Businesses Are Expected to be Allies in the Fight Against Corruption
Deputy Attorney General Rod J. Rosenstein announced Wednesday that the Pilot Program established by the U.S. Department of Justice (DOJ) in 2016 to incentivize companies to self-report violations of the Foreign Corrupt Practices Act (FCPA) will be made permanent with certain revisions. The "revised" program, which is reflected in the FCPA Corporate Enforcement Policy, is to be written into the U.S. Attorneys' Manual and takes effect immediately. The policy will include a presumption that businesses that: (1) voluntarily self-disclose, (2) fully cooperate in the government's investigation of the wrongdoing, and (3) take prompt remedial action, will be given a declination of prosecution. This expands upon the Obama administration's program, which offered reduced penalties for self-reporting and only issued declinations in limited circumstances.
The revised program is intended to send a message to American businesses that the government views companies as partners in the fight against global corruption. Deputy Attorney General Rosenstein expounded upon this strategy in his announcement unveiling the new policy Wednesday. "Most American companies are serious about engaging in lawful business practices. Those companies want to do the right thing. They need our support to protect them from criminals who seek unfair advantages," he explained. "Criminals try to evade law enforcement. But they also need to evade internal controls and compliance programs, if those internal controls and programs exist. Honest companies pose a meaningful deterrent to corruption." While Rosenstein acknowledged that there would always be uncertainty, the new program aims to "strike the balance in favor of greater clarity about our decision-making process."
The Revised Pilot Program
Rosenstein stated that the revised FCPA Corporate Enforcement Policy provides that the DOJ Fraud Section will give a business under investigation credit based on a totality of the circumstances, but a company that satisfies the standards of (1) voluntary self-disclosure, (2) full cooperation, and (3) timely and appropriate remediation, will be entitled to a presumption that DOJ will resolve the case through a declination. That presumption may be overcome only if there are aggravating circumstances related to the nature and seriousness of the offense, such as management's involvement in the wrongdoing or the pervasiveness of the misconduct throughout the company, or if the offender is a recidivist.
The revised policy provides opportunities even where a company does not qualify for a declination. If a company has voluntarily self-disclosed, cooperated fully and remediated in a timely and appropriate manner but nonetheless remains exposed to criminal prosecution, DOJ will recommend to the sentencing court a 50 percent reduction off the low end of the applicable fine under the U.S. Sentencing Guidelines. Furthermore, provided that the company has implemented an effective compliance program at the time of the resolution, DOJ will not insist on the appointment of a corporate monitor. Even where a company does not voluntarily self-disclose but later fully cooperates and timely remediates, DOJ will recommend fine reductions of up to 25 percent from the applicable fine range under the sentencing guidelines.
Companies that satisfy the requirements of the program will still be required to pay full disgorgement of illicit proceeds, and any applicable forfeiture or restitution that results from the underlying offense.
The policy contains further guidance regarding the self-disclosure, cooperation, and remediation requirements. First, self-disclosure must be voluntary, and not made "prior to an imminent threat of disclosure or government investigation." The disclosure must be made within a reasonable time after its discovery, and the company must fully disclose all of the facts and circumstances surrounding the violation not protected by the attorney-client privilege. Second, to receive credit for cooperation, the company must proactively and continuously share information uncovered during an internal investigation, attribute those facts to specific sources, and, where applicable, disclose information concerning potential criminal conduct by third-party companies and their officers, employees, or agents. To receive remediation credit, the company will need to demonstrate it has undertaken a thorough analysis of the causes of the underlying conduct (a "root causes" analysis) and has taken steps to remediate those underlying issues. Furthermore, the company will need to implement an effective compliance and ethics program and discipline employees involved in the offense as appropriate.
The New Cost-Benefit Analysis for Companies Facing Liability
"The new policy does not provide a guarantee," said Rosenstein. "[C]ompanies are free to choose not to comply with the FCPA Corporate Enforcement Policy." If a company chooses to disclose, it is guaranteeing the discovery of conduct that may not otherwise have come to light, and is subjecting itself to guaranteed disgorgement, forfeiture, and restitution costs, in addition to the costs of a potentially lengthy and costly investigation. Disclosure may also have significant reputational repercussions and put the company's employees, officers, and business partners in jeopardy of individual prosecution. That being said, "[a] company needs to adhere to the policy only if it wants the Department's prosecutors to follow the policy's guidelines[,]" and the guidelines provide for declinations of prosecution and significant reductions in penalties.
Companies should continue to thoroughly consider the pros and cons of self-disclosure in light of the new FCPA Corporate Enforcement Policy and engage counsel before and after FCPA risks are uncovered.