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Deputy Assistant Attorney General Matthew Miner On A Variety Of FCPA Issues (With Commentary)

Yesterday, Deputy Assistant AG Matt Miner delivered this speech [1].

It touched upon a number of Foreign Corrupt Practices Act issues including: the DOJ’s Corporate Enforcement Policy, voluntary disclosure, so-called declinations, coordinated resolutions, general compliance issues, and M&A transactions.

This post summarizes the speech and provides certain commentary.

Miner began:

“It was just about a year ago when, last November, the Department announced the implementation of the FCPA Corporate Enforcement Policy, which is enshrined in what is now the Justice Manual. For those who may be scratching their heads, I’m referring to what was until very recently called the United States Attorney’s Manual or USAM. The name change may take a little getting used to, but given that the policies in the Manual are applicable to all Department employees, not just Assistant U.S. Attorneys, I think the name change is appropriate. As Deputy Attorney General Rod Rosenstein stated when announcing the FCPA policy change:  “The new policy enables the Department to efficiently identify and punish criminal conduct, and it provides guidance and greater certainty for companies struggling with the question of whether to make voluntary disclosures of wrongdoing.”

As highlighted in prior posts here [2], here [3], and here [4] and this article [5], there is nothing certain about non-binding DOJ guidance that contains numerous vague and ambiguous terms that the DOJ has refused to provide additional clarity on.

Miner continued:

“Given my experience in private practice, I know firsthand the difficult decisions that management must make when they uncover misconduct. Senior management, boards of directors and their advisors have to weigh many factors when deciding how to respond to misconduct. But of all the decisions that need to be made, whether to voluntary self-disclose is perhaps one of the most difficult. The goal of the FCPA Corporate Enforcement Policy is to encourage voluntary self-disclosures by making clear the benefits for companies that voluntarily self-disclose, fully cooperate and remediate, most significantly a presumption of a declination.  It also spells out the Department’s expectations for companies to satisfy the standards in the policy. If you believe, as I do, that corporations are rational actors that react to clearly-defined economic stimuli, then it follows that the Department’s more concrete guidance will have a positive effect.”

Again, there is nothing “clearly defined” or “concrete” about non-binding DOJ guidance that contains numerous vague and ambiguous terms that the DOJ has refused to provide additional clarity on.

[6]

Miner continued:

“While it has been in place for less than a year, we’ve already had three FCPA declinations thus far under the Policy:  the declinations involving Dun & Bradstreet Corporation, the Insurance Corporation of Barbados Limited, or ICBL, and Guralp Systems Limited. The declination letters for all of these matters are available on the Fraud Section’s FCPA website, and we will continue to post future declination letters for cases resolved under the Policy. The declinations involving ICBL and Guralp are particularly noteworthy as they represent instances in which senior executives were implicated in connection with the improper conduct, and yet we nevertheless declined both cases under the Corporate Enforcement Policy. ICBL and Guralp make clear that although aggravating circumstances can overcome the presumption for a declination, such circumstances by no means preclude a declination. Companies making the decision of whether to voluntarily disclose should consider these cases, and recognize the significant benefits they can achieve through good corporate behavior under the Policy.”

Rather than drinking the Kool-Aid on certain of the above so-called declinations, ask yourself – based on the information in the public domain just what viable criminal charges did the DOJ actually decline? (See here [7] and here [8] for prior posts and here [9] for a relevant podcast).

Miner continued:

“Businesses thrive in a stable legal environment.  A stable legal environment exists when laws are enforced consistently and fairly.  And when business thrives, it benefits all of us. Our role is not to impose penalties that disproportionately punish innocent employees, shareholders, customers, and other stakeholders – especially for companies that have taken steps to rectify and prevent misconduct from occurring. That is why the FCPA Policy emphasizes the need for effective compliance and ethics programs – programs that foster a culture of compliance; that dedicate sufficient resources to compliance activities; and that ensure that experienced compliance personnel have appropriate access to management and to the board. But we also recognize that even with the best compliance program, it is still possible for one or a few bad actors to engage in misconduct.  That is why the Policy encourages companies to promptly report misconduct, fully cooperate and enact prompt and effective remedial measures. We know most companies want to do the right thing, and we want to reward those companies, accordingly.”

Hard to argue with much of what Miner says above. However, one non-binding DOJ guidance document (FCPA Guidance 2012), and then another non-binding DOJ guidance document (the Pilot Program in 2016), and then another non-binding DOJ guidance document (the Corporate Enforcement Policy in 2017) is hardly a “stable legal environment.”

Moreover, the FCPA Policy – by its own terms – “is aimed at providing additional benefits to companies based on their corporate behavior once they learn of misconductand has little to do with “emphasizing the need for effective compliance and ethics programs.”

Miner continued:

“It is again because these principles make so much sense that, this past July, I announced that going forward we will seek to apply the FCPA Corporate Enforcement Policy principles to mergers and acquisitions that uncover potential FCPA violations. We felt this clarification was needed because the Department’s guidance regarding mergers and acquisitions that was announced in the 2012 FCPA Guide and elsewhere was not updated or otherwise incorporated into the FCPA Corporate Enforcement Policy.  The clarification was intended to be just that – a clarification that the new Policy also applied to misconduct detected through M&A activity and due diligence. Consistent with the goal of clarity and consistency, it is also why today I’m letting you know that we will also look to these principles in the context of mergers and acquisitions that uncover other types of potential wrongdoing, not just FCPA violations. The last situation we want to create is one where corporations and their attorneys uncover a problem and then face uncertainty as to what to do next. We are fully cognizant that in some instances an acquiring company has limited access to a target company’s data and records in pre-acquisition diligence.  We also recognize that corporate deals often move quickly. In those instances, if an acquiring company unearths wrongdoing subsequent to the acquisition, we want to encourage its leadership to take the steps outlined in the FCPA Policy, and when they do, we want to reward them for stepping up, being transparent, and reporting and remediating the problems they inherited.”

[…]

At the Department, we know that there are many benefits when law-abiding companies with robust compliance programs are the ones to take over otherwise problematic companies. Not only can the acquiring company help to uncover wrongdoing, but more importantly, the acquiring company is in a position to right the ship by applying strong compliance practices to the acquired company. When an acquiring company conducts robust due diligence that unearths wrongdoing, reports that conduct to the Department, and engages in remedial measures, including extending already robust compliance to the acquired company, it frees up resources for the Department that may have otherwise been expended investigating the acquired company.  Most importantly, it stops the misconduct.”

Miner next stated:

“Another policy change from this past fiscal year that I would like to highlight is one that addresses coordinated resolutions. In May of this year, we implemented our new Coordination policy, often labeled our Anti-Piling On policy, that directly addresses issues that may arise when a company is faced with a combination of criminal penalties along with civil and/or foreign penalties.  This policy is also contained in the Justice Manual. While we’ve endeavored in the past to coordinate resolutions, prior to the roll out of the Anti-Piling On policy, there was no specific policy applicable to all Justice Department prosecutors.

Consistent with this approach, our decision to decline the Guralp matter that I referenced a few minutes ago considered not only the company’s voluntary disclosure, remediation and cooperation, but also to the fact that Guralp, a U.K. company with its principal place of business in the U.K., was the subject of an ongoing parallel investigation by the U.K.’s Serious Fraud Office (SFO) for violations of law relating to the same conduct, along with the fact that the company committed to accepting responsibility for that conduct with the SFO.

In another example from this past fiscal year, in the Societe Generale case, we saw the first coordinated FCPA resolution with France. That case resolved both FCPA violations and violations arising from its manipulation of the London InterBank Offered Rate or LIBOR. With regard to coordination with French authorities, we agreed to credit approximately $300 million that Société Générale will pay to French authorities under its agreement, roughly equal to half the total criminal penalty otherwise payable to the United States in the FCPA case. Another important aspect of that case was our determination that the company did not warrant a monitor due to its significant remediation, together with the company’s risk profile and ongoing monitoring by L’Agence Française Anticorruption.

We also saw the first ever coordinated FCPA resolution with Singapore in the case involving Keppel Offshore & Marine Ltd. Under that resolution, Brazil received approximately $200 million, equal to 50 percent of the total criminal penalty, and Singapore received up to approximately $100 million, equal to 25 percent of the total criminal penalty. And just this morning, we announced an FCPA resolution with Petrobras the Brazilian state-owned and state-controlled energy company.  Under the terms of the global resolution, the company agreed to pay a combined total of $853.2 million in penalties to resolve the U.S. government’s investigation into FCPA violations in connection with its role in facilitating payments to politicians and political parties in Brazil, as well as a related Brazilian investigation. The penalty reflects a 25 percent discount off the low end of the Sentencing Guidelines fine range due to the company’s full cooperation and remediation. In related proceedings, Petrobras reached a settlement with the SEC and entered into an agreement to reach a settlement with the Ministerio Publico Federal in Brazil. Under the non-prosecution agreement, the United States will credit the amount that Petrobras pays to the SEC and Brazil under their respective agreements, with the Department and SEC receiving 10 percent each and Brazil receiving the remaining 80 percent. These are not isolated events.  We continue to see a significant rise in global enforcement and cooperation with foreign authorities.”

As highlighted in this prior post [10], any discussion about “piling on” depends of course on what that term actually means. If it means U.S. law enforcement bringing an enforcement action against a foreign company from an OECD Convention peer country in which the “home” country also brought an enforcement action based on the same core conduct, well that is exactly what happened in many of the above enforcement actions. (See here [11] for instance).

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