At the recent American Bar Association’s National Institute on White Collar Crime, the Department of Justice’s (“DOJ”) Acting Head of the Criminal Division, John Cronan, announced that the Criminal Division will use the FCPA Corporate Enforcement Policy (“the Policy”) as “nonbinding guidance” in other areas of white-collar enforcement beyond the FCPA. As a result of this expansion, absent aggravating factors, DOJ may more frequently decline to prosecute companies that promptly self-disclose misconduct, fully cooperate with DOJ’s investigation, remediate in a complete and timely fashion, and disgorge any ill-gotten gains. Indeed, Cronan pointed to the DOJ’s recent decision to decline charges against a global bank, after the bank agreed to pay back $12.9 million in profits the DOJ claimed it obtained as a result of an alleged foreign exchange front-running scheme, as an example of the effect of this new wider application of the Policy.
At the same conference, DOJ officials promised vigorous enforcement and pushed back on the notion that the current administration was relaxing its enforcement efforts targeting white collar crime. Deputy Attorney General Ron Rosenstein outlined the DOJ’s enforcement priorities, and in doing so specifically noted that the DOJ wants to “avoid imposing penalties that disproportionately punish innocent employees, shareholders, customers, and other stakeholders.” Deputy Attorney General Rosenstein Delivers Remarks at the 32nd Annual ABA National Institute on White Collar Crime, March 2, 2018, https://www.justice.gov/opa/speech/deputy-attorney-general-rosenstein-delivers-remarks-32nd-annual-aba-national-institute. Nevertheless, Rosenstein pledged that DOJ would hold individual wrongdoers responsible for corporate criminal conduct, demonstrating the DOJ’s ongoing focus on individual accountability.
As we have discussed previously, the Policy was built on the FCPA Pilot Program, which set out expectations for how a company should manage an FCPA investigation and the potential rewards—including significant reductions in criminal fines—if a company complies with DOJ guidance. See Shearman & Sterling LLP, Deputy Attorney General Rod Rosenstein Announces Revised FCPA Corporate Enforcement Policy, Need-to-Know Litigation Weekly, Dec. 5, 2017, http://www.lit-wc.shearman.com/deputy-attorney-general-rod-rosenstein-announces-. In the FCPA context, the Policy went a step further than the Pilot Program. Under the Policy, when a company adequately voluntarily self-discloses, cooperates, and remediates, a presumption will arise that the matter will be resolved through a declination, rather than an enforcement action (although the company still may be required to pay disgorgement, forfeiture, or restitution). This presumption may, however, be overcome should there be aggravating circumstances regarding the seriousness of the offense or the nature of the offender.
The declination presumption embodied in the Policy also still requires full disgorgement, which could make companies question the advantages of self-disclosure under the Policy. By its very nature, disgorgement represents the repayment of illicit gains, and the government apparently believes it cannot be seen as allowing anyone—whether a corporation or individual criminal—to retain any portion of illicit gains. In this sense, the benefits that could in theory be gained by a company through participation in the Policy may be illusory in the case of large-scale white collar schemes. Once the amount of illicit gain is determined, it will be difficult for the DOJ to agree to any lesser amount, while a financial penalty may in some instances be open to negotiation. Furthermore, a public declination under the Policy may still carry with it substantial reputational costs that linger long after the matter is resolved.
It is also important to note that the DOJ’s decision on whether a declination is warranted is not guaranteed—it is a presumption only. The DOJ retains significant discretion to determine whether the company has (1) “timely” self-disclosed; (2) “fully cooperated” (including, for example, providing information and evidence on potentially culpable individuals, “proactively” cooperating, and preserving documents); and (3) timely and appropriately “remediated” (including, for example, disciplining employees and enhancing compliance programs). Moreover, the DOJ may find “aggravating circumstances” (such as involvement of executive management, excessive profits or pervasiveness of misconduct, or if the company is a criminal recidivist), in which case a company would not be entitled to the presumption at all. The potential for any of these elements to come out against the company represents a considerable risk in self-disclosing potentially criminal conduct to the DOJ, particularly in the case of conduct having a large total transactional value. In particular, the question of what qualifies as criminal recidivism—on which the Policy does not provide guidance—is a question that could be of particular importance for financial institutions that in recent years have been penalized in a number of criminal matters (e.g., money laundering and sanctions).
As we noted in our 2018 FCPA Digest Trends & Patterns, there are a number of questions and issues raised by the FCPA Corporate Enforcement Policy, which now will be of even greater importance given the wider application of the principle across the Criminal Division’s investigatory work. See Shearman & Sterling LLP, Recent Trends and Patterns in the Enforcement of the Foreign Corrupt Practices Act, Jan. 2, 2018, https://www.shearman.com/-/media/Files/Perspectives/2018/01/January-2018-FCPA-Digest-Recent-Trends.pdf. Like the Policy, the DOJ’s new white collar policy is likely intended to provide additional motivation for corporations that uncover wrongdoing to come forward to the DOJ to disclose, cooperate, and remediate. However, as evidenced by the analysis above, it still falls short of providing true certainty, as there are a number of subjective standards that, understandably, build in considerable discretion for the DOJ. Until more facts are known about the DOJ’s approach across a broader range of cases, the decision whether to self-disclose will undoubtedly remain one of the most challenging and fact-specific decisions a company can be faced with in the context of any given investigation