According to an October 28th article by Mary Jacoby in Main Justice, “Duross on Declinations,” DOJ FCPA Unit Chief Charles Duross was recently asked whether the DOJ would publish information on its FCPA declination decisions. According to the article, Duross said he was not “particularly comfortable doing it” and that disclosing declinations was a “very foreign concept” to him. Duross is quoted as saying that DOJ doesn’t “disclose declinations of drug cases or bank robberies” and he “likes to think [that DOJ treats FCPA cases] like any other criminal case.”
However, FCPA cases are not like other criminal cases. The majority of corporate FCPA enforcement actions are voluntarily disclosed, drug cases and bank robberies are not ordinarily voluntarily disclosed, and therein lies the difference.
My proposal (see here for the prior post from August 2010 when I first made this proposal in the aftermath of Digi International’s disappearance act) is triggered when a company voluntarily discloses an FCPA internal investigation to the DOJ and when the DOJ declines enforcement. In these situations, it is in the public interest to require the DOJ to publicly state, in a thorough and transparent manner, the facts the company disclosed to the DOJ and why the DOJ declined enforcement on those facts.
Here is why I think the proposal makes sense and is in the public interest.
For starters, the DOJ is already enthusiastic when it comes to talking about FCPA issues. Enforcement attorneys from both the DOJ are frequent participants on the FCPA conference circuit and there seems to be no other single law that is the focus of more DOJ speeches than the FCPA. Thus, there is clearly enthusiasm and ambition at the DOJ when it comes to the FCPA.
Further, the DOJ has the resources to accomplish this task as it has touted its increased FCPA resources and the new personnel hired to focus on the FCPA. Combine enthusiasm and ambition with sufficient resources and personnel and the proposal certainly seems doable.
Most important, the DOJ is already used to this type of exercise. It is called the FCPA Opinion Procedure Release a process the DOJ frequently urges those subject to the FCPA to utilize.
Under the Opinion Procedure regulations, an issuer or domestic concern subject to the FCPA can voluntarily disclose prospective business conduct to the DOJ which then has 30 days to respond to the request by issuing an opinion that states whether the prospective conduct would, for purposes of the DOJ’s present enforcement policy, violate the FCPA.
The DOJ’s opinions are publicly released and the FCPA bar and the rest of FCPA Inc. study these opinions in great detail in advising clients largely because of the general lack of substantive FCPA case law.
If the DOJ is able to issue an enforcement opinion as to voluntarily disclosed prospective conduct there seems to be no principled reason why the enforcement agencies could not issue a non-enforcement opinion as to voluntarily disclosed actual conduct
Such agency opinions would seem to be more valuable to those subject to the FCPA than the already useful FCPA Opinion Procedure Releases. If the enforcement agencies are sincere about providing guidance on the FCPA, as they presumably are, such agency opinions would seem to provide an ideal platform to accomplish such a purpose.
Requiring the enforcement agencies to disclose non-enforcement decisions after a voluntary disclosure could also inject some much needed discipline into the voluntary disclosure decision itself – a decision which seems to be reflexive in many instances any time facts suggest the FCPA may be implicated.
Notwithstanding the presence of significant conflicting incentives to do otherwise, it is hoped that FCPA counsel advises clients to disclose only if a reasonably certain legal conclusion has been reached that the conduct at issue actually violates the FCPA. Accepting this assumption, transparency in FCPA enforcement would be enhanced if the public learned why the enforcement agencies, in the face of a voluntary disclosure, presumably disagreed with the company’s conclusion as informed by FCPA counsel. If the enforcement agencies agreed with the conclusion that the FCPA was violated, but decided not to bring an enforcement action, transparency in FCPA enforcement would similarly be enhanced if the public learned why.
A final reason in support of the proposal is that it would give companies a benefit by contributing to the mix of public information about the FCPA. In most cases, companies spend millions of dollars investigating conduct that may implicate the FCPA and on the voluntary disclosure process. When the enforcement agencies decline an enforcement action, presumably because the FCPA was not violated, these costs are forever sunk and the company can legitimately ask why it just spent millions investigating and disclosing conduct that the DOJ did not conclude violated the FCPA.
However, if the DOJ was required to publicly justify its declination decision, the company would achieve, however small, a return on its investment and contribute to the mix of public information about the FCPA – a law which the company will remain subject to long after its voluntary disclosure and long after the enforcement agencies declination decision. Thus, the company, the company’s industry peers, and indeed all those subject to the FCPA would benefit by learning more about the DOJ’s enforcement conclusions.
Transparency, accountability, useful guidance, a return on investment.
All would be accomplished by requiring the DOJ to publicly justify a declination decision in the limited instances where no enforcement action follows a voluntary disclosure.