In an effort to move forward with the Department of Justice's (DOJ) policy of individual responsibility, the agency announced a pilot program to encourage corporations to self-report Foreign Corrupt Practices Act (FCPA) related misconduct and cooperate with the agency. While the new DOJ pronouncement is specifically limited to FCPA cases prosecuted by DOJ's Fraud Section, it is likely that other units within the DOJ will look to the memorandum for guidance in defining corporate cooperation in other types of cases.
Last fall, the DOJ published what has come to be known as the Yates Memo, a document authored by Deputy Attorney General Sally Quillian Yates that emphasized the importance of holding individuals liable for corporate wrongdoing.
The "Individual Accountability for Corporate Wrongdoing" set forth six "key steps" for the government's new policy, including a requirement that in order to qualify for any cooperation credit, corporations must provide to the DOJ all relevant facts relating to the individuals responsible for the misconduct.
To further this policy, the DOJ launched a one-year pilot program on April 5 "designed to motivate companies to voluntarily self-disclose FCPA-related misconduct, fully cooperate with the Fraud Section, and, where appropriate, remediate flaws in their controls and compliance programs," explained Assistant Attorney General Leslie R. Caldwell.
In exchange for voluntarily self-disclosing misconduct and fully cooperating, the program allows corporations to receive mitigation credit of up to a 50 percent fine reduction from the bottom of the applicable Sentencing Guidelines fine range calculation.
To be eligible for the credit, corporations must meet several criteria: voluntarily disclose the misconduct and all relevant facts related "within a reasonably prompt time after becom[ing] aware of the offense"; fully cooperate with the DOJ investigation; take appropriate actions towards remediation; and disgorge all profits resulting from the FCPA violation.
Disclosures that a company is required to make—by law, agreement, or contract—do not constitute voluntary self-disclosure for purposes of the pilot program, the DOJ noted, and the voluntary disclosure must occur prior to an imminent threat of disclosure or government investigation.
As defined by the DOJ, "full cooperation" includes the "preservation, collection, and disclosure of relevant documents and information relating to their provenance," as well as making company officers and employees who possess relevant information available for interviews. All facts relevant to the wrongdoing at issue must be shared with the agency, including all facts "related to involvement in the criminal activity by the corporation's officers, employees or agents" and all facts relevant to potential criminal conduct by third-party individuals or companies. Information about the corporation's own internal investigation must be shared with the DOJ, complete with "timely updates."
"Cooperation comes in many forms," the DOJ recognized. Once the threshold requirements of the memo have been met, the Fraud Section will "assess the scope, quantity, quality, and timing of cooperation based on the circumstances of each case when assessing how to evaluate a company's cooperation" under the pilot program.
If all of the requirements are met, a corporation will be eligible for up to a 50 percent reduction off the bottom of the Sentencing Guidelines fine range and "generally" not be required to appoint a monitor if an effective compliance plan has already been established, the DOJ said. In some cases, the agency may decline to prosecute altogether.
"Of course, in considering whether declination may be warranted, Fraud Section prosecutors must also take into account countervailing interests, including the seriousness of the offense: in cases where, for example, there has been involvement by executive management of the company in the FCPA misconduct, a significant profit to the company from the misconduct in relation to the company's size and wealth, a history of non-compliance by the company, or a prior resolution by the company with the Department within the past five years, a criminal resolution likely would be warranted," the agency explained.
As long as the corporation self-reports during the pilot program, it will be eligible for the benefits, even if the program expires, although the DOJ said it will consider extending or modifying the program after the year ends. For those companies that do not voluntarily self-disclose but do provide full cooperation to the DOJ, the agency will consider granting limited mitigation credit, "at most" a 25 percent reduction off the bottom of the Sentencing Guidelines range.
Why it matters
The DOJ made clear that it is taking FCPA violations seriously. In addition to launching the pilot program, the agency revealed that it "is intensifying its investigative and prosecutorial efforts" and "substantially increasing" its FCPA law enforcement resources by more than 50 percent with the addition of 10 more prosecutors, with three new squads in the Federal Bureau of Investigation devoted to the FCPA. The Department also strengthened its coordination with foreign counterparts, adopting an international approach "to combat an international criminal problem." "The Department's demonstrated commitment to devoting additional resources to FCPA investigations and prosecutions should send a message to wrongdoers that FCPA violations that might have gone uncovered in the past are now more likely to come to light," the DOJ warned.
To read the Fraud Section's FCPA Enforcement Plan and Guidance, click here.