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Deputy AG Rosenstein Assumes Causation In Calling The FCPA Pilot Program “Successful”

Assume

As long as there have been government programs, government officials have been inclined to proclaim the program a success.

For instance, last week in announcing the DOJ’s new “FCPA Corporate Enforcement Policy, Deputy Attorney General Rod Rosenstein stated:  “The incentive system set forth in the Department’s FCPA Pilot Program motivates and rewards companies that want to do the right thing and voluntarily disclose misconduct. In the first year of the Pilot Program, the FCPA Unit received 22 voluntary disclosures, compared to 13 during the previous year.  In total, during the year and a half that the Pilot Program was in effect, the FCPA Unit received 30 voluntary disclosures, compared to 18 during the previous 18‑month period.”

As highlighted in this post, Rosenstein’s statement assumes causation – in other words that the supposed increase in voluntary disclosures was the result of the April 2016 Pilot Program.

For starters, I think it would be unwise to automatically accept at face value the DOJ’s unverified voluntarily disclosure statistics. No one other the DOJ knows these numbers and there is no transparency around these numbers.

Even accepting the statistics, when “Grading the FCPA Pilot Program” (see here for the article) I noted that business organizations were often voluntarily disclosing prior to the April 2016 Pilot Program and thus “the key issue to track is whether the pilot program is motivating voluntary disclosure of potential FCPA violations that did not occur prior to the pilot program.” It was noted that “it will be impossible to empirically measure this issue.”

As is widely recognized, there are many ebbs and flows to FCPA voluntarily disclosures as well as enforcement actions and drawing conclusions about most things FCPA related through a mere 18 month window is suspect.

It is possible that voluntarily disclosures – for whatever reason- were lower (than recent years) for the 12-18 month period prior to April 2016 and it is also possible that voluntarily disclosures – for reasons other than the Pilot Program – were higher (than recent years) for the 12-18 month period post April 2016.

Indeed, I have spoken to some FCPA practitioners who voluntarily disclosed post April 2016 who said they would have likely done so absent the April 2016 Pilot Program and have likewise spoken to some FCPA practitioners who have not voluntarily disclosed post April 2016.

Indeed, as highlighted in this recent post, former SEC FCPA Unit Chief Kara Brockmeyer (who left her position in late April 2017) recently stated: “When I was with the government, the number of self-reports over five years stayed relatively constant. But I do hear as well from defense counsel that there are fewer self reports.”

Rosenstein’s assertion that the 2016 FCPA Pilot Program was successful because of the voluntary disclosure statistics cited above is an example of the logical fallacy post hoc ergo propter hoc (in other words, since event Y followed event X, event Y must have been caused by event X).

In short, we simply do not know (in any reliable way) whether the 2016 FCPA Pilot Program motivated (to a greater extent than what was occurring prior the Pilot Program) more voluntary disclosures.

Yet, as has been highlighted several times on these pages (see here for instance) the success of the Pilot Program can be measured by another metric.

As stated by the DOJ in the Pilot Program:

“the principal goal of [the Pilot] program is to promote greater accountability for individuals and companies that engage in corporate crime by motivating companies to voluntarily self disclose FCPA-related misconduct …” […] “this pilot program is intended to encourage companies to disclose FCPA misconduct to permit the prosecution of individuals whose criminal wrongdoing might otherwise never be uncovered by or disclosed to law enforcement.”

Measured against this main goal of the Pilot Program is the following fact: None of the seven corporate matters the DOJ has self-identified as being resolved pursuant to / or consistent with the Pilot Program (Nortek, Akamai Technologies, Johnson Controls, HMT LLC, NCH Corp, Linde Gas, and CDM Smith) have involved prosecution of individuals.

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