On March 1, 2018, John P. Cronan, the acting head of the Department of Justice’s Criminal Division, and Benjamin Singer, Chief of the Fraud Section’s Securities and Financial Fraud Unit, announced at the American Bar Association’s 32nd Annual National Institute on White Collar Crime that the Criminal Division will use the Foreign Corrupt Practices Act Corporate Enforcement Policy as nonbinding guidance in criminal cases outside the FCPA context.
The FCPA Corporate Enforcement Policy, announced by Deputy Attorney General Rod J. Rosenstein on Nov. 29, 2017, and incorporated in the U.S. Attorneys’ Manual, provides guidance to prosecutors regarding how to handle corporate resolutions in FCPA cases. It states, in relevant part, that “[w]hen a company has voluntarily self-disclosed misconduct in an FCPA matter, fully cooperated, and timely and appropriately remediated, . . . there will be a presumption that the company will receive a declination absent aggravating circumstances involving the seriousness of the offense or the nature of the offender.” To qualify for the benefits of the policy, the company must “pay all disgorgement, forfeiture, and/or restitution resulting from the misconduct at issue.”
The presumption of declination can be overcome by aggravating circumstances, which include the “involvement by executive management of the company in the misconduct; a significant profit to the company from the misconduct; pervasiveness of the misconduct within the company; and criminal recidivism.” Even if a criminal resolution is warranted, however, the company is eligible for a 50% reduction off the low end of the U.S. Sentencing Guidelines fine range, except in the case of a criminal recidivist. And if the company has implemented an effective compliance program, appointment of a monitor generally will not be required. Furthermore, even if a company does not voluntarily self-report misconduct, as long as it cooperates with the DOJ and timely and appropriately remediates, it will be eligible for up to a 25% reduction off the low end of the Guidelines fine range.
The policy intends to incentivize companies to come forward when they discover wrongdoing and “reduce cynicism about enforcement.” The policy also underscores the Department’s commitment to hold individuals accountable for criminal misconduct.
As an example of the Criminal Division’s new extension of the FCPA cooperation policy, Messrs. Cronan and Singer cited specifically to the Fraud Section’s Feb. 28, 2018 settlement with Barclays PLC. Barclays self-reported that, through its employees and agents, it had misappropriated confidential information from its client, Hewlett-Packard Co., and engaged in a front-running scheme that involved foreign exchange transactions. The company cooperated with the Fraud Section, providing all known relevant facts about the individuals involved in the misconduct, took steps to enhance its compliance program, agreed to pay $12.9 million in combined restitution to HP and disgorgement of its profits from the front-running scheme, and promised to continue to cooperate with the government. Based on the corporation’s conduct, the Fraud Section declined to prosecute the company. In January 2018, the former head of Barclays Capital Inc.’s New York foreign exchange trading operation was indicted in connection with the misconduct. Messrs. Cronan and Singer contrasted Barclays’ $12.9 million settlement with the $101.5 million in penalties and disgorgement that HSBC Holdings PLC paid after a similar front-running investigation, noting that HSBC did not self-report the wrongdoing and, at least initially, did not fully cooperate with the DOJ.
The DOJ leadership has clearly expressed a commitment to rewarding companies that self-report wrongdoing, fully cooperate and remediate while holding individuals accountable. These policy statements are a welcome development, an acknowledgment that, as Deputy Attorney General Rosenstein noted at the ABA White Collar Institute, corporate prosecutions may “disproportionately punish innocent employees, shareholders, customers, and other stakeholders.” Hopefully, they mark a return to the government’s historical practice of not prosecuting corporations that did the right thing by fully cooperating and remediating, as was for example the case with Salomon Brothers in the Treasury auction bidding practices inquiries and with Kidder Peabody in the insider trading probes.
Even if not formally binding on the individual U.S. Attorneys’ offices, these statements by senior DOJ officials provide a significant basis for defense counsel to argue for declinations or reduced penalties in corporate criminal matters outside the context of the FCPA. Similarly, Deputy Attorney General Rosenstein emphasized that “[c]orporate America is often the first line of defense for detecting and deterring fraud. Meaningful compliance measures help the Department preserve its finite resources.” Therefore, he explained, the DOJ “want[s] to reward companies that invest in strong compliance measures.” He stated that “[w]hen something does go wrong, the greatest consideration should be given to companies that do not just adopt compliance programs, but incorporate them into the corporate culture.” He cautioned, however, that a company that wants to be treated by the Department as a “victim,” should “act like a victim who wants to see the perpetrators held accountable.”