This recent post noted that DOJ and SEC enforcement officials have historically hit the speaking circuit in September.
First up is DOJ Principal Deputy Assistant Attorney General David Bitkower (pictured) who delivered this speech last week at an ABA conference.
As excerpted below, a portion of Bitkower’s speech focused on the Foreign Corrupt Practices Act including the DOJ’s so-called FCPA Pilot Program announced in April 2016 (see here for the prior post and here, here, here, here, here and here for prior posts regarding the program).
In the speech, Bitkower calls the FCPA Pilot Program “sophisticated” and “transparent.”
As demonstrated below, the FCPA Pilot Program is anything but.
In his speech, Bitkower stated:
“[W]e recently announced a number of enhancements to our ability to investigate and prosecute foreign corruption cases, including additional prosecutorial and law enforcement resources dedicated to FCPA cases. But as part of our holistic approach, we also developed a targeted pilot program to try to increase the incentive for companies to self-report these cases and aid us in ensuring that there are no safe havens for those who engage in such criminal activity. The pilot program, launched by the Fraud Section this past April, centers around a sophisticated and realistic approach to encouraging corporations and individuals to self-disclose wrongdoing and cooperate with our investigations.
The guidance explains the credit available to companies that voluntarily self-disclose FCPA misconduct, fully cooperate with investigations and remediate. In recent months, the Fraud Section has also made public several declinations made under the pilot program. This is part of our greater effort to promote both transparency and accountability, and is important for a number of reasons.
First, transparency enables the public to understand why particular results are reached in particular FCPA cases and helps to reduce any perception that our enforcement decisions may be unreasoned or inconsistent. And second, transparency informs companies what conduct will result in what penalties and what sort of credit they can receive for self-disclosure and cooperation with an investigation. This, in turn, enables companies to make more rational decisions when they learn of foreign corrupt activity by their agents and employees. Companies will thus understand that in any eventual investigation, a decision not to disclose wrongdoing will result in a significantly different outcome than if the company had voluntarily disclosed the conduct to us and cooperated in our investigation. In this way, we believe that increased transparency in our FCPA charging decisions will encourage voluntary corporate self-disclosure of overseas bribery, and thus more prosecutions of the individuals responsible for those crimes, and ultimately less crime.
This kind of testing, even on a pilot basis, of a systematic and defined approach to motivating companies to promote accountability, is squarely aligned with the department’s larger individual accountability initiative, with which I am sure you are all familiar.”
Regarding Bitkower’s comment that the FCPA Pilot Program is “sophisticated,” as prior posts here and here demonstrated through the use of prior DOJ speeches and prior DOJ FCPA resolution documents – the main thrust of the FCPA Pilot Program (that is to encourage voluntary disclosure and reward voluntary disclosure) is nothing new.
Indeed, since at least 2005 the DOJ has actively encouraged voluntary disclosure including through repeated assurances that voluntary disclosure results in meaningful credit.
Moreover, the DOJ’s offer in the Pilot Program to perhaps extend:
(i) up to a 50% reduction off the minimum amount suggested by the guidelines to companies that voluntarily disclose, cooperate and remediate; and
(ii) up to 25% reduction off the minimum amount suggested by the guidelines to companies that cooperate and remediate even in the absence of voluntary disclosure
is nothing new either.
Indeed, there have been numerous instances prior to the Pilot Program in which the DOJ resolved corporate FCPA enforcement actions using the same thresholds it “may” use going forward under the Pilot Program.
You can call the DOJ’s renewed emphasis on its long-standing practice and policy, slapping a label on it, and issuing a formal document whatever you want. As highlighted in this prior post, Albert Einstein is credited with saying that insanity is “doing the same thing over and over again and expecting different results.” In any event, “sophisticated” is not a term that comes to mind when analyzing the DOJ’s FCPA Pilot Program.
In his speech Bitkower next asserts that the Pilot Program is transparent and that this asserted transparency “enables the public to understand why particular results are reached in particular FCPA cases” and “informs companies what conduct will result in what penalties.” Such comments are nothing short of astonishing.
According to the DOJ’s website, it has declined three corporate FCPA enforcement actions since the Pilot Program: Nortek, Akamai Technologies and Johnson Controls.
In each situation the DOJ released a single paragraph letter to the media and stated in an accompanying e-mail that the DOJ “will decline to comment beyond the text of the letter.”
As highlighted in prior posts here and here, none of the DOJ letters contain any substantive discussion about the conduct at issue. Rather all three letters refer to “possible violations” of the FCPA and then describe procedural factors relevant to the DOJ’s decision such as voluntarily disclosure and cooperation.
Moreover, and perhaps most importantly given the lack of substance in the DOJ letters, is that the only information in the public domain regarding the Nortek, Akamiai Technologies, and Johnson Controls enforcement actions (that is the SEC’s administrative orders) do not present any actual viable criminal charges that the DOJ presumably declined. (See here and here).
In short, far from being transparent, the DOJ’s recent declination letters are substantively opaque and raise more questions than they answer.
As a leading FCPA firm stated in a recent update, “arguably none of the companies [in the recent declinations] truly ‘benefitted’ from not being charged with a violation that they did not commit and it would seem that none of these cases can properly be called “declinations,” at least in the traditional sense.” (See this recent FCPA Flash podcast for related commentary).
A portion of Bitkower’s remarks also discussed the DOJ’s “systematic, metrics-orientated approach in evaluating the compliance programs of companies seeking to resolve criminal investigations.” He stated:
“[T]he department has long placed emphasis when reaching corporate resolutions on the existence or lack of an effective corporate compliance program. Over the past 20 years in particular, the role of compliance has evolved, becoming more sophisticated, industry-specific and metrics-oriented. Many companies have tailored their compliance programs to make sense for their businesses, risk factors, geographic regions and their work. But some have not. And since last year, the Fraud Section has been using a compliance consultant—an attorney with extensive compliance expertise in a range of different industries—to evaluate corporate compliance programs in terms of both industry best practices and real-world efficacy, and also to make sure that companies are not passing off mere paper programs as bona fide compliance programs.
But our compliance consultant is not simply assisting the Fraud Section in analyzing the compliance programs of companies in resolution negotiations, she has also helped prosecutors improve how we approach investigations. With the benefit of the experience of the compliance consultant, we are able to use benchmarking and other metrics to conduct more exacting interviews of compliance personnel and other witnesses, allowing us to further develop facts and leads within an investigation while also being able to probe what companies are telling us about their compliance.”