program.” Although helpful to include in the policy, the details have been discussed and vetted through various settlements and public DOJ statements, so there is nothing new here.

Beyond the items highlighted by Mr. Rosenstein, the policy also contains a provision that companies that do not voluntarily disclose still may be eligible for cooperation credit if they “later fully cooperated and timely and appropriately remediated.” For such companies, the DOJ will recommend a 25% reduction in fines. So a company with aggravating circumstances essentially gets only a 25% reduction for voluntarily reporting; because such a company can still get 25% credit for cooperation even if it does not voluntarily report.

There is at least one glaring hole in terms of the policy’s effect on public companies – it cannot and does not provide for how the SEC will resolve the case against a public company in the event that DOJ declines prosecution.

There is no doubt that this new policy is helpful for a company that, for reasons other than the policy, would likely voluntarily disclose anyway. For example, a public company that would have to disclose to the public the violation due to the violation’s materiality, would clearly benefit by disclosing under this policy.

For other companies, however, this new policy does not create a large enough incentive on its own to report a suspected violation. This is especially true when weighed against a company that takes the responsible steps of ending the violation, remediating to the extent possible, strengthening its compliance program, but does not self-report. A company making a voluntary disclosure under this new policy will have to pay a great deal to its legal team for the requisite internal investigation and settlement dance with the government. In addition, it will pay disgorgement, forfeiture and/or restitution. A company deciding to just fix the problem and move forward will pay some reduced costs to its legal team but nothing else – unless the government finds the violation on its own or through a whistleblower.

It is usually good for the government to operate pursuant to written policies and the new FCPA Corporate Enforcement Policy is a good thing to have. It does not, however, change current practice nor is it sufficient incentive to make a voluntary disclosure to the DOJ without first weighing the pros and cons.