There are some issues in the Foreign Corrupt Practices Act space that really should be simple.
For instance, the question “what is an FCPA enforcement action” really should be simple.
However, as highlighted in the article “A Common Language to Remedy Distorted FCPA Enforcement Statistics” various FCPA Inc. participants have adopted (for self-interested reasons perhaps) creative and haphazard counting methods regarding “what is an FCPA enforcement action.”
The end result is a muddy conversation about many FCPA enforcement issues and the creative and haphazard counting methods infect the quality and reliability of FCPA enforcement and related statistics of interest to many in the legal and business communities.
Another question that should be simple is “what is a declination.”
However, as highlighted in various prior posts here (January 2013), here (January 2013), and here (March 2013) various FCPA Inc. participants have again muddied the conversational waters by adopting (for self-interested reasons perhaps) creative definitions of the word “declination.”
The DOJ has also thrown some mud into the conversation through vague, imprecise, and strange definitions of “declination.” For instance, who can forget the DOJ’s “selling” of Morgan Stanley’s so-called “declination” circa 2012 (see here) even though based on the information in the public domain, it is questionable whether there were any actual, viable criminal charges against the company for the DOJ to decline.
The mud became – well even muddier – when, in connection with its April 2016 FCPA Pilot Program, the DOJ publicly issued three letters pertaining to Akamai Technologies, Nortek, and Johnson Controls and how, consistent with the Pilot Program, the DOJ was “declining” criminal charges against the companies. Here again, the question needed to be asked: based on the information in the public domain, was there were any actual, viable criminal charges against the companies for the DOJ to decline?(See prior posts here and here).
This previous post awarded an FCPA Professor Apple Award to Debevoise & Plimpton for its thought-leadership on the DOJ’s first three so-called “declinations” under the Pilot Program. In pertinent part, Debevoise’s FCPA Update stated: “arguably none of the companies 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 also this FCPA Flash podcast with Debevoise lawyer Philip Rohlik).
The mud become even thicker when in late September the DOJ issued two so-called “declination & disgorgement” letters pertaining to HMT LLC and NCH Corp. in which the companies agreed to pay the DOJ disgorgement of $2.7 million and $335,000. (See here for the prior post).
What exactly is a “declination” nowadays?
With the DOJ recently launching a “declination” page on its FCPA website does this mean that matters that do not appear on this page are not “declinations”?
On the flip side, if a matter appears on the DOJ’s page – as the HMT and NCH matters do – does this mean it is a “declination” when in reality it was yet another version of an FCPA enforcement action?
Similarly, if a matter appears on the DOJ’s page – as the Akamai Technologies, Nortek and Johnson Controls matters do – does this mean we are supposed to blindly accept the DOJ’s designation when the declination letter merely references “potential” FCPA violations and then offers no substance whatsoever regarding the “potential” violations? After all, the DOJ is marketing a government program with its so-called “declinations.”
The most recent edition of the always informative FCPA Update by Debevoise & Plimpton contains an article titled “The Difficulty of Defining a Declination” that nicely summarizes the recent layers of mud added to the mix. In pertinent part it states:
“The HMT and NCH declinations … raise the question of whether and to what extent the Pilot Program, in addition to offering guidance on how to receive a declination, has altered the meaning of what a declination ordinarily will be.”
Elsewhere, the FCPA Update states:
“It is worth noting that all of these declinations [listed on the DOJ’s declination page] involved self-disclosure prior to the announcement of the Pilot Program and are therefore declinations applying the policy set out in the Pilot Program rather than, strictly speaking, declinations rewarding self-reporting since the DOJ announced the Pilot Program. Nonetheless, differences between the resolutions with HMT and NCH, on the one hand, and the other three listed matters, on the other hand, raise the question of what the DOJ means by “declination.”
Addressing the DOJ’s recent “disgorgement & disgorgement” letters, the FCPA Update states:
“The benefits of a Pilot Program declination are therefore muted by the requirement to pay disgorgement, the reputational damage from published allegations, and the related potential for collateral consequences, as well as the reality of the Pilot Program’s baseline encouragement of self-reporting and cooperation. The Pilot Program therefore appears to have created a dilemma for the DOJ. By providing somewhat detailed allegations relating to a declination, the DOJ laudably has answered the calls of commentators and practitioners for more transparency with regard to what can merit a declination, information which, over time, could become useful to companies doing business in high-risk jurisdictions. At the same time, the greater transparency arguably makes declinations, and therefore self-reporting, less advantageous to companies that uncover wrongdoing by their employees, certainly relative to a clean declination in the traditional sense.”
In short, when it comes to the meaning of a so-called “declination” what the FCPA space is left with is one big, muddy mess.
The article “A Common Language to Remedy Distorted FCPA Enforcement Statistics” highlights why the lack of common language as to the basic question of what is an FCPA enforcement matters.
For the same reasons highlighted in the article, the lack of a common language as to the basic question of what is a “declination” also matters.